Skip to main content

Despite a push from the federal government, there remain significant statutory differences in the treatment of manufactured versus modular homes.

Innovation in housing is necessary to address the lack of affordable housing supply in the United States. One avenue of innovation in recent years is the vast improvement in the quality of manufactured housing and the introduction of modular housing. Today’s manufactured housing and modular housing have almost nothing in common with what was once pejoratively called “mobile homes,” though current legislation finds its lineage therein. Statutorily, there are significant differences in manufactured versus modular housing. We will highlight those differences and the impact they have on where these homes can be placed.

  • A Manufactured Home is a dwelling unit built on a permanent chassis that is attached to a permanent foundation system and bears a HUD Data Plate and HUD Certification Label, having been built to HUD’s Federal Manufactured Home Construction and Safety Standards (HUD Code).
    • Certain manufactured homes are referred to as CrossMods® and include design features like site-built covered porches, garages, higher-pitched roofs, and permanent foundations.
  • A Modular Home is built in accordance with the International Residential Code (IRC) as administered by state agencies responsible for adopting and administering building code requirements for the state in which the modular home is installed.
  • Prefabricated, Panelized, and Sectional Homes (other terminology used by Fannie Mae) do not have to satisfy HUD Code or the IRC; however, the home must conform to local building codes in the area in which it will be located.

The lines between manufactured, modular, and site-built homes are being blurred by FHA, Fannie Mae, and Freddie Mac, but not necessarily under Texas law.

At the federal level, we have seen a push to make manufactured housing more accessible as a solution to the affordable housing shortage. Historically, lending for the purchase of manufactured homes has been more difficult to obtain than for site-built, or even modular homes. Recently, however, Fannie Mae, Freddie Mac, and the FHA have changed the requirements for appraising manufactured housing, thus expanding access to such loans.

On November 2, 2023, the FHA updated its policy for the valuation of manufactured homes to allow FHA-insured loans (typically made to borrowers with low to moderate incomes) to, when there are less than two comparable sales of HUD-certified manufactured homes, require appraisers to use the most appropriate site-built home comparable sales for valuing the manufactured homes. Effectively, this policy equates the value of manufactured homes with site-built homes.

Additionally, for conventional home loans, on February 7, 2024, Fannie Mae updated its Selling Guide to allow 30-year loan terms (previously a maximum of 20-years) on cash-out refinancing of multi-width manufactured homes. Effectively, this update equates the expected useful life of a manufactured home with a site-built home.

However, while lending on manufactured homes is becoming more accessible, the Texas statutory treatment of manufactured housing remains significantly different from modular and site-built housing; thus, barriers to the installation of manufactured housing remain.

In Texas, Manufactured Homes, including CrossMod products, are governed by the Texas Manufactured Housing Standards Act (TX Occ. Code Chapter 1201). The title to a manufactured home is issued by the Texas Department of Housing and Community Affairs (TDHCA). Once installed on a permanent foundation (if allowed by the municipality), the owner may apply to the TDHCA to convert the home from personal property to real property. On the other hand, a modular home is issued a decal from the Texas Department of Licensing and Regulation stating it has been built to IRC standards and, once attached to its foundation, it automatically becomes a part of the real property.

Because a municipality can, pursuant to TX Occ. Code Sec. 1201.008 prohibits the installation of mobile homes altogether, the conversion of a manufactured home to real property can effectively be precluded by municipalities. This is not the case for modular homes. According to TX Occ. Code Sec. 1202.251, a city cannot have different standards for site-built versus modular homes, so anywhere a site-built home can be built, a modular home can be installed.

In addition to potential prohibitions by a municipality, deed restrictions, including Covenants, Conditions and Restrictions (CC&Rs) administered by HOAs, can outright ban manufactured housing. With regard to modular housing, the authority of deed restrictions to prohibit them is murkier. Older deed restrictions often do not contemplate modular housing at all but can contain language prohibiting homes built “offsite” or other similar concepts. Case law in Texas interpreting deed restrictions’ applicability to modular homes is scarce and the issue is ripe for litigation in light of the statutory treatment of modular housing as distinct from manufactured housing.

If you are considering manufactured or modular housing for your community, it is important to consider the implications thereof on municipal regulation, financing, and insurance.

Texas Mobile/Manufactured/CrossMod®

 

Texas Industrialized/Modular
Building Code Standards
Built to Manufactured Home Construction and Safety Standards (HUD Code) which preempts local building codes Built to International Residential Code (IRC) and all local building codes
Applicable Law
Governed by: Texas Manufactured Housing Standards Act (TX Occ. Code Chapter 1201) Governed by: TX Occ. Code Chapter 1202
Certification/Licensing
HUD Certification Label attached to exterior. Data Plate paper labels affixed inside the home. Displays a decal from TX Dept. of Licensing and Regulation stating it has been built to IRC standards.
Real or Personal Property?
Title to the home is issued by a state agency. Once installed on a permanent foundation, the home becomes part of the real property and is no longer registered/titled as personal property. No title is issued; once placed on the foundation, it becomes part of the real property, like a site-built home.
Can a city ban them?
Yes. TX Occ. Code Sec. 1201.008 says a municipality may prohibit the installation of a mobile home for use as a dwelling in the municipality, but if an area has been determined appropriate for manufactured housing by the municipality, it shall permit the installation of a HUD Code manufactured home. An application to install a new HUD-code manufactured home for use as a dwelling is considered to be granted unless the municipality in writing denies the application and states the reason for the denial not later than the 45th day after the date the application is received.

 

No. TX Occ. Code Sec. 1202.251 says a city cannot have different standards for site-built and Industrialized/Modular homes, so anywhere a site-built home can be built, an Industrialized/Modular home can be built.
Impact of Deed Restrictions
Deed restrictions (CC&Rs) can prohibit Mobile/Manufactured homes altogether. Deed restrictions (CC&Rs) may require homes to be constructed “on-site.” The interpretation of this will be litigated.
Financing
Conventional mortgages can be obtained when the manufactured home is purchased with a parcel of land. Personal property loans can be obtained for homes located on land the buyer does not own such as a manufactured home community, or when only the home is being financed and not the land. (FHA is expanding financing options.) Treated the same as site-built homes.
Insurance
Manufactured housing has different insurance coverage than site-built homes. Traditional site-built homeowners’ insurance may be obtained.

CONTACT:

Jennifer MartinJennifer Martin I  512.370.2883  I  jlmartin@winstead.com

Jennifer Martin is a member of Winstead’s Real Estate Development & Investments Practice Group. She has extensive experience representing HOAs, homebuilders, developers, and investors in planned community and condominium law.