The percentage of US modular and container homes is small. Could it have a bigger impact?
Modular construction, built inside a climate-controlled factory and then trucked to a site for assembly, has been slow to catch on in the U.S. It makes up less than 4-percent of the housing stock, compared to 15-percent in Japan and 45-percent in Scandinavia. Is it the answer to increase the housing supply? And what about other ideas like container homes?
For clarification, a modular home is different from a mobile home, also called a manufactured home. It’s already assembled by the time it gets to the site and doesn’t need a permanent foundation.
Upping the supply in Cincinnati and Dayton and Columbus
Vacant urban lots
Tamara Sullivan is focused on finding creative housing solutions in Cincinnati and beyond. She landed on modular construction as a way to quickly build single and middle housing on vacant urban lots. Her company, InnovaLab Ohio, bought an Evanston lot from The Port where she says Schnicke Development Group is building a duplex to be finished in the first quarter of 2025.
She told Brick by Brick, “It bothered me that at the early part of the 20th century people could order their first home from a catalog and a hundred years later we’re still building houses exactly the same way.”
Sullivan is also working on a modular home development in Westwood.
InnovaLab just finished seven modular homes in Detroit’s North Corktown neighborhood, an area divided by I-75 and also still reeling from the 2008 financial crisis. They will be sold as part of a community land trust.
Dayton City Manager Shelley Dickstein is open to modular construction and remembers homes built on Patterson Road.
“Those were Unibilt (largest modular home provider in Ohio with a factory in Vandalia) and they were the first modular homes that were done in the city. We haven’t done a lot out in the neighborhoods yet.”
Dickstein says she thinks it’s largely because there isn’t a developer proposing them.
Modular apartments
But Dickstein recently was impressed at a presentation for a modular apartment building in Columbus, Trolley District Apartments.
“And they are creating very large apartment complexes with their modular just by bringing in the boxes and adhering and fixing the boxes and all of that,” she says.
Columbus Underground.com reports, “Many of the apartments in the building are actually made up of two modules – one with a living room and kitchen and the other containing a bedroom and a bathroom – which are stacked with a crane on top of each other or onto steel support beams.”
Developer Connect Realty says its modular system will “result in lower construction costs and faster overall delivery.”
Modular tiny homes
Residents of Vista Village are preparing to move into the Columbus tiny home development at the beginning of 2025. The nonprofit’s Henry Hook told the Columbus Rotary, “Our model will serve those who are homeless today and those who are the precipice of being homeless tomorrow (like) teenagers and young adults, aging out of foster care.”
It also serves men and women returning from incarceration, veterans and those recovering from substance abuse.
Phase I includes 41 modular tiny homes constructed by Unibilt and is the first of its kind in Ohio.
Hook says, “Many times, our social service sector treats, addresses the needs of these individuals in their own silos. We believe that the ultimate goal is to transition to employment, independent functioning in the broader community in 18-24 months.”
Vista Village also includes a two-acre park and a community center with wrap around services.
Miami Valley Housing Opportunities is planning a similar development for Dayton, Beacon Place Village, and hopes to break ground in November, 2025.
Container homes
House in a Box has a shipping container model home in Lebanon and looks to expand its footprint. Brick by Brick’s Hernz Laguerre Jr. took a tour.
Worldwide, one million people live in container homes. Long considered niche, shipping containers are picking up speed and anticipated to reach a market size of $126.5 billion by 2034.
One roadblock is zoning. Some municipalities heavily regulate them.
Modular market trends
According to the Census Bureau Survey of Construction data and a National Association of Home Builders analysis, the total market share of non-site built single-family homes was just 3-percent in 2023. That’s up from two-percent in 2022.
It appears modular construction has a lot of catching up to do, according to this graph from 1992-2023
Credit: NAHB Blue=modular Red=panelized/pre-cut
A total of 27,000 single-family units used modular (12,000) and panelized/pre-cut (15,000) construction methods in 2023. This is out of a total of nearly one million single family homes completed.
