Build Cast

Solutions for Fixing the Housing Affordability Crisis: Innovative Solutions and Perspectives

Brian Hurd Season 3 Episode 5

Is the American Dream of homeownership becoming a nightmare due to escalating costs? Sit tight for an enlightening conversation with industry experts John Wright, Jennifer Castanson, and Will Stoker, as we dissect the major factors contributing to the housing affordability crisis. From supply-demand imbalances, labor challenges, supply chain disruptions to industry fragmentation, we leave no stone unturned. We also explore solutions that could potentially bridge the divide between various segments of the homebuilding and housing market.

Can we think beyond the traditional building model to make housing affordable for most Americans? This episode takes you on a journey to understand the rising land costs and how it’s impacting housing affordability. We explore options to increase the number of homes built on one acre of land and discuss Fannie Mae's manufactured housing program as a potential solution. Struggling with the stigma associated with manufactured housing? Hear it from our guests as they share feasible strategies to change public perception about this affordable housing solution.

Don’t miss out on the discussion about Fannie Mae's MH Advantage program and how it offers cost savings compared to a site-built home. How can we change financing options to make manufactured housing more appealing to home buyers? We tackle this question head-on. We also dive into the promising world of energy efficiency with Clayton Homes' commitment to building all their products to the new DOE zero energy ready product by 2024. Tune in as we discuss how technology and influencers can reshape the narrative around affordable housing, and share our thoughts on addressing supply and affordability in the housing market.

Subscribe to BUILDCast on your favorite podcasting platform or visit us at https://buildcast.buzzsprout.com. For questions or to suggest other topics you'd like to hear more about or to learn more about Thrive Mortgage, please contact us at BUILD@ThriveMortgage.com. You can also see the video of all BUILDCast episodes on our YouTube channel at YouTube.com/ThriveMortgage. Thanks for tuning in!

Thrive Mortgage is an Equal Opportunity Lender, NMLS ID #268552.

Brian Hurd:

Welcome back. It's really good to be back in the studio huh, it is.

Natalie Roberts:

It's always a good time in the studio.

Brian Hurd:

This is going to be a fun episode of Buildcast. You know, they always say make sure you're in a room with people that are smarter than you. Oh boy, I think we've done that clearly here, although that's not terribly hard. Well, I should say, I don't mean to be so self deprecating, but, yeah, welcome back. You know, and we're here today to talk about housing affordability. Obviously, it's been a buzzword for months, you know, really years.

Brian Hurd:

You know I think if we were, you know, a decade away from housing equilibrium before COVID. You know, I don't know where we are right now, but it's exponentially worse. You know, I was reading an article that the NIHB put out and let me just let me just go into this really quick before we introduce our guest. But NIHB stated that their data showed 64.8 million households out of 132 million are unable to afford a $250,000 home. That's a problem, that's a major problem. The median home price of a single family home is 425,000 plus A bigger problem and, according to NIHB, 73% of all households cannot afford median priced new home.

Natalie Roberts:

We have a crisis.

Brian Hurd:

We do so. What we've done is is bring together, you know, some of the brightest minds in our opinion. You know that are actively working to communicate the challenges and, ideally, find solutions within the industry. We've got John Wright. John Wright is one of us. He's he's been a lender. You started your mortgage career in 93, right.

John Wright:

That's correct.

Brian Hurd:

Yeah, yeah. And now he is with Thaney May working on their affordable housing goals. We've got Jennifer Castanson. She is the vice president of Construction Project Management for software company BuildExact and a contributing writer for innovation on Forbes. She is everywhere. I mean, when there's a conversation about manufactured, when there's a conversation about affordability, modular, all of those things, I always see her name attached to it. So you know, thank you so much for being here.

Jennifer Castenton:

Thanks for having me, yeah.

Brian Hurd:

And then we've got the Will Stoker Will is an advisor for ESG, which is, oh, right ahead, brian Hurd. Environmental social and governments and Will.

Will Stoker:

I'll let you briefly tell everybody what that means, but we're really happy to have you here as well, yeah so I said at the top of the organization here at Fannie Mae focused on our efforts to serve manufactured housing industry. So I lead a lot of our industry engagements with a broad variety of stakeholders and use that to inform our product development strategy for manufactured housing Excellent.

Brian Hurd:

Well, let's just kind of dig right in, Just so you all know the rules. There really are no rules. We try to keep this conversational. We want to make sure we're giving everybody their time, but you know, we'll just see where the conversation goes. But otherwise, you know, what I'd love to open up with is how did we get here? You know we know that there is a massive affordability crisis, but what are some thoughts on how? What got us here over the last three years, five years, 10 years, whatnot?

Jennifer Castenton:

We want to simplify its lack of supply. No new, nothing, not enough built to meet the demand. And that's over simplification.

