Affordable Housing, Unaffordable Credit? Concentration and High-Cost Lending for Manufactured Homes

Abstract

Policy makers place high hopes in manufactured homes, the largest source of unsubsidized affordable housing in the US, to alleviate housing supply shortages. This paper shows that high market concentration in the multi-billion dollar market for manufactured home loans enables lenders to charge substantially higher interest rates than for site-built homes. Loan-level data indicate that loans in counties with higher market concentration carry significantly higher rates. Evidence from bunching around the regulatory HOEPA rate threshold, an instrumental variable analysis, as well as a difference-indifferences analysis around the introduction of HOEPA suggest a causal relationship. We establish that integrated lenders, which play an outsized role in the market for manufactured home loans, charge particularly high rates, and additional results suggest that these lenders exploit their market power over borrowers.

Keywords: mortgage market, competition, household finance, manufactured homes, mobile homes

JEL Classification: G21, G23, L13, R31