This may be remembered as the year California’s leaders finally grasped that a lack of housing was an enormous problem, driving up the cost of homes and rent to such an extent that the Golden State has become the epicenter of U.S. poverty, with more than one in five households living paycheck to paycheck. The realization spurred state lawmakers to propose dozens of bills meant to promote housing construction.
Yet the most significant measure to make it into law was utterly conventional — Senate Bill 35, which included a payoff to a powerful interest group. The measure, authored by Sen. Scott Wiener, D-San Francisco, makes it easier for some housing projects that meet zoning and affordability standards to win approval — so long as they pay “prevailing,” or union, wages to construction crews, which add an estimated $90,000 to the construction of a 2,000-square-foot-home in San Diego County. Was that really the best the Legislature could do?
Clearly not — especially since there is an answer to the housing crisis hiding in plain sight. If Californians can get past harsh stereotypes about trailer parks — if they’re as ready to embrace new thinking as officials in Great Britain and Japan — if they’re willing to learn from history’s greatest investor — and if they’re willing to take a cue from one of the world’s most successful and disruptive companies.
Trailer parks have long suffered from a downscale image. While many are perfectly fine communities, some older parks look and feel shabby, and smug putdowns of their residents have been common for many decades. The London Independent newspaper noted that they were …… cruelly portrayed, pilloried, as uncouth, unhygienic, slovenly, illiterate, insolvent … even if trailer moms, trailer dads, toiled 60 hours a week in low-paid, low-prestige, dangerous jobs, they were defined by the fragility of their plywood roofs.
But 2017 is not like 1957. Manufactured homes built entirely at factories — not “pre-cut” homes with factory-built parts that are assembled at home sites — are far more durable and attractive than the “mobile homes” of old and remain vastly cheaper than conventional brick-and-mortar homes. The Independent article that brought up “trailer trash” stereotypes went on to tout the promise of prefab houses and to applaud the British government for making such homes a central part of its plan to build 1 million new housing units by 2020.
In Japan, the embrace of manufactured housing came decades ago. Toyota can build a semi-detached modular house guaranteed to last 60 years for about $90,000. Studios are much cheaper. About one-sixth of new homes are manufactured in Japan — which the London Guardian wrote earlier this year should help inspire “a revolution” in British housing.
Writing last week in USA Today, rural investment activist Suzanne Anarde described how manufactured homes, which cost about a fifth as much as regular homes, already constitute …… the country’s largest source of unsubsidized affordable housing and [are] home to more than 17.5 million low-income Americans.
The potential of manufactured homes was grasped long ago by legendary investor Warren Buffett. His company, Berkshire Hathaway, bought Clayton Homes for $1.7 billion in 2003, and the Berkshire subsidiary now controls about 50 percent of the U.S. market — and 70 percent of under-$150,000 home sales. Lately, it has been on a buying spree, snapping up four small, innovative home builders and setting a goal of dominating the market for homes in the “sweet spot” of $150,000 to $200,000. The second-richest person in the world, per Forbes, looks to have yet another a gold mine on his hands — at least if manufactured homes take off.
That now seems more likely, thanks to a decision by the Federal Housing Finance Agency. Under a proposed policy change announced in May, the two mortgage-financing agencies under the FHFA’s auspices — Fannie Mae and Freddie Mac — are likely to push local banks to make it easier to obtain mortgages for manufactured homes.
But Buffett isn’t the only mega-billionaire who appreciates the alternative to conventional home building. Google co-founders Sergey Brin and Larry Page have given their blessing to an innovative housing project seen as a small but promising step toward solving a Northern California housing crisis that the San Jose Mercury News reported in June …… may help [Google] attract workers to the crushingly expensive Bay Area.
The tech giant plans to buy 300 units of modular housing to serve as temporary employee accommodations on its planned “Bay View” campus at NASA’s Moffett Field, according to a source familiar with the plan. Experts heralded the move as not only good for Google, but as a potential template for others to follow as the high cost of construction combined with expensive real estate make affordable housing hard to come by.
So will Google actually inspire California officials to embrace manufactured housing? That very much depends on whether California officials actually, you know, want to solve the housing crisis by sharply adding stock — or if they just want to send out the message that they’re trying by endorsing affordable housing bonds and approving minor regulatory reforms.
Consider the special interest payoff that had to be made to enact Weiner’s SB 35 — the prevailing wage concession requiring builders to offer union-level wages and benefits. If you think that the building and construction trade unions that demanded and won that concession will accept the Legislature making it easier for state residents to buy high-quality manufactured houses for $70,000, you’re not paying attention.
So why don’t the Californians who worry loudly about their children moving to states where home ownership is realistic for a young adult — and not a fantasy — unseat the lawmakers who don’t take on the housing crisis head on? Because it’s not just California lawmakers who don’t really want to take decisive steps to add housing. It’s millions of Californians.
In March, state Legislative Analyst Mac Taylor put out a report about how and why local governments are doing such a poor job with housing. He didn’t blame the usual suspects — NIMBYs, unions and environmentalists. He blamed public opinion:
Unless Californians are convinced of the benefits of significantly more home building — targeted at meeting housing demand at every income level — no state intervention is likely to make significant progress on addressing the state’s housing challenges.
Nationally and globally, it’s going to be exciting to watch manufactured housing explode, as seems likely to happen, and see if Warren Buffett or his heir beat Amazon’s Jeff Bezos, the frontrunner, in the race to be the world’s first trillionaire.
Either way, Californians are vastly more likely to be reading about the phenomenon on their phones than witnessing it in their back yards.