Modular multifamily construction is increasing, up 7-percent, the highest it’s been in two decades, but modular single-family is not. One reason, experts say, is it’s hard for manufacturers to expand because neighboring states generally won’t certify construction from an out of state factory. This can require expensive inspections.
The massive U.S. apartment developer Greystar is hoping to mimic modular construction in Europe, which it says is much faster. Fastcompany.com reports Greystar wants to cut construction costs by 10-percent and finish projects in half the time. To do this, it bought a factory in Knox, Pennsylvania to test out the concept and is building a modular Pittsburgh apartment complex.
Is it faster and cheaper?
In 2023 a modular home in the U.S. took just over eight months from permit to completion, two months faster than a site-built home. In 2019 it was one month. Unibilt Custom Homes , the largest modular home producer in Ohio, says it can do it in about three and a half months. (including plumbing, heating and electrical on-site hook-ups) Southwest Ohio site-build developers tell Brick by Brick they can finish a house in six to nine months.
Modular is not necessarily any cheaper than a home built onsite. Unibilt’s President Greg Barney says the main advantage is it’s built inside a factory in a controlled environment. (we take a tour for the podcast)
“We always say, do you buy a car? Do they dump a pile of parts out in your driveway and do they assemble it in your driveway? No. And now with a home, you’re buying the most expensive purchase you make in your lifetime and when they site build they dump a pile of lumber in the drive in the mud and it gets rained on and so forth,” says Barney.
Unibilt says it’s difficult to get a home under $300,000.
Benefits of modular housing
A study for the Modular Building Institute (MBI), the industry’s primary trade association, projected a 16-percent cost savings and a 39-percent shorter timeframe when compared to conventional construction.
The Harvard Business Review reports, “the shorter schedule has proven to be accurate,” and “From a developer’s perspective, the expedited timeline can be a financial bonanza, saving months of carrying and overhead costs.”
That’s because the construction is happening simultaneously at two places. While the factory is building the boxes, subcontractors are digging and putting up foundation walls on-site. When that’s finished the electrical boxes can be set in place and so on.
The Harvard Business Review points to a 2019 McKinsey & Company report that said modular construction could deliver in a 20-50-percent shorter time but “that is still more the exception than the norm.”
Another benefit is quality, as the President of Unibilt pointed out. Everything is built inside a climate-controlled factory without being subject to the weather. The house, apartment, or commercial building, moves from station to station inside and workers do it with a high level of precision.
Disaster housing
The fact that it can be built quickly helps in disaster situations. Modular homes are coming to Lahaina, Hawaii where 12,000 people were displaced by a wildfire in August, 2023.
One development has 450 interim units and Hawaii Public Radio reports the first nine families moved in August, 2024. They will live there cost-free until August of 2025. Hawaii Public Radio says, “The housing will be used for fire survivors for the next five years. The property will then be turned over to the Department of Hawaiian Home Lands.”
In 2017 the MIT Lincoln Laboratory began a research project called “Alternatives for FEMA Disaster-Related Housing Assistance.” One of its reports looked at “factory-built housing” as defined as modular, panelized and pre-assembled housing and excluded both site-built housing and manufactured housing (mobile homes).
One challenge is pop-up factories. The report asks:
- Are pop-up factories government-supported, or fully private-sector led?
- Through what agency (e.g., housing, community development, emergency management) and at what level would government support be appropriate and warranted?
- How should pop-up factory facilities be utilized once the demand surge for post-disaster housing has passed?
- What is the best way to leverage the efficiencies of production given the difficulties of managing variation across individual orders and installation?
The report emphasizes the need for not just single-family modular housing but hotels and multi-family.
Limitations
HUD rule
The MIT report on factory-built housing asks, “What is stopping Us?” Many say it comes down to one thing-The National Manufactured Housing Construction and Safety Standards Act of 1974, also known as the “HUD Code.”
It requires modular, panelized and precut construction to be built to state and local standards even though manufactured housing (mobile homes) can adhere to federal standards.
Right now it’s hard for manufacturers to expand because neighboring states generally won’t certify construction from an out-of-state factory.
