Center for American Progress

Fact Sheet: Using Modular Building To Increase Affordable Housing Stock
Fact Sheet

Fact Sheet: Using Modular Building To Increase Affordable Housing Stock

Modular building could reduce construction costs, making building new homes more affordable.

Crane lifting piece of a modular home
Seen is a crane as it takes four 15-foot-wide by 60-foot-long modular home segments and stacking them on top of each other to make a new duplex, August 2018. (Getty/Hyoung Chang/The Denver Post)
Read CAP’s report on modular building

Modular building, a method for rapidly constructing housing stock, offers a solution to alleviate the shortage of affordable housing in the United States. This construction technique allows the entirety of a building to be fabricated at an off-site factory. The building’s components, or modules, are then transported to the construction site, where they are assembled into residential buildings indistinguishable from those traditionally built on-site.

The off-site construction of a low-rise multifamily project can save 20 percent of total construction costs relative to a traditional on-site construction.

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Modular building:

  • Has the potential to reduce construction costs and make building new homes more affordable, especially in areas experiencing severe shortages in affordable housing. Most importantly, modular building can deliver housing quickly to meet the needs of cost-burdened individuals and families who otherwise would be displaced or become homeless. If governments engage in coordinated initiatives at all levels to bring modular building to scale, it could also help make housing stock more resilient and sustainable relative to the challenges of climate change.
  • Offers several benefits that traditional on-site construction does not, including cost savings, shorter development timelines, and an overall safer and more efficient development process. (see table below)

Modular building can accelerate project timelines by 30 percent to 50 percent.

  • Still represents a relatively small segment of the residential construction market in the United States (3 percent), in contrast to other countries (45 percent in Finland, in Norway, and in Sweden and 15 percent in Japan) where the practice is well-established. Several factors have limited the United States’ market share, including financing and payment schedules, building codes and zoning, transportation requirements, labor shortages and costs, and stereotypes.

The construction of modular buildings typically requires 67 percent less energy than the conventional construction of equivalent products.

The table below details the benefits and challenges of modular building.

To fully realize the benefits of modular building and bring them to scale, it is essential for governments at all levels to promote the expansion of the modular construction industry by enhancing its capacity and competence and addressing the critical challenges it faces.

The Center for American Progress offers the following recommendations:

  • Expand financial resources for the modular construction of affordable housing. States and localities should make grants available for modular affordable housing projects that meet specific climate and environmental sustainability criteria.

Federal agencies should expand strategies to make tax-exempt private activity bonds available for modular affordable housing projects, particularly multifamily developments. Government-sponsored enterprises should continue exploring how to support the financing of modular affordable multifamily housing—for instance, by incentivizing the securitization of mortgages for homes built with modular techniques that meet specific climate and environmental standards. And the federal government should restructure construction financing models to provide builders substantial funding during the initial phase of modular projects.

  • Standardize building codes and land use to facilitate production and project approvals. States should work together to develop uniform building codes governing modular construction. These would enable manufacturers to streamline their production. In addition, more consistent and standardized administrative rules and building codes at the state level would improve efficiency, reduce costs, and ultimately facilitate broader adoption of modular building. The U.S. Department of Housing and Urban Development could play a key role in standardizing state-level approval processes by developing language around modular building codes for states to adopt. Local governments should streamline planning approvals and reform zoning to facilitate the adoption of modular construction of affordable housing, particularly multifamily housing in high-density, transit-oriented developments. State departments of transportation should be encouraged to harmonize regulations for transporting modules, at least within regions.

Only 39 states have state modular programs that ensure modular homes meet state building codes and amendments.

  • Support a more diverse workforce and higher wages in modular construction jobs. Because modular building uses rapidly advancing technologies that increase construction efficiency and productivity, the modular construction industry should prioritize workforce development and targeted hiring. Modular manufacturers who receive government support to construct modular affordable housing should be required to pay prevailing wages and create pathways to jobs for workers from all walks of life.
  • Expand the capacity of modular building. Congress should authorize grant and tax credit programs to support the expansion of modular housing construction capacity. Local governments should incentivize businesses to establish modular factories—for example, by purchasing units built off-site; facilitating the use of public land, idle lots, and brownfields for modular business opportunities; and promoting public-private partnerships.

The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.


Michela Zonta

Former Senior Policy Analyst, Housing Policy


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