This is a story about numbers, starting with 3.7 million, which is the amount of additional homes that the United States needs to meet demand, according to Freddie Mac. Other sources, such as Zillow, estimate the shortage is closer to 4.5 million. Then there’s 76,500, which is the average number of carpenter positions that will go unfilled each year through 2033, according to the U.S. Department of Labor. For comparison, electricians will come up short about 80,200 annually over that period.
Eighty could be the magic number when it comes to tackling the chronic shortages of both housing and skilled trades. That’s the ballpark percentage of work completed on factory-built housing when it arrives at the job site. This catchall category includes modular and panelized homes and obviously isn’t a new concept. But lately, it’s gained interest and investment, including for multi-dwelling units (MDUs) and commercial buildings such as hospitals and hotels.
“A lot of commercial developers are looking at modular now because of the increased speed, which leads to a faster ROI,” says John McMullen, Modular Building Institute (MBI) marketing director. “Multifamily housing has been a huge sector for commercial modular construction for the past several years. In our 2024 report, multifamily housing was 20% of all commercial modular construction. We don't see that changing going into next year [because] housing is needed absolutely everywhere.”
Greystar Real Estate Partners is so bullish on the modular business model that it created a subsidiary devoted to it. In April 2023, the $78-billion rental development and management company opened the Modern Living Solutions factory in Knox, Pa., to design and build apartment modules for Mid-Atlantic metros such as Baltimore and Pittsburgh. The plant currently builds a dozen apartment units each week but can ramp up to twice that amount.
“Manufacturing the modules in a factory-controlled environment means that projects can be delivered up to 50% faster than traditional construction with less external risk presented by factors including weather, labor shortages, or on-site safety concerns,” Greystar said in a release. These benefits apply to commercial projects, too.
“It’s cost avoidance because if you can't find enough labor on site, our team can produce a quality product that’s plug and play on the job site,” says Doug Bruhns, EVP and chief commercial officer of SteelCell, a Baldwin, Ga.-based company that specializes in correctional and medical facilities. “It's schedule insurance in some ways because if you're building on site, you don't really know [what could go wrong].”
Modular also can be a way for developers to meet sustainability goals, including ones that help qualify a project for government incentives.
“With sustainable designs, efficient usage of materials, and speed of construction, Modern Living Solutions units will have a smaller carbon footprint than traditionally built projects,” Greystar said. “Roughly 80% less waste will be produced compared to traditional builds.”
Developers also could build temporary factories near large subdivisions to supply thousands of modules — similar to the concrete batch plants used for major construction projects. A 2022 EC&M article explored how this approach could include using robots rather than humans to install the electrical infrastructure in the factory so that even less has to be done on site.
“Some of these national builders have 15 different floor plans,” Chris Haynes, an instructor in the automation and robotics department at State Tech in Linn, Mo., said at the time. “Maybe they mirror [this model]. ‘We can start pre-drilling holes so we don't necessarily have to have a guy that knows everything except for getting wire from point A to point B.’ And if they can get this robot to feed wire through, then they don't even need that. They'll just need the guy to come in at the end and terminate the connection.”
No shortage of shortcuts
Factories enable the use of automation that’s not possible on job sites. An example is a CNC machine that cuts a floor joist to length and then drills the holes for plumbing and electrical runs — all in one pass rather than the multiple steps of traditional site building. But that still leaves plenty of site work for electricians.
“Basically 90% of the work is done in the factory for inside the cell,” Bruhns says. “The hookups are 100% on site. They’re hooking into junction boxes that we supply. There is still a ton of work that needs to be done on site for these justice facilities and medical facilities.”
In commercial projects, hookups and other work often are done inside a mechanical-electrical-plumbing (MEP) corridor that runs the length of a series of modules, such as a hallway’s worth of hotel rooms. Once construction is complete, MEP continues to provide maintenance workers with access for the building’s life. In hotels, that reduces the need for them to enter occupied guest rooms. In prisons and jails, it means maintenance doesn’t create opportunities for exchanging contraband or pilfering tools.
“Nowadays, most justice facilities are going with a rear chase concept,” Bruhns says. “Before there was a lot of front chase work, where you have to bring your tools in through the active facility to perform maintenance. If you're entering an occupied area, you have to have tool checks to make sure none are taken while you're doing the maintenance because the inmates will do damage with those.”
Some single-family modular and panelized homes use a similar approach. For example, Bensonwood builds exterior walls with the traditional sandwich of siding, sheathing, framing, and insulation, but it’s followed by a non-structural interior framework of 2x3s that serves as a chase. The drywall, beadboard, or other finish layer is installed on the job site once the MEP work is done.
“All the installation is done on site by local electricians,” says Seth Clarke, director of preconstruction at the Walpole, N.H.-based company.