Brian Hurd:

Sure, Well, I mean it's really kind of at the crux of it. But let's dig a little deeper and go. Why is there, you know? Is it lack of deliverable lots? Is it lack of, you know, home builder confidence in building inventory? It's probably a combination of number of things. Land itself, yeah, land itself materials.

John Wright:

I don't know that. There's one answer, brian. I mean I think the easy answer maybe the umbrella is the supply, but there are a lot of different factors that have influenced that. You've got, like you just mentioned it, the materials and what we saw with the ramping up with the supply chain issues. You know that was COVID.

John Wright:

But even before that, when we were working at Fannie Mae on some of the manufactured housing, initially with some of our newer products, the inventory was a problem and we knew that and we were trying to address that with. You know additional housing types or housing stock. I think there's a lot of different factors that contributed to that and other ones. You know just labor challenges. When things are great and there is building, you know you've got movement and transient workforce where one builder may get another builders, you know employees or the different laborers and skilled workers and you start moving around and that creates challenges. So I'm with Jennifer, I think the supply is the initial, but then you've got a lot of different moving parts underneath that that have contributed to where we are.

Natalie Roberts:

Yeah, sorry, go ahead, Jennifer.

Jennifer Castenton:

There's certainly tons of levers, and I think that one of the things that I've been trying to focus on for quite a while now is about the fragmentation of the industry. So as long as there continues to be that fragmentation meaning you know, the architects working over here, the distributors working here, the developers working here and that all of these silos then there cannot be a confluence to meet the demand and create efficiencies that are necessary in order to meet that demand. So that's something that I think that maybe isn't ignored but is avoided, because as soon as you start breaking down those various verticals, then the relationships change and it's just as you know, people who have been working on that script for so long don't know how to work anymore.

Brian Hurd:

Now I think that's a really interesting thought. You know, and you mentioned kind of that there are fragment and all these different segments that make up home building and the housing market. Are you suggesting that, you know, some sort of collective be made, either locally, regionally or nationally?

Jennifer Castenton:

Well, I do think that you know there's a lot of firms like Katera tried to bring everything in house and I think the ones that are trying to do some sort of vertical integration within their organization will will help us solve for some of those challenges, but I think that just having you know when projects can start, pre design and involve all the stakeholders, we're going to be a lot smarter and be able to create better solutions to solve for this crisis. So I just think that I don't know if it's a collective, I don't really. You know, it's hard to put a pulse on it because you have to have willing stakeholders in order to get involved in that. I don't know if you keep having business as usual, as we've had for decades, then people still have business and I think there's a fear of, you know, risking not having that business moving forward if you change that dynamic.

Brian Hurd:

Well, and I think the only concern I would have is, you know, as if you have, you know situation kind of where the rich get richer, you know you have these larger builders and if they're bringing everything in house and they're controlling every aspect of it, so that that would be my only concern.

Brian Hurd:

But I love the idea of creating, at least on the local and regional level, a conversation between the municipalities, the designers, the builders, the realtor community, bringing all developing developer community, bringing them all together Because, as you say, you know you have to be on the same page to some extent, because if it's all siloed, you're all working for your own efforts and you're not doing anything collectively?

Natalie Roberts:

That and to. I think we could potentially be missing one of the key elements in the question. Right, the question was why? How did we get here Representing builders and developers across North America and on the frontline and I'm in the trenches, so I'm there from land acquisition all the way, taking the product in the communities to launch? And, as an example, in Texas we're looking at right now, I've got several landier land deals getting ready to go under LOI. You can't get the deals for less than 100,000 an acre. And if I can't get the deal less than 100,000 an acre, as a builder I can't build a product that's going to hit a price point that the majority of Americans can own. So it's it's.

Natalie Roberts:

It's a supply is always an issue. I agree with you, Jennifer, but when we're looking at a 3.2 to four month inventory and builders unable to bring a product to market that is attainable, compounded with interest rates, I don't know. I think supply in many areas I understand, I'm, you know, localizing it, but it's also builders are can't get on the forefront to build that right now. And so the conversation becomes how do we get real with where we build, what we're building on it, what programs are offered in and that we can reach that percentage of buyers who can't afford a home at 450,000. The builders simply can't build it right now.

Brian Hurd:

And I don't think lot supply or a lot cost land itself is just not going to get cheaper. I mean, you know they're not making any more of it, as Mark Twain said, you know. So I think what we and we'll talk about this a lot of hopefully on this call is we've evolved, been involved in some of these projects with manufactured and higher density to where you can put a substantially larger amount of homes on one acre piece of property. So so you know well, let's talk about that a little bit. Let's talk about you know, your thoughts and in where Fannie Mae is putting efforts into affordable housing, manufacturer at all that type of stuff.

Will Stoker:

Yeah, I mean. So John and I work pretty much exclusively on our manufactured housing programs. Manufactured housing industries been around for a long time now, close to 50 years but there's this, this brittleness and, in some ways, this this unwillingness to change the way that they do things.

