12/22/2016
Sherry Farley, President and CEO, Frontier Housing
Stacey Epperson, President and Founder, Next Step Network
Challenge: Manufactured houses, once commonly called mobile homes, represent the largest source of unsubsidized affordable housing in the United States. They are an energy-efficient and readily available option for communities experiencing housing shortages. Yet many view the homes as inferior and dismiss them as a viable alternative.
Historically, manufactured housing has been overlooked as an option for promoting financial security and stimulating wealth through homeownership. The prefabricated homes, constructed in factories and assembled at building sites, are an energy-efficient and readily available solution to housing shortages. But the industry was plagued by stereotypical images of mobile homes, even though the latest generation of homes included modern designs with efficient energy systems. The stigma was compounded by a misunderstood marketing and loan structure.
In 2004, the nonprofit corporation Frontier Housing pledged to cut its building cycle times in half. To meet this challenge, the organization recognized manufactured housing as the obvious choice. But Frontier Housing's president, Stacey Epperson, had viewed manufactured housing as an inferior product rather than as an essential, affordable option for Frontier's customers. In researching the field, however, she discovered that it represented the largest source of unsubsidized affordable housing in the United States. Manufactured housing was home to 22 million Americans with median incomes of about $30,000, while those with median incomes of at least $70,000 lived in traditional site-built housing.
In 2010, after testing a regional pilot in Eastern Kentucky, Epperson created Next Step, a subsidiary nonprofit of Frontier Housing. Next Step's mission was to put sustainable homeownership within reach of everyone, while transforming the manufactured housing industry through consumer education, affordability and energy efficiency.
Next Step became the first place where the elements necessary for Manufactured Housing Done Right came together. That program began training and providing technical assistance to a national network of nonprofits to increase access to affordable housing by following the Next Step System. The system connects responsible financing, comprehensive homebuyer education and a method for delivering high-quality, sustainable factory-built housing at scale.
With Frontier's support, Next Step was launched as an independent social enterprise in 2013. Over the next three years, Next Step's fast-paced infrastructure developments led to unforeseen challenges that became opportunities for innovation. One of Next Step's critical lessons came in 2014, when they examined their impact and realized that their member-centric strategy needed improvements. In order to grow, it would be essential to work more closely with the industry, including manufactured housing retailers, lenders, community owners and manufacturers.
Before pivoting their strategy, they deconstructed the layers of their mission: preparing homebuyers for purchasing the homes, providing quality homes with fair loans and sustainable life-cycle costs and advocating for relevant policies. Next Step realized that all the layers did not need to be in one package as they had been with the original member-centric strategy. Instead, they could be delivered over time through different channels that also drew strength from industry players.
Next Step then launched two industry initiatives in 2015, Retail Direct and SmartMH, to leverage the existing systems to deliver quality factory-built homes, while continuing to sustain their members' strategy. In the Retail Direct program, members partner with Next Step approved retailers to prepare customers who then order homes through the retailer. The member acts as the customer's trusted advisor while the retailer orders homes with a small deposit from the member, then the retailer completes the home, manages the construction and, after closing, assumes the warranty liability.
With SmartMH, Next Step identifies loans that support the purchase of Energy Star manufactured homes incentivized by utilities. The goal of the pilot program is to increase production of Energy Star manufactured homes from one percent to 50 percent in Kentucky over the next two years and provide access to better loans for these purchases.
Over 10 years, Next Step has created a valuable process by asking businesses to do something different and innovative. To date, the Next Step Network has supported more than 1,400 families who have either bought a new Next Step home or live in a manufactured housing community that is owned and managed by a network member. Next Step has created a field of work where none existed before with a network of 49 Members serving 28 states and the District of Columbia, and partnerships with Clayton Homes, Champion Homes, Cavco and regional manufacturers.
Erika Ortiz is a homeowner who worked with a Next Step network member to purchase a new Energy Star manufactured home and replace her deteriorating mobile home, where she had been living with her mother and two daughters. Ortiz enrolled in a financial education program that included classes and financial counseling and was able to lower her debt and obtain a responsible loan. In the winter of 2012, Ortiz purchased a new manufactured home in a South Tucson community. After the family moved in, she said: "Primavera is building another house down the street. Every day I check the progress. I think about how another family will move in and be as happy as we are."
Ortiz's story is just one of many, and going forward Next Step will continue to expand their network and develop new programs to deliver more quality, energy efficient homes coupled with homebuyer education and fair financing to families nationwide.