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Can Going Modular Fix Our Housing Shortage? Not Yet.

Modular houses assembled from factory-built components are cheaper to build and the governor of Colorado is all in on them. They won't solve the housing problem but can be part of the solution.

A modular home being assembled
A modular home being assembled on a building site. A modular house can be finished in about half the time of a home built onsite from scratch. (Shutterstock)
Location may be the most important word in real estate, but as developers will tell you, branding runs a close second. I once happened to work across the street from a new apartment building in D.C. whose owners decided to call it the Georgetown Overlook. A friend of mine said the name made sense because the residents had to overlook the fact that they were nowhere near Georgetown.

Something similar applies to the names we call the kinds of buildings we live in. In the years after World War II, a lot of people who couldn’t find or afford anything better lived in house trailers. But those sounded cheap and flimsy, so the same dwellings came to be known as mobile homes. That didn't really help, so they were rechristened as manufactured housing. It turned out that buyers didn’t much like the idea of a house built entirely on an assembly line, so a more substantial variant was born: “modular housing” — homes assembled on an owner’s lot from factory-built components.

Alas, even that one hasn’t turned out much of a success. It’s unfortunate in a way, because we have a shortage of several million housing units in this country, and if we could convince more people to buy houses that were made somewhere offsite, either partially or completely, we might at least make a dent in the problem.

Jared Polis, the Democratic governor of Colorado, is one political leader who thinks so. Polis has devoted much of his five years in office to the job of creating more housing, especially less expensive housing, but so far he has met with only limited success. He tried rather spectacularly in 2023 with a comprehensive plan to relax zoning requirements in much of the state, thus potentially expanding the housing supply, but he couldn’t get it through the Legislature. He’s made some limited progress on housing policy by dint of executive orders, but comprehensive change continues to elude him.

Now, however, he is trying a new approach. Early in February, Polis announced that he was making available $38 million to subsidize the work of eight of the state’s modular housing developers. Thirty-eight million isn’t a huge sum in state budget terms, but the administration projects that it will help make possible the construction of 4,755 new modular dwellings every year and create 1,280 jobs for workers constructing them. In making his announcement, Polis explained that the initiative would mean “more people can live closer to the jobs and communities they love.” The ultimate goal, he said, is “nice housing for every budget.”

The modular developers themselves were unrestrained in their enthusiasm. One of them promised that his firm could build a two-story modular home in only 18 days. Another one said much of the work can be done with a 3D-printing process. A third committed to using timber that needed harvesting from fire-prone areas.

AT THE VERY LEAST, IT’S AN INTERESTING EXPERIMENT. But could it be the precursor to an expansion of housing built offsite as an answer to our current housing shortage? To answer the question, it may help to distinguish the various brands of off-site construction and assess why none of them has been much of a success in the market.

First came trailers. Perhaps it’s not necessary to say much about them. Trailers will be forever associated with the veterans who came home from World War II and got squeezed by a national housing shortage. The trailers, often those designed for camping trips, were seen as the back end of automobiles. To those lucky enough to have a more permanent home, living in a trailer sounded like living in one’s car. So there was an obvious branding issue that needed to be taken care of.

That’s how we got mobile homes. They were generally bigger and a little nicer than trailers, but “mobile” wasn’t a good choice for an adjective. It shouted out impermanence, and in the rapidly changing postwar American world nearly every family was looking for permanence. More fundamentally, there was a toxic association with trailer parks. Living in a trailer park meant your home was just a piece of personal property, not real estate, and you had to answer to a landlord who tended to be insensitive or absent or both. These homes were easily damaged in storms and difficult to resell, and generated a whole string of jokes and insults. “Trailer park trash” is an expression of bigotry, but we all knew it referred to a shiftless, possibly violent tenant.

Anyway, mobile homes gave way to manufactured housing, a change stimulated by a 1974 federal law imposing some regulation on how it could be built and operated. That law required manufactured homes to conform to many of the same building codes as conventional housing.

Still, manufactured houses were mobile, and just about everybody knew that. They were finished in a factory and placed on a steel chassis so they could be moved around. It was very difficult to alter or improve them once they were constructed. Banks charged higher mortgage rates to the purchasers. They were cheaper than other types of housing, but that wasn’t necessarily a selling point: Once you owned one, it generally didn’t appreciate in value, and unloading it on someone else wasn’t easy.

ALL OF THIS BROUGHT US TO MODULAR HOUSING, the kind that Jared Polis is seeking to encourage in Colorado. It’s actually a considerable step forward. Modular housing is held to all of the same local or state building code regulations as a conventionally constructed home. It generally has a permanent foundation and often a crawl space. It’s delivered to its site in whole rooms, and while they tend to be small rooms, you don’t have a lot of nails and lumber sitting around in your yard during the assembly period. A modular house can be finished in about half the time of a home built onsite from scratch. Mortgages are easier to get than for traditional manufactured housing. When modular is done well, it can be hard to tell the difference between these homes and conventionally built ones. And they are quite a bit less expensive than the conventional site-built house.

All of this is encouraging. Warren Buffett has invested substantial amounts of money in the modular home industry, as has Bill Gates, who touts it as a plausible answer to the national housing shortage. But it’s not much of an answer yet. At the moment, modular housing constitutes less than 4 percent of the housing stock in this country. Even the much-maligned mobile home is more common, comprising about 6 percent of the existing stock. Homes built in factories may be quite a bit better now, but the stigma has not gone away.

It’s clear we need to do something to create more reasonably priced housing. But if we’re honest, we have to concede that the interventions we have tried so far have not worked all that well. We can set minimum percentages of affordable units for new development, but if we set them high enough to make a big difference, not many new projects will get built. We can revise local zoning laws to greenlight multi-unit construction in neighborhoods of mostly single-family homes, but this is politically divisive and, so far at least, hasn’t brought in very encouraging numbers. The media love to print stories about cute tiny houses, but the fact is not many Americans will be attracted to living in a 400-square-foot home. I’ve been arguing for years that we need to create high-rise apartment buildings along commercial corridors, but they are not easy to multiply and generally require people to become long-term renters when what they really want is a home of their own.

We may not be on the verge of a major boom in modular housing, but looking at it in the context of the larger housing emergency, I’m tempted to think of what Winston Churchill said about democracy: It’s the most flawed of political ideas, except for all the others that have been tried.
Alan Ehrenhalt is a contributing editor for Governing. He served for 19 years as executive editor of Governing Magazine. He can be reached at
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