Brian Hurd:

That's, I think is called NIMBY ISM. It's called NIMBY ISM.

Will Stoker:

Yeah, well, that's on the locales side, but I'm talking about, like the supply side here, the traditional model for the way that these homes are sold. You know, it's more akin to like a car dealership model. Right then, something that we would be very interested in yeah, like subdivision and builder front. So a lot of the work that we're trying to do is to convince traditional you know subdivision builders and developers to buy into this product and use manufactured housing as a new way to build out their product stack and their delivery model and put them in a position to hit a lower price point than what would be otherwise possible with traditional onsite construction.

Will Stoker:

So we're starting to see some promising developments, I think, towards that goal, but obviously we'd like to see it grow a lot faster and help to meet some of the demand that's out there.

Brian Hurd:

Well, and part of the problem has been on my side of the industry. You know, I think there's there is that tendency to kind of turn your nose up at that type of product. Perception is a lot of it. You know, I'd rather do a million dollar loan than a, you know, 20,000,000 dollar loans, whatever. Whatever the reasons are, but the challenge is, if we're trying to get people to look at manufactured modular that sort of thing as an alternative, as we've talked about over the last several years on these bigger projects, we have to start acting like the site builders you know, and that means how these loans are financed and you know, and that's why you know, we've we've loved the partnerships, if I can say that, with Fainimae, because literally one of their focal points is MH Advantage, which truly does help change the way manufactured homes are financed.

Brian Hurd:

You know, it's not a second class loan in any way, shape or form. It's not a higher rate. You don't have all these LLPAs on it. You know, in fact, in a lot of ways it's actually easier to buy a manufactured home than a regular stick built. So I'm going to stick with, you know, either you, john, or Will. You know why don't you talk about that a little bit Fainimae specific efforts towards, you know, mh Advantage and financing these properties.

John Wright:

Yeah, I'll start and maybe we'll convoke in. We started in I think it was around 2018, and we went to the industry. We didn't do it in a vacuum or a bubble where Fannie Mae tried to be the one to solve and solution everything alone. And so that scope, the imprimise, was how do we get a home that's built in a controlled environment with a lot of efficiency, with a lot of the characteristics that you would have within a site built from a quality standpoint, and bring that to market so that it doesn't automatically have the consumer paradigm or that stigma of housing a blast resort right Like I can't get a site built, so I have to settle for manufactured housing. So we baked in some of those aesthetics and called curb appeal or whatever. That more closely emulated the site built looks things like lower to grade set. So sometimes with manufactured housing, because they're brought in on that chassis, when they're tied down, they don't dig out the foundation deep enough. So it's got a little bit of a raised look. It's fine, but we went with a little bit of a lower set as a requirement.

John Wright:

You mentioned some of the financing options. The end goal was to say, somebody driving down the street that would see one of these homes, would look at it and say, well, I can't tell the difference whether or not it's built on site or it was built in a controlled environment, brought in right in a production plant. So I think that was part of it. I will say that the challenge initially because this was new housing types, because we baked in requirements for these homes. It was new so there was no existing, so everything was having to be done per order, one at a time, and that represented a challenge getting it off the ground. But I think the end goal is still where we are, and Will mentioned the subdivision work. I think that's an important piece of that. So I don't know, will, if you want to jump in with that side of it or you get any additional thoughts on the MH Advantage type financing.

Will Stoker:

Yeah, so we at Fannie Mae have spent a lot of time, as John said, trying to educate various stakeholders in the process on what we're trying to do here with MH Advantage and use our position in the market to help influence the broader conversation around affordability. The reality is that a lot of people don't know the role that Fannie Mae plays in the market.

Will Stoker:

And if you're a consumer, you don't really have to care right, because the loan is being closed with the lender and everything that takes place on the secondary market is kind of behind the scenes. So for a while it was just us Fannie Mae out there evangelizing for the product. What's changed recently and what I think Will lead to some new adoption and some new positive press coverage, is we're starting to see some of these impartial perspectives out there, like in the academic community come in and say communities and locales should be seriously considering manufactured housing as part of their affordable housing strategy.

Will Stoker:

So just recently there's a report from the Joint Center for Housing Studies at Harvard. They put out a report on the cost advantages of manufactured housing relative to site built.

Will Stoker:

And for the first time they had some good data, finally on our MH Advantage program and the houses that are eligible for that program. So the finding was that these MH Advantage, or cross-mod style homes, as the industry calls them, that those homes can achieve a 20% to 30% cost savings relative to a comparable site built home. And so we've been out there sharing our perspective, but it's nice to have others in the industry come in and say this is something that makes sense and can provide some targeted affordability in neighborhoods across the country and I think that's going to help with the adoption moving forward.

