Against the public interest
Opportunity denied
The story below was in part inspired by reading a substack blog called ‘Full Stack Economics’. The author is Timothy B Lee of San Francisco in the USA. You can see his content here:
In Western Australia the Administrative Appeals Tribunal has ruled that homes made in a factory should be equipped with a chassis and wheels. Some councils enforce this nonsense, others disregard it. A house with a tow bar and wheels might look out of place in a conventional subdivision. But in a proposed Caravan Park or a Park Home Park this ruling might be enforced even though the home never moves and is occupied on a permanent basis. Such a rule would very likely stifle the idea. Fairies have wings. Should elephants?
Producing a home in a factory is very much more efficient and can be a whole lot cheaper. The product doesn’t have to look fragile or any less attractive than the bricks and mortar version. Nor does it have to look like a ‘donga’, as seen in a mining camp. Mining camps don’t fall under the planning controls. It’s not easy to get entire families to commit to living on a remote mine site in a desert up north. Perhaps the occupants prefer dongas because single person accommodation offers more privacy, and its preferable to the bunkhouse style that might make it difficult to get a decent sleep after a 12 hour shift.
A manufactured home offers a fantastic opportunity to accommodate the entire family inexpensively. It’s appropriate if you desire to have a two or three bedroom, one bathroom house that can be paid off quickly rather than be a burden throughout your working life. Timothy’s article documents the barriers that prevent this approach being adopted in the USA. The planning system in the USA and Australia looks after the interests of those who already have a house in a conventional suburb that demand that their neighbours use bricks and mortar. Fifty years ago, the most desired roof was clad with fired clay tile, heavy, expensive and prone to leak. Those who chose steel were seen to be lowering property values. Change is slow but it happens.
Todays suburbs are a network of roads designed to allow a car to reach the front door. Speed humps and roundabouts slow the traffic. There is a call to reduce speed limits to 30Km per hour, for the safety of kids, cyclists and pedestrians. The design for suburbs, that we nowadays take for granted, was developed in the horse and buggy age. Then, the means of transport was primitive and relatively slow. Kids played in the streets that were often paved with natural earth. As an urchin my grandmother played marbles in Hay street that is now in in the heart of the central business district of Perth.
If we re-designed suburbs to exclude cars, houses would not need to face up to a heat sink in summer and a wind tunnel in winter. Furthermore, with each house accommodating two to three vehicles you stand a good chance of being bunted from behind by an out of control fast moving projectile that could come to rest in your living room.
In the next design for a more desirable place to live, fast moving projectiles would be quarantined in one location serving an entire block of residences. The houses would be placed for the convenience of kids, gardeners and walkers. Handcarts would be allowed but not automobiles, cyclists, e-scooters and perhaps even gophers. Then the house could be positioned to suit the he passage of the sun to provide for protected courtyards, real grass lawn underfoot and trees to provide shade and shelter. You would be saying ‘Good morning’, more often as you moved to and from your garage along a narrow walkway shaded by a roof and equipped with the occasional bench seat where your neighbour could ply you with a beer. The chance of developing a safer, sharing, co-operative and supportive community would be enhanced to an extent that is currently unimaginable. ‘Hit and run’ would become a thing of the past and ‘burglary’ as an occupation would disappear as the ‘fast getaway’ became impossible. Playing marbles might come back into fashion. There would be no more street facing ‘front doors’, impressive porticos, verandahs and heat absorbing picture windows, just openings in the most appropriate places to give access to an outdoor environment where you prefer to be, so as to build up your vitamin D and fend off the Covid. Fences between houses would probably disappear because they would simply get in the way of children’s play and social interaction. I see this as the ideal environment for a lightweight, thermally efficient, factory built, low cost modular home that could arrive on a truck and be slung into place using a crane.
Timothy writes:
In many areas, the most affordable type of housing is manufactured homes. Centralizing production in a factory allows companies to take advantage of economies of scale and employ less skilled workers for some parts of the manufacturing process. As a result, a manufactured home tends to be much cheaper, per square foot, than a conventional stick-built home.
Manufactured homes are frequently called “mobile homes” or “trailer homes,” but that’s misleading. While manufactured homes are shipped to a lot for installation, most are placed on a permanent foundation and designed to never be moved again.
But as Matt Yglesias explained in an excellent article last year, the law puts manufactured homes at a systematic disadvantage. One federal rule requires manufactured homes to have a chassis that stays attached to the home even after it is placed on a permanent foundation. This not only drives up the cost of manufactured homes, it also has perverse regulatory implications. The chassis requirement makes it easy for hostile local governments to regulate them as if they are actually mobile homes, which are often subject to more onerous regulations.
Even worse, the fact that they’re theoretically mobile means that manufactured homes are often not eligible for conventional 30-year mortgages. Instead, they have to be financed with chattel loans that tend to have shorter terms and higher interest rates.
These factors have contributed to a dramatic decline in the manufactured home industry in recent decades. Manufactured home shipments peaked back in 1973 with 581,000 homes sold. In 2021, the industry sold only 106,000 homes, in spite of today’s much larger population. There’s room to build a lot more manufactured homes if the legal environment were more favorable.
This is my comment: Sadly, this is an opportunity denied. In my view its unconscionable. Its the result of a gross interference in the market at the behest of sectional interests.
Right now it’s very normal for an affluent family to buy a custom home and fill it with furniture from Ikea or KMart. The stick frame house being built today has little that is custom built about it. Hopefully, we are not far off a revolution in the housing market that could provide affordable housing for all. The revolution will likely come with the opportunity to buy a beautifully finished house off the shelf and place it on rented rather than purchased land. Hopefully we will see the disappearance of the two car garage, the driveway and the road out front, and the advent of communal garaging within walking distance. The result could be suburbs without subdivision. This will require adjustments in the planning system. Planners will have to get out of the way.
If this comes with smaller mortgages, easier resale, reduced house price inflation and enhanced mobility for workers, national productivity will be enhanced. We will all be much better off.
The following words apply equally to the USA and Australia:
We have homeless people in America. We have people living in overcrowded housing. We have people trapped in neighborhoods with high crime and bad schools. Housing is both a key to human dignity and also a key to all kinds of access to economic opportunity. We also just have a lot of people who, if they could spend less on housing, would have more to spend on other things. That spending could power the economy forward in other ways.
Credit to Mathew Yglesias on his substack called ‘Slow Boring’.