Monday, June 4, 2018

Affordable and Low Income Modular Housing - What's the Difference?

Affordable Housing vs. Low Income Housing. While these two terms may seem to have the same meaning, they are different.

Affordable housing would be for tenants that have three to four times the rent amount in income. The rent they are paying is affordable to them.

Low Income Housing

Low-income housing would be people that barely have two times the rent in income. Your apartment is not even considered ‘Affordable’ to them, but that is all they can afford.

The Federal government recommends that a family spend no more than 30% of their income in rent. If they are paying more than 30%, you will likely have trouble collecting the rent, or it will be a chore every month.

Two types of housing are considered government subsidized and low-income housing. These programs are Public and Section 8 housing and both programs are overseen by HUD and subject to their rules and conditions for apartment rentals. Public housing is managed by local housing authorities and is available to renters with low income that meet the criteria of the program. Section 8 housing gives low-income families a voucher that makes up the difference in what they can afford and the actual cost of the apartments for rent that are available to them.

The low income housing market people tend to cause more wear and tear, 'eating' the low income building bit by bit.

Affordable Housing

Many apartments and homes advertised in rental listings as affordable housing are usually for renters with higher incomes and are different from low-income housing.

Building ‘affordable’ single family modular or on-site homes has almost become a thing of bygone days. Land costs, state and federal regulations and raw materials costs have all come together to force the affordable housing crowd to seek multi-family living.

I see a future where the modular home industry will be divided into 3 distinct markets. Some factories will actually try to service all three but you ask if this is even possible.

Four types of modular construction:
  1. Simple and custom single family homes. Average looking ranch, capes and 2 story homes that can be produced quickly will continue to be the bread and butter product of the Midwest modular home factories. Custom modular home factories are found mostly along the East Coast to New England.
  2. Affordable housing for a specific rental market. Factory OS and Kasita Homes are addressing this market which can only grow larger as most of the affordable housing is multi-family and needed in the top Metro markets immediately.
  3. Low Income housing could be another huge market for modular in the coming decade as labor shortages to build these projects becomes scarce. Factories that decide to build modular in this arena will have to work on slim profits, a very strict timetable and slow payment schedules.
  4. Commercial and hospitality modular construction is entering the modular construction very quickly. Champion and Guerdon are two big names that have chosen to jump in with both feet.

Single family homes, once the only thing built by almost every modular factory in the US, is now becoming an afterthought for many factories. Small and large modular home builders are facing delays getting their homes because their factory has taken on a project that has a “time to completion” clause in the contract and the builder’s home is now being forced to the production line later than ever.

Factories, especially on the East Coast, that have made the decision to stay with the single family builder should see a jump in business over the next 2 years. One single family factory in the East is already at capacity through next February.

As modular construction becomes more popular with governments, the media and developers one has to wonder when we will start seeing modular factories being built in big numbers.

1 comment:

Steve L said...

Sharing the DU underwriting guidelines from Fannie Mae
It was mentioned Government minimum Housing expense of 30% is too low in this current market place

Maximum DTI Ratios
For manually underwritten loans, Fannie Mae’s maximum total DTI ratio is 36% of the borrower’s stable monthly income. The maximum can be exceeded up to 45% if the borrower meets the credit score and reserve requirements reflected in the Eligibility Matrix.