Affordable Housing Resources (AHR) of Nashville, Tennessee, has begun using manufactured housing development as a means of providing affordable housing for lower-income families in rural Tennessee.

AHR creates affordable housing opportunities and neighborhoods of choice through a variety of lending, pre- and postpurchase education, affordable mortgages, down-payment assistance, and housing development programs. It became a NeighborWorks HomeOwnership Center in 1999.
 
In 2003, the Tennessee Housing Development Agency (THDA) and several local banks asked AHR to expand its lending and homebuyer education programs into rural Tennessee. AHR agreed, and after quickly discovering a need for affordable housing in these communities, decided to expand its housing development services into them as well. While researching construction costs, staff found traditional building methods too expensive in rural communities and turned, instead, to the manufactured housing option.

Research.  Before launching the rural development project, AHR staff spent about one year examining reports, handbooks and professional studies on manufactured housing options and strategies. AHR also visited with public officials and private citizens to discuss local housing needs. During this research period, AHR learned that 18 percent of all new homes in the country are manufactured homes. Staff also discovered that 50 percent of the homes sold to households below 80 percent of the area median were manufactured homes. This supported the notion that manufactured homes could provide practical, affordable housing options to rural families in Tennessee.

Phase I.  AHR divided its rural housing development project into small, manageable pieces. Phase I involved four modular homes in three different rural areas of Tennessee. AHR acquired the building sites from local subdivisions. Each cost between $5,000 and $10,000.

The Homes.  All four Phase I homes were one-story ranches. One unit had four bedrooms and two baths; the remaining units had three bedrooms and two baths. All properties were between 1,500 and 2,000 square feet and were built on about one acre of land. The sales prices ranged from $79,000 to $89,000.

Construction.  Three of the manufactured homes were purchased from Cavalier Homes of Addison, Alabama, and one was purchased from Modular One Homes, LLC, of Pulaski, Tennessee. Since AHR had limited experience with the selection and set-up process, staff obtained a contractor referral from each company to help with construction. The contractors were responsible for home delivery and set-up, plus foundation installation, plumbing, and driveways. AHR staff helped set up the homes, but mainly focused on learning from the contractors.

Homebuyer Education.  To support new owners of manufactured homes, AHR began offering a prepurchase homebuyer education program specifically designed for these customers. The class covers traditional homebuyer education topics such as budgeting and financing, but also goes over manufactured-home options, selection, installation, evaluation and financing. These classes are held a couple times a month in different communities and are required for customers who want to buy one of AHR’s manufactured homes. The course is a companion module to the standard homebuyer education class and costs $25. NeighborWorks America has a specific curriculum on this topic, which is available from its Web site at www.nw.org.

Financing.  Buyers can tap into AHR’s standard financing options or get first-mortgages from local lenders. Customers must meet the standard lending criteria through either source.

Staffing.  AHR hired a full-time director of rural housing in August 2004 to manage the rural expansion of homebuyer education, home maintenance, and manufactured housing projects.

Marketing.  AHR markets the Phase I homes through advertisements in local newspapers and sales magazines. Staff also reach out to lenders, Realtors and local agencies who make referrals; post for-sale signs in the yards of the homes; and distribute information at AHR.

Program Costs.  Program costs include staffing and housing development expenditures such as land acquisition, factory overhead, delivery, set-up and insurance. Additional expenses include education and marketing. AHR estimates each home costs around $70,000 to develop.

Funding.  In 2004, AHR applied for and received a $40,000 Manufactured Housing Design Innovation Grant from NeighborWorks America in partnership with the Ford Foundation and the Manufactured Housing Institute. These funds went toward Phase I of the project. All remaining costs were covered by AHR’s operating budget. In the future, AHR expects the development fees to cover the total operating cost.

Manufactured housing allows customers more choice in the construction process. If buyers get involved early enough, there are several layout features they can decide on. Manufactured housing projects can also be completed much quicker than stick-built homes. Timing is easier since construction workers don’t need to worry about weather and other factors that hinder construction timetables.
 
Of the four homes completed through Phase I of AHR’s manufactured housing initiative, two are under contract and two are on the market.
 
AHR held three homebuyer education classes specifically for manufactured housing customers in 2005. Class sizes ranged from four to 10 participants.
 
While conducting program research, AHR found the Hispanic population to be an emerging client (this population has grown by nearly 500 percent in Tennessee over the past 10 years). Staff also realized that the rate of homeownership for these families remained low, despite the growth. AHR, therefore, decided to link its manufactured housing initiative with targeted outreach and education for Hispanic homebuyers.
 
AHR has received funding and begun working on Phase II of the project, in which staff will create a subdivision with 10 to 20 homes on one tract of land.

• Carefully market manufactured housing programs to funders. It may be difficult at first to gather support for this type of development. Staff must demonstrate the quality of manufactured homes as well as their cost effectiveness.
   
• Speak to community residents about the quality of manufactured housing as well. Some historical problems have left bad impressions, and many people aren’t aware of the improvements that have been made to manufactured housing over the years.
   
• Be sure to research and review several manufacturing companies before selecting homes for the project. Though improvements have been made over time, all manufactured homes are not created equal.
   
• Select the layouts that look the least like manufactured homes. Layouts that deviate from the standard “rectangle” will be more appealing to funders, buyers and the public.
   
• Get expert help and learn how to set-up manufactured homes properly before trying to do it on your own. Hire contractors who are familiar with the process and can teach the best construction methods.
   
• Create homes that are affordable. Research local housing markets and develop properties that rural families can afford. There are many options for home layout, size, delivery, construction and set-up, which can make these projects seem complicated at first. Once you find the right product at the right price, duplicate what works.
   
• Pinpoint a target audience. Determine the families who are most likely to purchase this type of home and outline their financial and tangible needs. Pay attention to immigrant trends, and reach out to these families who often have tremendous housing needs. Staff also will need to implement marketing strategies that work in rural communities.
   
• Master the construction and home set-up process. Ultimately, this is what makes the manufactured housing option affordable. AHR staff plan to complete two or three more installations with help from contractors, but will finish up Phase II on their own. This should save the agency 20 percent on construction costs.

Agency interview on 08-15-05 with: Frank Latimer, Director of Rural Housing