According to the actual paper that introduced the distinction, and adjusting for change of terminology in the last 50 years, a type-1 hypervisor runs in kernel space and a type-2 hypervisor runs in user space. x86 is not virtualizable by a type-2 hypervisor, except by software emulation of the processor.
What actually can change is the amount of work that the kernel-mode hypervisor leaves to a less privileged (user space) component.
For more detail see https://www.spinics.net/lists/kvm/msg150882.html