The Urban Institute reports, “If policymakers want to better take advantage of the benefits of modular housing in the single-family housing market, a small change in the U.S. Department of Housing and Urban Development (HUD) code could stimulate more modular construction.
Two bills are making their way through Congress to expand HUD’s authority, which would allow modular builders to “make a serious dent in the national’s housing deficit,” according to a commentary by Jordan Rogove in Planetizen.
Congressman John Rose’s proposed bill would strike the phrase “built on a permanent chassis.” (Expansion of “Attainable Homeownership Through Manufactured Housing Act)
The ROAD to Housing Act, proposed by Senator Tim Scott would include a wider array of modular and prefabricated buildings.
Sector needs to remodel itself
McKinsey & Company Senior Partner Jose Luis Blanco told Brick by Brick he’s an optimist and has seen a lot of improvements in the modular sector in the last two to three years. But he still sees a number of ways the sector needs to remodel itself and spells it out in this article.
He says it needs to:
- Have best-in-class manufacturing capabilities, including sophisticated digital design platforms and lean, efficient production lines.
- Address overdesign to minimize excess use of steel, wood and concrete.
- Train the on-site crews.
- Make sure to have enough capital because many of the costs are up front.
- Use advanced analytics to give a better understanding of construction costs in different regions.
Blanco sees modular, be it a full assembled model, a pre-assembled panel or just a bathroom, to continue to be a necessity to add housing.
“For example, a few years back we had a significant amount of like multifamily demands for what we call workforce housing or affordable housing that drove a lot of the demand. Obviously over the past twelve months we’ve seen a little bit of a slump there, but I believe in ‘25 and ‘26 we’re going to see a resurgence in that demand.”
Also driving demand, he says, are shortages in labor.
Financing
There usually isn’t a problem getting a bank loan for modular housing, but can be for mobile homes (manufactured housing) and container homes.
However, first-time homebuyers Fannie Mae, through the MH Advantage®program, can put just 3 to 5-percent down for a 30-year loan.
To qualify, the home must be at least 400 square feet and not on leased land unless it’s in a Fannie Mae approved condo development.
Looking ahead
The question is, can modular and container homes ramp up enough to make a difference in the housing shortage?
Gary Fleischer, modular construction industry observer says “never. In Modular Home Source.com he explains, “With over 800,000 projected new home starts for 2023 and modular home factories currently building about 2.5-percent of that total, or about 20,000 new homes, what it would take to just build 10-percent of that total is incomprehensible.”
Hypothetically, he imagines if the average modular factory produces 12 modules a week and the average number of modules to build one new home is about three, the average factory builds four new homes a week.
“That equates to approximately 80 current factories primarily building new modular homes in the U.S. If each of those factories could produce enough to meet 10-percent of 80,000 homes a year, it would take an additional 240 new factories capable of building at least 12 modular homes a week,” he says.
Planetizen commentator Jordan Rogove says prefabricated is not a dirty word and we need to empower modular builders. He points to a Los Angeles Business Journal study showing modular homes cost 14-percent less than traditional build homes. He says that’s impossible to ignore.
Others see it too. McKinsey & Company says, “Modular construction in European and US markets has the potential to deliver annual savings of up to $22 billion.”
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Ann Thompson – Host, Producer
Over the last thirty years in Cincinnati, Ann Thompson has brought a wealth of knowledge and expertise to her reporting. She has reported and anchored for WVXU, WKRC, WCKY, WHIO-TV and Metro Networks and freelanced for NPR, CBS and ABC Radio. Her work has been recognized by the Associated Press and she has won awards from the Association of Women in Communications and the Alliance for Women in Media. She is a former News Director and Operations Manager. Ann has reported from India, Japan, South Korea, Germany and Belgium as part of fellowships. Ann thinks of the Brick by Brick project as “journalism for good.” She serves as host and producer. Ann lives in Anderson Township with her husband Scott. They have two boys. Jake graduated from the Air Force Academy in 2022 and Kurt attends West Point.