This “service layer” provides a couple of benefits. First, having a dedicated space for electrical, telecom, IT, and plumbing means that their installation doesn’t require drilling and sawing through insulation and vapor barriers, thus preserving the energy-efficient building envelope. It also preserves structural strength because the studs, cripples, plates, and headers are never touched.
"Our CNC equipment notches out the back side, so you have all the raceways already precut into the service layer and then falling into the partitions," says Hans Porschitz, Bensonwood operations officer. “The machine is also drilling holes at the same height. We're creating efficiency for electricians on our job sites so they don’t have to drill a bunch of holes. They just pull those runs before the interior finish goes on.”
A second benefit is long term and ties in with the sustainability goal of factory-built housing. Decades from now — when the home is remodeled — or when new technologies arrive, those changes can be made entirely in the service layer faster and cheaper.
“In the commercial world, they have bigger buildings, and people don't want to tear them down,” Porschitz says. “They repurpose them, so they want to be modular in their fit out. We have tried to bring that to residential.”
Building blocks and stumbling blocks
With so many benefits, why isn’t factory construction more common? One reason is that some builders and developers are simply more comfortable with their traditional workflows — drawbacks and all.
“It's just something different,” says MBI’s McMullen. “Most developers have their ways of doing things. It works for them, and they can turn a profit. Modular construction work is a different mindset. You have to do things in a slightly different order. It takes a lot more capital upfront, especially for big commercial projects.”
The U.S. Department of Housing and Urban Development (HUD) plays a key role because factory-built housing that meets its national code qualifies for special financing options. But some believe HUD could do even more.
“How do we get HUD to issue advance market commitments for large-scale factory-built housing, to put tens or hundreds of thousands of units on demand?” U.S. Rep. Jake Auchincloss said in a June 2024 Brookline News interview. “Because that’s how you get the factories to actually get the scale economies they need and go down the production cost curve.”
Stigma is another hurdle. Modular often is lumped in with manufactured — aka “mobile” — homes because they all come out of factories. One fundamental difference is that modular and panelized homes are designed for a one-time installation on a permanent concrete foundation. By comparison, manufactured homes are built on a permanent chassis so they can be trucked to the dealer’s lot and then to the owner’s property. In theory, they can be moved many times after that, although that’s actually uncommon due to the cost, which can easily run $5,000 per move.
“It's that word — modular versus manufactured — that's still a stumbling block for a lot of people,” McMullen says. “The end product is no different than traditional construction. You're getting a permanent building that's often built better and to higher standards than traditional building. We're seeing that go away a little bit with more states establishing their modular [code] programs and adopting these standards that we've helped create.”
Navigating code compliance
Codes are one way to distinguish modular and panelized from manufactured.
“Anything built after 1976 under the HUD Code we consider ‘manufactured housing,’” a HUD spokesperson says. “In most cases, the only distinction between them is that homes sit on this permanent chassis. As far as we're concerned, no mobile homes are being built anymore. The distinction between a HUD Code manufactured home and a modular home is essentially just that one is built to the HUD Code and one is not.”
The HUD Code is noteworthy for another reason: It has nationwide clout.
“HUD is the only pre-emptive code that exists,” the spokesperson says. “Local building authorities don't have independent authority to do their own reinspection.”
Congress is considering changes — such as eliminating the permanent chassis requirement — that could result in the HUD Code expanding to cover a wider range of factory-built housing.
“The real advantage of the HUD Code is that you can build in one state and ship it anywhere in the country,” the HUD spokesperson says. “Many folks who try to make modular work at scale, folks with a lot of funding, run into the issue of having to build different versions in every jurisdiction where they want to sell it. So a lot of them are excited by the opportunity to be more under the HUD Code.”
Another development is the growing number of statewide building codes, such as Utah’s in 2024.
“Utah was based on the work that we did in Virginia, which was the first state to adopt building standards from the International Code Council and MBI: ICC/MBI 1200 and 1205,” McMullen says.
UL also plays a key role with its Commercial and Industrial Prefabricated Buildings and Units program (QRXA).
“This program is focused on evaluating the electrical systems and components of the building or unit, which are typically in concealed spaces,” says Christopher Jensen, UL Solutions regulatory services manager. “The UL Solutions’ Certificate of Inspection identifies the specific edition of the NEC that was used to inspect the prefabricated building or unit. At www.UL.com/piq, you can enter ‘QRXA’ into the search field and see that 19 manufacturers have prefabricated buildings inspected under this program.”
QRXA helps avoid delays on the job site — as long as the AHJs know that it exists and that certification means they don’t have to wonder if everything inside the walls meets whatever version of the NEC they use. The good news is that UL is working to build awareness.
“UL Solutions’ Codes and Regulatory Services division has staff that attend many electrical trade shows, conventions, and events, such as the Independent Alliance of the Electrical Industry (IAEI) section meetings, where they provide presentations and information on technical topics of the day, such as modular construction,” Jensen says.
