Modular home construction methods could see increased demand in the coming years as budget-conscious builders seek new ways to deliver homes at attainable prices while maintaining profit margins.
This is evident from predictions by the Modular Construction Institutea trade association representing factory-built housing. The group and consultant FMI interviewed and surveyed approximately 200 homebuilders in the segment and found room for the company to grow. But they have lobbied for a legal environment that is friendlier to their goals.
Manufactured homes – which can include everything from prefabricated homes built on the assembly line, modular construction and precision panels and materials – remain relatively a niche in the homebuilding world. Industry insiders blame regulations, such as zoning and legal designations, for lumping them in with mobile homes.
“Modular is very stable and predictable, we are holding our own in this crazy year of rate volatility and high capital markets,” says Tom HardimanExecutive Director of MBI. “Speed to market is the key driver.”
Modular builders are trying to expand beyond the niche
The manufactured home segment – MBI focuses on things like volumetric modules and boxes, not panel or prefabricated systems – accounted for 5.2% of total construction last year. That included $24.5 billion in work in the US and Canada.
But the industry predicts a 6.3% increase in demand by 2030, when there could be $33.2 billion in activity. Compare that to $15.4 billion in construction activity in 2021, according to MBI data.
That question is driven by how quickly modular construction can be achieved on a construction site. And with about 44% of builders saying they’ve been impacted by the tariffs, they’re hoping to gain on cost against traditional construction methods, Hardiman said.
Demand factors include multifamily, housing and medical uses. Multifamily remains the leading segment of its market, but the company expects to gain greater market share in things like small data centers.
The large megaprojects that dominate the headlines in the data center world are not suitable for modular solutions. But consider small-scale centers, such as one built for specific use at a university, Hardiman said.
“We predict a high growth rate,” Hardiman said. “That is a completely new market for our sector.”
And often, Hardiman said, modular is deployed to reimagine a conventionally designed project. Factory capacity is not an issue for builders, and around 92% reported overcapacity, with many factories operating only one shift.
Paolo Tiramanico-founder of Las Vegas-based modular builder Boxabl, says he’s seen that demand. The startup has grown to a $3.5 billion valuation with its modular homes, like a small residential community in Las Vegas or a rental resort in Oklahoma.
“The mission is to solve the housing crisis,” Tiramani said.
The regulatory bottleneck for modular
The regulatory framework for manufactured housing remains an issue for the industry. Tiramani said the problem lies in the small nuances of local building codes, which vary from area to area. Each state has its own certifications, plan reviews, and compliance measures.
“We now have IBS [Industrialized Building System] code that is 3,000 to 5,000 pages long and is a business in itself,” Tiramani said. ‘It’s complete madness. Death by municipal excess.”
Tiramani said modular builders need three things: national certification standards to let builders use the same materials across state lines, streamlined permitting and performance-based building codes that are more flexible.
The bipartisan 21st Century Road to Housing Act includes language that could help the industry. For example, encouraging cities to adopt pre-approved housing designs. That could allow manufacturers to scale designs that meet those plans.
Ned Resnikova fellow at the Roosevelt Institute, said that provision is an overlooked one in the housing law. Pre-approved building designs would make it much easier to build a project.
Tiramani has lobbied for this. A state-wide “catalog” of pre-approved building designs would help quickly establish reliable demand for modular projects. Why not let a half-dozen different school districts in a state use the same design for a new building, he asks.
More bills have come to light. California attracted attention with a comprehensive package that includes allowing the state to stop certain factories. Then Oregon Rep. Suzanne Bonamici submitted a bill to create a grant program for manufactured housing initiatives.
State and federal efforts could make a difference for the company in the coming years, Hardiman said.
“We want to build sufficient supply, period,” Hardiman said. “We need to industrialize this process more, or make it more production-oriented.”