John Wright:

Yeah, I think that's a good point, brian. Just sorry To what Will's talking about. We also have kind of morphed and addressed the questions and the challenges with that product since inception and one of the big changes was changing that comparable sale allowance for these homes. We allow that initially, allow that initially. Where site built, comparables could be used may be used. And still the builder developer community and probably rightly so were a little reluctant because they weren't sure if they invested in this, if there was truly going to be an Apple to Apple comparison based on the end product versus what was in the market.

John Wright:

Because our guidelines had required a couple of manufactured home close sales. So we strengthened that language up in February of this year to say you know what, if you've got an MH Advantage home and there aren't three MH Advantage comparables, then the appraiser has to use at least two site built. And we did that intentionally. We had feedback from the industry and feedback from our lenders and we responded to say we recognize this, maybe an obstacle, it could be something that would create reluctance at the builder developer level. So we're going to take it out, we're going to remove it and hopefully we're starting to see very positive feedback from that and we're anticipating the end result is that those builder developers kind of use that as the last. Ok, I get it, let's go ahead and jump into it. So I didn't want to miss that opportunity because I think that was a big change for us.

Brian Hurd:

Well, it may seem small, but it really is kind of a big deal, because we know that the most difficult house to appraise in a subdivision is the first one, and that's if it's stick built, site built. The problem is obviously compounded when we're talking manufactured, make no mistake, we're not talking to your grandmother's smoke home. They haven't been called that since what? The?

Jennifer Castenton:

late 70s, I think something like that.

Brian Hurd:

78, whatever it has been. But these are very well built, very well appointed houses and in a lot of cases they not only stack up to but they are superior, as we know with some of our projects. So, jennifer, I know you've got some comments on the financing side.

Jennifer Castenton:

Yeah, so I'm no fainting may that I qualify that, but I think that what I was talking about before is this whole culture dynamic and culture shift. Well, for consumers, it's going to be the same thing. So if you're talking about somebody who's really doing offsite construction and most of the home is built offsite which is in the things that I'm reporting on people I'm talking to the different companies that are doing it. That's where we're creating the most efficiencies and that's where we're able to really drive down the price.

Jennifer Castenton:

Well, if you're using that type of process, it is a massive culture shift for the consumer as well, because they have to look at the design and improve it before it goes through the factory, right? Whereas when you're doing a site build, you're visiting the site and you're being handheld. So it's a totally different dynamic. And then also, if you're looking at the builders financing, that's totally different too, because when you need to have the product delivered to the factory, and when is that putting pressure on the builder to make sure that their balance sheet is proper, right? So it's just a. And then when the appraiser has to come to the factory, and then when they're getting so, anyway, it's just a total different shift in process and there has to be some change management along with some education.

Brian Hurd:

Well, I think that's really important. I mean, and I like the culture shift. There's been some good catchwords.

Natalie Roberts:

Buzzwords.

Brian Hurd:

But I think that the way manufactured has been financed the traditional way and in no disrespect to that way. But if I'm a home buyer and I'm looking at one of the publics and their regular stick built, I look on bakeratecom and I see a six or a seven or whatever it is I know I'm not supposed to talk about rates but let's just guess and say I see 6%.

Brian Hurd:

Then I walk into a manufactured home dealership and I'm seeing OK, it might be substantially larger. And I go wait a minute. What's wrong? Why is this product, why does it take so much more? And we already know that rates are having a substantial impact on the housing market. Well, it's exponentially worse when you're talking about chattel type properties and whatnot. And I think it's a service issue and we've talked about it many times. If we want to compete with the stick built, we have to act like it, and I think what I love is seeing a lot of these projects and let's kind of dig into that a little bit, because we've all been involved with them to some extent. We've got Orville that's 132 units. We've got Moab that's what 180-ish. Yeah.

Natalie Roberts:

We've got Boseman, you've got Group of Concept Bill Lockhart, Bill Marcus', community yes.

Brian Hurd:

And Joel with Gateway American Resources in fruition, colorado, and those are really exciting because I think that helps change the way we look at manufactured. So I'm going to just kind of throw this out Natalie, you or anybody, let's talk about these truly ground up manufactured home communities.

Natalie Roberts:

Yeah, well, and Just real, real quick, john. You pointed to it and it was an initiative taken by Skyline Champion, coincidentally right as COVID hit right.

Brian Hurd:

And so, while they're involved in all of these projects. Yeah, that's right.

Natalie Roberts:

And that's when we first met. But you know, when they approached, when they approached us, it was how do we rebrand Genesis home so that it does stand up to a single family builder, and what does that mean? And so what we did was we went down that road. Where we were going out, we were getting not only the CMS, the COMS, but we went in with each builder and breaking down. How do we stand up and build a product, design, a product based on a DR Horton or KB Home? Right, because that's your entry level buyer and that's typically your two to 250 price point. So we spent a significant amount of time doing that. And then what happened then was that translated into architecture within Skyline and product design, meaning what features are we putting in down to John the foundations? And so what came out of that was a new line that builders and developers can take and run with standing up next to a single family stick built home, not only Texas, but nationwide North America and then running into the problem in the roadblocks not problem, but roadblocks.

