HUD aims to help multi-story manufactured housing go vertical

For decades, manufactured housing has excelled at producing lower-cost homes.

What it has struggled to do is go vertical.

Fact is, America’s most severe housing shortages are no longer in places where inexpensive land is abundant. They’re in high-cost metropolitan markets where making housing pencil often requires more homes on less land. That makes manufactured housing’s challenge – up to now – to develop and build multi-level homes everybody’s challenge.

A proposed rule from the U.S. Department of Housing and Urban Development (HUD) could help change that equation.

The proposal would expand the definition of a manufactured home and allow upper-level sections of multi-story manufactured housing to be transported and assembled without a permanent chassis — a technical change that industry leaders say could unlock new forms of higher-density housing, reduce construction costs and make manufactured housing more viable in expensive, land-constrained markets.

For developers working in places such as California’s Bay Area, where land costs and labor shortages can make conventional construction difficult to justify, the proposal represents more than a regulatory update.

It could effectively remove one of the industry’s most persistent design and engineering obstacles.

“This rule change…opens up more design flexibility. It opens up more innovation potential. It reduces some of the vertical construction cost, and that may mean that some of these sites that maybe aren’t even economical for site-built construction, because labor is so expensive and scarce, can make sense to build with a two-story manufactured home with no chassis under the upper level,” said Sean Roberts, CEO of manufactured housing developer Villa and a member of HUD’s Manufactured Housing Consensus Committee.

“That opens up opportunities to develop more housing in these locations where it’s really, really needed, and that’s a good thing.”

A rule aimed at the next generation of manufactured housing

Last week’s proposal is designed to encourage more multi-story manufactured housing construction.

Specifically, HUD would permit upper-level sections of manufactured homes to be transported and assembled without a permanent chassis. The proposal complements language in the 21st Century ROAD to Housing Act that would remove the permanent chassis requirement for the first floor of manufactured homes.

Roberts told HousingWire TBD that while two-story manufactured homes are certainly possible under current regulations, they have become less common because of the design complications and costs associated with permanent chassis requirements.

For developers operating in high-cost states such as California and Colorado, where Villa is active, the implications could be significant.

“The only way to get a project in many of those places to make sense economically is to be more land-efficient, which means to build more per square foot of land, and the way you do that is by going vertical,” Roberts said.

Why the chassis matters

The challenge with requiring upper-level sections to include a permanent chassis is not simply the additional cost.

Roberts estimates the requirement can add between $5,000 and $10,000 to a typical home. More importantly, he said, it forces designers and engineers to work around structural steel framing when locating stairs and routing mechanical, electrical and plumbing systems.

Builders often must cut stair openings into the chassis and weld components together in ways that are considerably more complicated than conventional framing methods.

Removing the upper-level chassis would allow second stories to be designed more like traditional upper floors, with more precise ceiling heights, improved stair placement and more efficient overall layouts.

Lesli Gooch, CEO of the Manufactured Housing Institute, said in a statement that the organization strongly supports the proposal.

“From a construction standpoint, eliminating the fixed steel frame from the upper floors removes major design barriers. Enhanced design flexibility, reduced unnecessary costs and material waste, and expanded options for today’s homeowners can all become a reality with this change,” Gooch said.

The proposal also builds on a 2024 HUD update to manufactured housing construction and safety standards that permits up to four dwelling units within a single manufactured housing structure.

“What this all means is you can have much more efficient and innovative two-story single-family homes, duplexes, triplexes, and it opens up a totally new type of way of thinking about manufactured homes, which is really, really exciting, because of the cost efficiencies of building this way,” Roberts said.

From rural housing solution to urban housing tool?

More than half of all manufactured homes today are located in rural areas, where land is relatively abundant and housing costs are lower.

Industry leaders believe that could change if federal rules make multi-story designs easier and less expensive to build.

Villa is currently working on a project in Santa Rosa, California, where several two-story manufactured homes may be incorporated into the community. Roberts said the proposed rule would make projects like that easier to execute and more economically feasible.

Others in the industry see similar potential.

During Cavco Industries‘ Q4 2025 earnings call in May, President and CEO William Boor argued that broader removal of chassis requirements could dramatically expand manufactured housing’s relevance in urban and suburban markets.

“A lot of the innovation that could take place…if you think about those kinds of opportunities, you start to see the opportunity for product innovation for urban and suburban markets, and that opens up a whole new market opportunity for this industry,” Boor said.

Roberts believes another regulatory barrier may eventually warrant review as well. Current HUD Code requirements mandate that at least one exterior exit door be accessible from each bedroom without traveling more than 35 feet.

While that standard works well for single-story homes, Roberts said it becomes significantly more restrictive in multi-story designs where stairways consume much of the allowable travel distance.

If HUD wants to fully unlock multi-story manufactured housing, he argues, that requirement could become the next area for reform.

The local approval challenge

Even if HUD finalizes the proposal, its ultimate impact will depend heavily on what happens at the state and local level.

Manufactured housing has gained increasing acceptance among policymakers seeking solutions to housing shortages and affordability challenges.

Since 2021, lawmakers in 10 states have enacted laws requiring local governments to allow manufactured and modular housing by right in single-family zones as part of broader housing legislation. Florida, Idaho and Virginia joined that list this year.

States have also begun modernizing financing rules. New York, for example, last year enacted legislation allowing eligible manufactured homes that are permanently affixed to land and connected to utilities to be classified as real property rather than personal property, potentially giving buyers access to conventional, GSE-backed mortgages.

Gene Kim, executive vice president of commercial real estate at Ascent Developer Solutions, said modern manufactured housing communities increasingly resemble traditional residential neighborhoods.

Removing chassis requirements altogether would only accelerate that trend.

“It’s cheaper, and you now have better designs and better quality communities. So, the distinction between site-built and manufactured housing communities is going to get even thinner,” Kim said.

Local governments still retain authority over design and architectural standards. But those standards for manufactured housing cannot exceed those imposed on site-built homes.

That reality could become increasingly important if HUD eventually removes chassis requirements altogether.

“If ‘chassis’ is removed outright from HUD’s definition, it will force states to revise their own laws, as most state laws rely on the HUD definition,” the draft notes.

Randy Grumbine, executive director of the Virginia Manufactured and Modular Housing Association, said the change would ripple through numerous sections of state code.

“It’s pretty involved to make the change and clean up,” Grumbine said. “It’s in sections you don’t realize until you start looking.”

Whether those legal and regulatory changes ultimately bring manufactured housing into more traditional suburban neighborhoods remains uncertain.

Grumbine cautioned that adoption will take time.

“But within the next five years, sales could rise as we see more adoption,” he said. “We need more developers coming to Virginia and doing subdivisions to show what’s possible when done right,” with such features as curbs, landscaping and gutters.