As both the cost of housing and the interest rates have skyrocketed in the last three years, the affordable housing crisis has only intensified nationwide, begging for a new solution to the ever-growing need for subsidized housing. Developers are facing on the one hand an approximate 500,000 housing unit shortage and on the other hand a limited inventory, high materials costs, and labor shortages. The solution? Modular construction projects.
Since the pandemic’s start in 2020 and the associated economic impact, every county in the US is short the needed and vitally important amount of affordable housing. And while the Biden administration works to address this crisis with the Housing Supply Action Plan, manufacturers, builders and local governments are working in collaboration to make sustainable modular housing developments into realities for their communities.
CRATE Modular’s factory in Carson, California. CRATE Modular manufactures modular construction components for multifamily, educational facilities and commercial and hospitality spaces.
To provide some context and at the risk of oversimplifying a complex topic, there have been two primary ways in the past to create more affordable housing. Known as project-based subsidized housing, the first approach was to subsidize the cost of the housing development and pass on the savings to the housing consumer via lower rental costs. The other primary approach has been to subsidize the housing consumer directly, so that they have more money to purchase or rent housing units available in their local marketplaces. Rental vouchers and mortgage interest tax deductions fall into this second category. Nearly every affordable housing strategy has fallen into one of these two broader categories until recent economic factors begged for a new solution. Modular construction appears to offer a third way whereby housing can be produced at a lower cost, but without the need for the previous heavy subsidies that are proving to be unsustainable.
Modular construction involves manufacturing building components (modules) in a factory and then delivering these modules to a building site for assembly. Typically, prefabricated modules are comprised of very specific building sections such as panels that contain wiring, plumbing, insulation, and even cabinetry and fixtures. Modular construction is widely used in building commercial and multifamily housing units, as well as single family homes.
“Tiny homes” and accessory dwelling units (ADUs), which are complete housing units that can be delivered to a slab for near-immediate use, are other examples where modular construction is often employed.
A Blokable housing unit being delivered to a test site as part of a national project to evaluate modular construction methods. Source: https://www.modular.org/2022/11/15/affordable-housing-reimagined/
Modular housing can be produced more quickly and with a more efficient use of resources than most community developments. This translates to cutting down on overall construction costs, as well as significant reductions in energy consumption.
As an additional advantage, builders benefit from the simplified and streamlined planning and construction process. Because the modular housing units can be manufactured at the same time that the new, affordable community development sites are being prepped, projects can be financed, delivered, and occupied faster and at a lower overall cost. And because modular homes can be built with a high degree of precision, energy efficiency, and quality, housing consumers then benefit from the resulting higher-quality product that lasts longer and is less expensive to maintain and operate.
But, this new solution to the affordable housing crisis is not without its challenges. Among the impediments preventing the wide application of modular construction across the United States is the fact that builders are having to conform to differing local building and zoning codes. Much like non-modular housing, builders must develop home models that can meet these codes and are incurring architectural and permit fees in the development process. Ideally, these costs can be absorbed by the ability to reuse the pre-approved plans on subsequent projects and achieve savings in the long run.
Forward-thinking local governments can support this shift towards sustainable modular housing by creating plan templates and by implementing an established system for administrative review and approval for affordable development projects using those templates moving forward. The City of Fresno is taking this approach to accelerate the production of affordable housing, as are many other US cities.
Another impediment to wider application of the modular construction approach is the need for modules to be delivered from a factory to the actual building site. Shipping costs add to the project overhead significantly, especially if the modules have to be transported across a wide distance or around physical barriers such as overhead power lines, train trestles, and other local infrastructure. One way to ameliorate those costs is to locate new factories as close as possible to the building site. While city planners don’t always have the capability to situate affordable housing developments where delivery is easily accomplished due to zoning and space constraints, future consideration should focus on making this process as efficient and cost-effective as feasibly possible.
In our strategic consulting projects, we’ve advised our clients to develop modular-based development plans and are following the lead of partners like COCIC in Ohio and Navigate Affordable Housing in Alabama, both of which are developing steady streams of infill projects using modular construction. Our clients have inventories of vacant lots that could be ideal for new modular construction projects. They are well positioned to facilitate unique partnerships between builders, community partners, local officials, and the families that need housing.
The ePropertyPlus software system supports project management of modular (and traditional) construction projects. Subscriber organizations also have the benefit of being able to use ePropertyPlus’ native mapping and project planning tools to evaluate where modular housing might make the most sense as infill development.