Natalie Roberts:

As we were going down this journey was getting in front of municipalities, and Brian knows this well, you know we can't tell you, guys, how many times we had to sit in front of city councils and change the narrative on a trailer to a home. It's not a manufactured home, it's a home, a home is a home. And so how do we pull away from that and then design this and put it out there so that we can get the buy in first from municipalities and then start tapping into actual consumers with a price point that is attainable? What happened from there I think we dive into, because we all know this project well is Orville, california, and you know Debbie and our development and James really kind of taking the initiative and designing, finding the property, getting it, getting through city council and municipalities and then bringing that to life, which took four years.

Brian Hurd:

And it's been a heck of a team effort. I mean, it was James Brighet's vision. Into his absolute credit, he stuck through it.

Natalie Roberts:

He did and.

Brian Hurd:

I can confidently say that the deal has been closed. The deal actually has been funded. So we are going to well I say we, but we're kind of all part of that project start breaking ground, I believe next month. That's really really exciting.

Natalie Roberts:

Yeah, but that's, that's your lead in right. And then what we're all talking about today is is attainability. Brian will share with you all. I am not a fan of the word affordability. I think it puts us back rather than going forward. And what can I attain, you know? And that starts with we start with attaining a home, then we move into. It's an actual home, not a manufactured home, not an image advantage, because what we're doing is spinning a wheel of just a scripted story that's old. And how do we bring this to life? Hitting the supply that we need to get, jennifer, like you said, an attainable rate, not to keep blamming, but you know we look at. Well, john, you talked about the foundations or, you know, bringing them in on a chassis and then they're still raised slightly off the ground. We definitely will encourage, you know, our listeners and everyone. And it's it's not a shameless plug, but genesishomescom there's a proof of concept community. There, a consumer does not know that's a manufactured home when they come.

Brian Hurd:

They do not. But I think that's you know. And, taking it a step further, I mean that's really important because we've you know, like you said, we have set in front of these council meetings and no matter how passionately we try to extol the virtues of manufactured and affordable, they still, in their mind, have a affordable home, you know and it doesn't really help if we have to go to a factory.

Brian Hurd:

I don't care how good the product is If it's sitting on cinder blocks on the side of the road or in a factory in Athens. Whatever it may be, it's not going to have the same impact. And that's why Lockhart is so critical, and that's why some of these other projects are so critical. Right, I think we're going to start getting adoption, which I think that was, that was John's word, or anyway, but I mean, that's really important.

John Wright:

Because I think she wants to add to that and I just wanted to dovetail off of her culture shift, because everything you're talking about my personal experience with some of the language used in the regulations. There's wording like no trailers, no mobile homes. So it's very it's legacy language. It's just never had to be addressed. But the shift is the fact that a borrower, consumer, will go to a site, just like they will site the homes and look at which homes they want. Manufactured housing today is great as it might be, If you don't have a development right, a neighborhood, I don't care if it's 10 or a thousand and 10. If you don't have a neighborhood where I can go look and say I like that model, but I want to change this. I want to add that I have to do it at the dealer location.

Jennifer Castenton:

Right.

John Wright:

Dealer location is a different buying model and, if we're honest, it kind of perpetuates that legacy yes, paradigm of what manufactured housing is versus real housing or whatever other language that we've gotten out of our survey. So I think Jennifer's point of the culture shift, the truth of concept in this neighborhood, is the way to make that happen. Because if we do everything else but we still have somebody having to go to a third party location and pick something out that then gets moved, it doesn't make that full shift.

John Wright:

So I just think that's an important piece to all of the work that's being done.

Jennifer Castenton:

Yeah, and I think that you were talking about Nellie some of the production builders who are focusing on this now, and I moderated a panel with John Jaffe, who's the CEO of the country's second law.

Jennifer Castenton:

So he said that he anticipates that 30 to 50% of all homes will be produced in a factory in the next five years. So, yeah, right, I mean I, you know, I actually used that in a presentation yesterday and it's actually a picture of us on the panel and you can see the surprise on my face in that picture. But you know, it is just, it's just an indication of where we're headed. And someone else on the panel, which I think is something that we all need to be thinking about, is that he know enough with Bond he's a principal at Bond. He was saying that housing is a product consumer product that is not manufactured, and so I don't think, you know, if we start talking to consumers and production builders start showing what they can do truly with manufacturing, then people will. I mean, I think there will be an easy shift, but all that needs to be happening, yeah, if I could just tie it back to a point Brian made earlier about the personal property financing for the traditional manufacturer housing communities.

