OAKLAND A nonprofit developer is using manufactured housing to create new homeownership opportunities in the high-cost San Francisco Bay Area housing market.

Oakland Community Housing, Inc. (OCHI), is purchasing small vacant lots around the city and then placing manufactured homes on the properties that are then sold to low- and moderate-income families.

“The East Bay has a serious housing shortage,” said Dwight Dickerson, OCHI’s executive director. “We are constantly looking at innovative ways to allow more people to remain here in their own community, near family and friends, and to actually buy a home if at all possible. We think that we have come up with a combination of ideas that will have a very successful outcome.”

A grand opening was recently held for four homes that were built under the group’s Infill Homeowner-ship Initiative. These houses are known as the E Street Project, a reference to the development’s location. OCHI completed another home in 2004, which was sold to a single mother with two school-age daughters.

In addition, the nonprofit is working on 16 more homes on two sites in another area of Oakland. These homes are known as the Linden A and B projects. The first group of homes will be done by early 2006, and the second set is scheduled to be completed in mid-2006. They are significant because they will be the first three-story manufactured homes built under the group’s initiative.

The roughly $1.5 million E Street Project features single-story homes that are built on a lot that had been owned by the city of Oakland. The 22,000-square-foot lot had become a dumping ground.

Other developers looked at the property and passed on it.

OCHI saw the lot and decided it could put four homes on the site, which is in a residential neighborhood. The organization also built a one-block section of street as part of the construction process.

The Infill Homeownership Initiative has helped the organization think about developing on smaller scattered sites in a way that was not financially feasible before, according to Amanda Kobler, OCHI’s project manager.

OCHI cites several benefits of working with manufactured housing, which, in general, means that sections of the home are constructed in a factory environment rather than built on site. Because these houses are built in a factory, there’s more quality control, and materials stay out of the rain, reducing mold and other problems.

The pre-built sections are transported to a building site and then assembled. The manufactured housing industry estimates that its homes can run as much as 35% below traditional construction costs.

Officials stress that manufactured homes are not trailers, and they are not mobile homes. Built to Department of Housing and Urban Development standards, they are installed on permanent foundations. In many cases, the latest models are difficult to distinguish from site-built homes.

In 2004, one out of 10 new single-family housing starts in the nation was a manufactured home, according to the Manufactured Housing Institute.

The E Street homes are three-bedroom, two-bathroom houses with approximately 1,440 square feet. They were manufactured by Marlette Homes.

The houses sold for about $390,000, which is the market value in the neighborhood. Two of the buyers, however, are Sec. 8 housing voucher holders who will use their vouchers toward their mortgages. These families earn between 30% and 50% of the area median income (AMI), according to OCHI.

Another home went to a family earning about 70% of AMI, and the fourth house was sold to a family that earned about 90% of AMI.

To make these homes affordable, the families may have also received downpayment assistance from the California Housing Finance Agency and/or used the city of Oakland’s Mortgage Assistance Program.

The challenges

Because OCHI is using a hybrid type of construction that calls for attached garages to be built on site, one of the big challenges was to find contractors and subcontractors who were interested and able to do the job.

The group eventually found a local team of contractors to work on the project.

There were also some financing issues. In some cases, lenders aren’t used to handling loans involving manufactured housing. The construction period on a manufactured house is often shorter than a conventional home, so standard loan draw-down schedules may not work and may need to be modified.

For the E Street deal, OCHI received a $270,000 acquisition and predevelopment loan from the Nehemiah Community Reinvestment Fund.

“I think manufactured housing is an important tool in meeting people’s need for affordable housing,” said Peggy Jones, director of the fund. OCHI, she said, is being creative by looking at using these homes for small infill projects.

Wells Fargo provided an $864,000 construction loan. The 12-month loan had a variable rate, pegged at 0.85% above prime, and had a 75% loan-to-value ratio.

Wells Fargo also worked with the families in purchasing their homes.

On the eight-home Linden A project, OCHI received a $1.9 million construction loan from Silicon Valley Bank (SVB). On this project, the manufactured-home factory required 50% of the construction costs upfront, according to OCHI officials. SVB agreed to extend the funds without a guarantee from the factory. The bank, however, mitigated its risk by requiring phased delivery and construction of the homes, according to OCHI.

Few affordable housing developers have done deals like these, so OCHI’s initiative serves as a demonstration program.

The nonprofit has received a grant of Ford Foundation funds by CFED, a nonprofit economic development organized based in Washington, D.C., to document the program’s “best practices” so that the strategy may be used elsewhere.

Since it was founded in 1973, OCHI has developed approximately 1,200 units of affordable rental and for-sale housing.