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A Unique Opportunity to Address the Affordable-Housing Crisis: Off-Site Construction

It offers significant cost, efficiency and sustainability benefits, but its widespread use is hampered by a patchwork of state and local regulations. Regulatory consistency could help builders deliver the housing we need.

Housing modules being built in a factory.
Housing modules being built in a factory. Off-site home construction can deliver projects up to 50 percent faster at cost savings of as much as 20 percent. (Photo: Signature Building Systems)
Across the country, homebuilders are rethinking how we build housing to address the affordability and availability crisis that has left millions of Americans struggling to find homes within their means. Between 2017 and 2022, national housing costs skyrocketed by 52 percent. Years of market fluctuations have led to an unprecedented shortage of homes for sale, as well as too few affordable rentals. The U.S. now has a deficit of 1.5 million homes, with the greatest supply shortages at low-income price points.

This disconnect is unsustainable and must be addressed now. Off-site construction, also known as modular or prefabricated construction, offers one practical solution.

Off-site construction involves building components or entire houses in a controlled factory environment and then assembling them onsite. This method streamlines the building process and can significantly reduce construction time, and can deliver projects 20 to 50 percent faster than traditional methods at a cost savings of up to 20 percent. This approach also offers a strong business case to builders, for whom time is money, by mitigating delays due to weather exposure, availability issues with on-site delivery and assembly on a piecemeal basis.

And contrary to the popular notion that energy conservation and lower-cost housing represent a zero-sum game, off-site construction offers significant sustainability benefits. As much as 30 percent of building materials delivered to a traditional construction site end up as waste. Through lower wastage rates, off-site projects can further reduce costs and provide embodied carbon savings of up to 45 percent.

Numerous government and industry organizations have identified off-site construction as a key housing affordability strategy. President Biden recently recognized this opportunity in his administration’s Housing Supply Action Plan, while the U.S. Department of Housing and Urban Development, backed by both parties in Congress, is supporting research to help expand its use.

But despite the benefits that can be achieved through modular and off-site building projects, major barriers are limiting uptake, including a patchwork of state and local regulatory requirements and a lack of understanding of the off-site construction process. Thirty-nine states regulate off-site construction at the state level, but each has different rules and regulations. This diversity hinders the ability of off-site manufacturers, who could be delivering housing solutions regionally, to do so efficiently.

Eleven states leave the regulation of off-site construction to local officials who often do not have the experience or capacity to effectively review and inspect components that are often built at facilities that could be hundreds of miles away. To deliver off-site construction projects in these jurisdictions, developers and manufacturers need to engage and educate local officials each time, cutting into the time savings off-site construction can deliver.

Salt Lake City is one such jurisdiction in a state without a statewide off-site program and, like other communities, is struggling with housing availability and affordability. Recognizing the need for a diverse set of tools to address the challenge, the city wanted to provide avenues for off-site construction. Its City Council was the first in the nation to adopt new standards aimed at providing consistency in the off-site regulatory process and leveraging the expertise of third-party agencies to ensure that projects meet building code requirements.

The commonwealth of Virginia, which does have a statewide off-site construction program, is in the process of finalizing its adoption of new statewide standards. Virginia is already a leader in facilitating the use of off-site construction, and the new standards will provide the state with a nationally recognized basis for engaging manufacturers.

In June, the International Code Council and the Modular Building Institute announced a national initiative focused on bringing consistency to the off-site construction regulatory process through the widespread adoption of the Salt Lake City- and Virginia-adopted standards. Developed and supported by a broad cross-section of manufacturers, builders, design professionals, affordable-housing advocates and building code officials, ICC/MBI Standards 1200 and 1205 capture best practices from across the country to streamline the deployment of modular projects.

You won’t often hear a builder use “encourage” and “regulation” in the same sentence. But given the consensus reached on the ICC/MBI standards and the need to address the off-site regulatory patchwork, I had the opportunity, as the chair of the National Association of Home Builders’ (NAHB) Building Systems Council, to propose a resolution formally supporting the adoption of these standards. With approvals now by six NAHB committees as well as the NAHB Leadership Council, the nation’s largest association of builders backs this critical effort.

Off-site construction offers a unique means to tackle the affordable-housing crisis head on. Policymakers and industry leaders must work together to remove regulatory barriers, including the patchwork application of inconsistent building standards, that are stifling its growth. Taking the lead from states and localities like Virginia and Salt Lake City, states across the country should adopt the ICC/MBI standards to help builders, developers and manufacturers deliver the housing we need.

Matt Belcher, an experienced builder and nationally recognized consultant and author on the business of green building, currently serves as chairman of the National Association of Home Builders’ Building Systems Councils.

Governing’s opinion columns reflect the views of their authors and not necessarily those of Governing’s editors or management.
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