Will Stoker:

What's interesting is there's a ton of equity capital that floats into that sector right, but it's all in service of that traditional model right when the land and the home are split. The home is in many cases a depreciating asset and that's arguably not in the best interest of the consumer to buy into right. So here we have some of these proof of concepts that we're talking about that really break the mold, like in Oroville right, when it's all a fee, simple package.

Will Stoker:

It's a cheaper product to bring to market and that's a benefit to the consumer. But the long term security in the land, the permanent foundation, the pride of ownership all of that's going to translate into wealth building opportunities for the consumer. And it's going to be a big deal for the manufacturing housing industry too, because it's going to help them address some of these perception problems that we've been talking about here.

Brian Hurd:

And it definitely goes back to requiring, you know, that culture shift that Jennifer mentioned, because part of it, okay. So Fannie Mae has done a really good job of creating the tools, the financial tools and products and programs that you know we as a mortgage company need. But you know, I'll admit I was ignorant to it and I didn't put a lot of focus on it until about three and a half years ago when I spent some time with the Fannie Mae guys and Skyline Champion out in freezing, louisville, kentucky. But I got to experience it and it just blew my mind because I it's not that I turned my nose up at it, I just was ignorant to it.

Brian Hurd:

And we've made a substantial cultural shift here at Thrive just to really focus on manufactured, you know, instead of just doing those, you know, regular production builds or you know we've had a heavy tilt towards custom builds. But, yeah, I mean, we've had to create that culture shift, you know. And, jennifer, I'd love to hear you talk a little bit more because you know, I think it takes influencers and you're obviously an influencer in this space, you know, you, you, you kind of have this collective. You know, you've got Doug Tallin with Skyline Champion, you've got Ken Semler with Impressa, that sort of thing. How are you or how should we be getting the word out?

Brian Hurd:

Because I think that's what it's going to need to change that culture.

Jennifer Castenton:

So thank you, I mean I think that's a compliment. It is. I've necessarily seen myself as an influencer, but I do get to talk to smart people and then share their stories and their ideas. So I you know, like you said at the beginning, I write on housing innovation for Forbes and when I trip across somebody who's doing something pretty phenomenal, then I try to write something about it and share it out. Now you just talked about some of the other folks in the space who are also sharing great stories and I think they're great advocates to follow and ambassadors to follow.

Jennifer Castenton:

I think there's also, like the United States Department of Energy House, the ABC Collaborative, which is the advanced building construction, and they have a really, really hot and heavy focus on modular construction right now, not only for the efficiencies, but also for the quality and the energy gains that we can have from building in a factory and just having maintaining that quality and focusing on that. So, to answer your question, I think that there's so many different opportunities. I would say one of them is to visit and get with people in your local market and then also follow the technologists and the venture capitalists and see where they're headed as well, because they definitely are interested in this. In March, I presented on a panel with three modular builders Atoval, joe Wheeler out of Virginia Tech and Mighty Buildings and what the people in the room being South by Southwest, were very different and unique from going to a housing conference, and it was a lot of developers and investors who are all over this.

Jennifer Castenton:

So I would say that they're great ones to follow too.

Brian Hurd:

Well, I think, yeah, and I think it's. We've known for years that proof of concept is going to be everything, and I think once these kind of early adopters that you're talking about, jennifer, once these communities, and once this product really starts to not just be talked about but actually built and sold, then I think you're going to see kind of an avalanche. I mean, 30% still blows my mind, but I guess you can really think about it. You know it's a quicker build time. There's more turns a year, which is you know which is a developer's dream. So yeah, I guess.

Natalie Roberts:

And I think it addresses the supply, and that's one thing we haven't brought up, you know, in this conversation. Is Jennifer going back to your initial point about supply?

Natalie Roberts:

These homes are built in less than two weeks in a plant and from the time they're built to delivery, you're in under 30 days and then you have another. Typically, what we found with Walker was you have about 45 to 60 days of actually getting the home set and finished out. Right your site work. So we're addressing that. And one thing I wanted to bring up just hearing what the group is saying when it comes to innovation and technology, icon is a perfect example of changing a narrative and down the street right In Austin, five minutes down the street they sold immediately.

Natalie Roberts:

They could not sell them quick enough right, and that was at a price point that is not attainable. It would be.

Jennifer Castenton:

you know you're talking far from a table Right.

Brian Hurd:

I think they're five mid fives up.

Natalie Roberts:

I think they sell it at five, 50. Yeah, and so you know, we start to see, you know one innovative technology come out and I think that that also breaks open our doors to the conversations and to the consumer perception of what mh advantage and what cross mod and modular and ADU is all of it, but icons kind of leading the way on that from a consumer perception, if I don't know if you all agree with that, that's how I view.

