Modular 2.0: How Prefab Housing Is Making a Comeback

As I’ve written numerous times for Catalyst, U.S. cities are gripped by a housing affordability problem that won’t disappear anytime soon.

The main cause is regulation: cities with more restrictive rules build less and have higher costs; those with less restrictive rules build more and have lower costs. But another factor for practically all U.S. markets is the sheer cost of building. Prefabricated housing, which is produced and sometimes assembled off-site, has long been viewed as one way to lower costs and has seen a resurgence as new technology makes the idea more scalable.

Prefab construction has a long history in the U.S. According to the Modular Building Institute, it dates back to the Colonial Era as an idea brought from England. Throughout post-WWII America, it was linked with various futuristic building plans, although in reality, its most common use has been as workforce trailer homes.

That is how most Americans still think of the housing genre—envisioning low-income trailer parks—but recently prefab has gained some cultural cache.

A British trade group, the Modular & Portable Building Association (MPBA) claims that the sector has grown dramatically, with an article stating that: “The modular industry has had a remarkable impact on reducing costs while increasing quality and safety. Having gained considerable momentum over the past few years, advanced modular techniques reduce build times by an impressive 50-60%.” One British firm, TopHat, earned a $103 million investment from Goldman Sachs, which recognizes prefab building as a growth market. 

The MPBA states that the primary method is “volumetric modular construction.” This is the process of developing the structure for a six-sided building offsite. As Vesta Modular explains, this is distinct from conventional modular construction because all components are enclosed.

Another prefab construction method, trendy of late, is 3D printed structures. 3D printing, which is based on digital models, can print out blended concrete to develop intricately designed walls that are ready for assembly. 3D printed homes remain relatively rare, but their adoption could drastically reduce labor costs, as some projects only take 24 hours to print and cost $4,000.

Erica Barnett with the Sightline Institute, Seattle-based urban affairs think tank, cites major firms Kattera (which she notes has utilized another innovative technology, cross-laminated timber), OneBuild, and Blokable. Barnett points to the high costs of construction as a key motivator for exploring prefab methods, observing in 2018 that markets like Portland have a labor shortage and that multifamily construction’s complexities make pre-built materials attractive.

“Typically, the developer selects a general contractor, and that contractor, in turn, hires subcontractors who then often hire sub-subcontractors, and so on,” Barnett writes. “Eventually, the contractor at the bottom of this chain actually does the work. Every layer of subs takes on some of the huge risk of a giant construction project but also drives up costs.” 

By moving development off-site, often at a single factory, the prefab method reduces these complexities and speeds up turnaround time. A McKinsey report estimates that, once this industry scales, it will lead to 20% cost savings. 

But in the U.S., reaching that scalability will be uphill, and is actually moving in the wrong direction depending on how you look at it. In 1998, manufactured homes as a share of all new single-family homes were nearly 40%. That plummeted in the 2000s as lending standards changed, but in the past decade has ticked back up, and is now nearing 10%.

Instead, the prefab strategy seems to be in a transitional, or experimental stage that is inching towards success through the work of niche firms. One of them, Autovol, based in Idaho, has been using robotic technology to assemble buildings. Autovol uses volumetric methods, aided by robots that do the construction. The firm claims that this will greatly enhance speed, and hopes to produce 1,600 units annually. 

The company’s most recent major project is Virginia Street Studios, a multi-story apartment building in San Jose, CA—the heart of Silicon Valley, and one of America’s most expensive housing markets, with a median rent of $2,374. The firm’s CEO, Rick Murdock, told the Idaho Statesman that his product could be one solution. 

“We produce multifamily, multi-story affordable housing with the idea that we want to save you 20% of your costs and 40% of your time,” Murdock said.

Along with the San Jose project, Autovol has one in Oakland, Napa Valley, and California’s Central Coast, although the San Jose project is the largest at 301 units. According to Tony Piscitello, a project investor, it took only 20 days to install.

Like most other construction projects, prefab faces NIMBY opposition and zoning hurdles. There is, in fact, often specific language discouraging such housing in local codes, in what amounts to classic snob zoning. 

Huntsville, TX, has banned “manufactured homes” entirely, while jurisdictions in South Carolina and Kentucky have limited the size of lots where manufactured homes can be built. Former HUD secretary Ben Carson showed support for loosening regulations against prefab construction, although it doesn’t appear this led to any local-level changes.

Localities should reconsider their opposition to a building form that was once much more common. New technology is improving the way these units look and function for the American consumer. The speed and efficiency of prefab will help lower housing costs in jurisdictions that now struggle with housing affordability and could even help address homelessness.

This article featured additional reporting from Market Urbanism Report content manager Ethan Finlan.