This piece in the NYT reports that Warren Buffett is making a countercyclical move into manufactured housing. Until recently, at least, this form of housing (pejoratively referred to as ‘trailers’) has been very significant in the US – around 20 per cent of all new houses, and up to 50 per cent in rural areas.
This raises a number of questions. First, why there is no comparable development in Australia, where manufactured units are typically used only as holiday accommodation? Is it a matter of building regulations, and if so should we be changing these regulations to bring down housing costs? Or, as the NYT story implies, does this kind of housing degenerate rapidly towards slum status. The rapid decline in the manufactured housing market during the boom of the late 90s seems to support the view that this is a last-resort option.
There’s also a bigger question which I’ve been puzzling over for some time. Real incomes for the bottom 40 per cent or so of US households haven’t risen since the 1970s. At the same time, ownership of items like TVs and washing machines has expanded significantly. That’s not surprising, since the relative price of these items has dropped. But that implies that other relative prices have risen, and housing is an obvious candidate. Has housing quality declined for low-income Americans? If consumption of all items has increased, while income has been constant, the implication is obviously that savings have declined, presumably because of the availability of new forms of credit, and the story also hints at this.
I’d be very interested in any comments and grateful if anyone has useful references on the points I’ve raised.