Brian Hurd:

I think in some ways, yes, I mean I still love the efforts of Skyline champion and what they're doing, absolutely. But you're right, I mean I think they've they've been. You know, they started out with that small little. What was it? 400 square foot house in Austin Yep, you know it was in a tiny home and it ended up selling. For what? 455 or something like that you know, in this community, right down the street I think it's 150 homes.

Natalie Roberts:

Right Around yeah.

Brian Hurd:

I've walked the product. It's nice product, it's definitely not affordable, but I think what it does is is it opens, as you've said, opens the door for a different type of product, and we see the success of that. And that's why you know a lot of these venture capitalists Jennifer's mentioning a lot of these groups are saying, okay, wait a minute, what if we can do some form of alternative building, modular manufacturing, whatever and find a way to get cost down and maybe go a little bit higher density, kind of like some of the conversations we're talking about, you know, with condo regimes and whatnot, Mm, hmm, that's where I think there's going to be a massive amount of change. So energy efficiency has been brought up a few times. Will do you want to speak to that and how important that is to Fannie Mae or you specifically?

Will Stoker:

Yeah, it's definitely important to us. It's a bit of a tenuous conversation. If you're talking about the traditional manufactured housing stakeholders, there's going to be some potentially new regulations that change the way that they think about energy efficiency that are coming out through the DOE. And that will probably have the effect of making some of these homes a little less affordable to some of these.

Will Stoker:

Sure Right, if you're improving the envelope and the performance. There's some costs that goes into that. But I think that gets back to the perception that we were just talking about, right, I mean, one of the perceptions of manufactured housing is that it's a depreciating asset and that's all tied up in whether the home is energy efficient and can perform in the same way that a site built home can. So we want to see the industry do what it can to try and dispel that myth and maybe orient some of these consumers and some of the players in the market towards building an energy efficient product. You saw a really cool development recently with Clayton Homes. They are the largest builder of manufactured homes in the industry today. They have about a 50% market share. They've come out and said we're going to build all of our manufactured housing product, starting in 2024 to the new DOE zero energy ready product. Yeah, which is going to be a really exciting development.

Brian Hurd:

So they're going to get going faster than most of the production builders. I know Beezer Homes is putting a ton of effort on that net zero product and energy efficiency and whatnot, but wow, that's fascinating.

Natalie Roberts:

Just like Jim will right Always, I swear to, he is always taking the lead, even though he's not as active in the company. I had the opportunity about five years ago to work with them while they were launching a similar was like the first iteration of what we're seeing come out now, ie manufactured housing set up in a traditional neighborhood. And the innovation that comes out of Clayton Homes is just mind blowing, down to the way they have their offices set up with live tickers for every time a home is sold in North America they it's great to hear they're now taking a charge on energy so that we can start standing up to single family.

John Wright:

One thing I think gets missed too. I got this from Kevin Clayton a couple of years back, I think the output, the home itself, is looked at from an energy efficiency perspective. But the build process is so tight that the savings that you have compared to, say, traditional site built in the waste, the usage of tools, the driving to and from the site, whatever you want to, however you want to do it, it would be hard to put a number, but that's also savings, right? Kevin said at one point that a traditional multi-width home at the end of the build right it's gone through it's been assembled the amount of waste fits into 250 gallon drums. So I think all of us have been around the site. Bill huh, oh yeah, okay, that blow. I come from a family where my uncle, as a contractor, has been there for 40 something years. My dad's kind of a guy where he does all this stuff. Those guys couldn't put 250 gallon drums worth of waste in just an ad on her.

Brian Hurd:

There's just no way to do it.

John Wright:

So the efficiencies are amazing and I think that the economies of scale if we start to move closer to that 30% built you know control environment number that Jennifer mentioned that should further accentuate those efficiencies from an energy perspective, from a waste perspective, et cetera, which then should drive down our cost. Right, if I have to boost my energy efficiency but I'm also able to save because I'm doing more of it, it ends up being a wash. So we can keep that price point fairly flat versus everything right now just seems to be on a Northward trajectory. That pushes people out that want to get in, and that's the challenge.

John Wright:

The other point I think that's key is any supply can be good supply if we're backfilling with the attainable right. It can't be all manufactured, it can't be all 3D printed, it can't be all site built, it can't be all high end. We need that mix. So if an alternative comes in and says I can do whatever $550,000 house that would have cost me 700 a site built, even though that's not what we would consider to be in an attainable dollar category, it still opens that up, which then means the one below that there is why somebody is able to move in, and I think that's the other piece We've got to keep. It goes back to the supply. We've got to keep boosting that up in all of these creative ways.

Brian Hurd:

All areas? Yeah, absolutely. Well, I know everybody's got tight schedules, so what I'd love to hear is everybody just kind of give your parting shots, whatever you want to say in terms of where you think we need to go, what we can do. Jennifer, let's start with you. We're on the spot.

Jennifer Castenton:

Yeah, I jeez. I think that we need to pay attention to the failures in the industry and solve for those, because I, you know, katera came and went and I'm really happy that they did and I think there's a lot of learning for us to get from that, and yeah so and excited to see the big production builders getting into this and, if they can do, if they can show their manufactured housing right next to their site built, maybe that will be a turning point for consumers as well.

Brian Hurd:

Which is exactly what's going on in fruition. You know, that's that 10,000 unit community in just northeast of Denver that has mostly, or the vast majority, is going to be site built, but then you have 680 units that are manufactured and it'll be really interesting to see that symbiosis between the two. So one.

Natalie Roberts:

What's nice on that is is to again see the evolution. Scott Roberts, who is Roberts communities there, florida, arizona and Texas. He launched with a similar concept a few years back which was an integration of tiny homes, arby's and manufactured housing. The tiny home portion sold out in two days, and this was five years ago, and the rest how that master plan molded together. Jennifer, hearing you say, and Brian, you know, bringing in now single family, we're seeing an evolution is just, you know, the pace at which we see it. I think we all would love to kick into high gear.

Brian Hurd:

John Will parting thoughts.

John Wright:

I'll start, I think so. What we haven't talked about, and I think is important, is single with manufactured housing. So we started that. Deliveries were eligible in February 21. That to me has been a pretty fun low product because we weren't really thought about. Let's say, agency financing wasn't thought about for single with.

John Wright:

Single with has represented about a 75% since month one of production being in what we would consider to be, let's just call it, our affordable bucket, which is 100% area median income or less. That means all the borrowers that are coming through that would hit in that space are going to be the qualifying income where it's 100% of the area median income or less. And we've seen three out of every four of those borrowers that have done single with fall into that category. And that's without us pushing that like we do with, say, our flagship affordable product which is home ready, which caps out the qualifying income at 80% AMI. So you have to be a borrower at 80 or less in order to even qualify single with. We don't. It doesn't matter what you make, and yet three out of every four are still falling in.

John Wright:

I think it's price point. I mean we don't have like hard data, but you've got price point. You've got an acceptance of a smaller footprint, to the point of the tiny homes right when those sold out. I think you've got consumers that want that. So I think my parting shot would be anyone listening that's in that lending space or developing space. Don't be scared of that. Look into it, consider it. It is an option for those borrowers who would be willing and probably just don't know that they can get secondary market financing for that housing. Now for us, for manufacturers, all got to be real property, but that's fine. People are accepting of that and I would just encourage the investigation and the research because it's open for business on our side for those single with.

Brian Hurd:

Well, it's a time when the industry and sorry, well, I'll make it really quick, but you know the you know when we're slower in a lot of areas you know, if I'm looking at this chart correctly, over 65 million households realistically need to be under that $250,000 price point. That is massive, massive. So, anyway, sorry, well, I just had to act smart and throw in a little stat.

Will Stoker:

But no, that's all good. Yeah, just to tie it back to the perception point earlier and single wide is a good example of this. You know certainly you all deal with it as you're trying to to serve stakeholders and in the primary market. You know how do we address perception, how do we bring high quality product to market.

Will Stoker:

We dealt with that here internally too, for the single wide. So you know the thought was and this is the reason that we didn't allow it you know the thought was that these homes don't perform in the same way that you know traditional double wide and maybe an image advantage type product would. And then we started allowing it on a variance basis and when we started looking at the data we found well, the loans are performing about, as well as some of these other products that we're talking about.

Will Stoker:

It's a motivated consumer. That's real property, to John's point, so there's that aspect of it as well. I think we spent most of this conversation talking about the supply side of the equation and I think that's really important. But on the demand side, you know, we really need, at the end of the day, more lenders to take the affordable and attainable housing and the products that are that are paired with those to take it seriously. You know we're lucky that Thrive is a great partner and is out there evangelizing on our behalf and making a lot of these relationships. The reality is that some of the mortgage lenders that are out there still have a really outdated perception of housing.

Will Stoker:

And so, yeah, most of them do right, and so they choose not to originate these types of loans as a result, and that ends up being a lot of the work that John and I do here at Fannie Mae is like trying to dispel those myths and try to bring more lenders into our camp to originate these loans.

Brian Hurd:

Or you can just refer them to us.

Jennifer Castenton:

There you go.

Brian Hurd:

Well, I so appreciate you all. You know, again, you're here for a reason, because we look at you as really kind of the masterminds behind. You know or certainly the evangelist is a good word to use for affordable housing something that Natalie and I have been talking about for all three seasons to some extent, you know, even when we did the homeless series. So you know, and this is a great way to kick off what will ultimately be a three-part series. So thank you so much, you know, for joining us, sharing your thoughts and look forward to continued discussion.

Jennifer Castenton:

Thank you so much Great work. John, we appreciate it. Yeah, it's a little bit, yeah. Next, episode.

Will Stoker:

No, I definitely hope so. Yeah, bye.