Modular construction, panelized building, and other techniques could shave major costs off the price of building a new home, a new study finds.
Manufactured housing techniques could shave 20% to 30% off the cost of building some homes, according to a new from the JPMorganChase PolicyCenter. Those techniques could also cut down the time needed to build new homes by 30% to 50%. Think two months less of building time.
Since construction accounts for nearly two-thirds of the cost of a new home, cutting those expenses could help homebuyers face a surging market that has priced many out.
“We’re really trying to look at what levers, and particularly state and local levers, that can reduce the cost drivers of what it takes to build housing,” Olivia Barrow Strauss, vice president of Housing Policy at JPMorganChase, tells Realtor.com.
JPMorganChase has funded about $52 billion in debt and equity to finance affordable housing, as well as $498 million in philanthropic capital for affordable housing strategies. That money has preserved 435,000 affordable housing units.
Advancements in building
The off-site construction industry is broad. It includes manufactured housing, including mobile homes built on a chassis. It also includes “modular” housing, which is constructed in components at a factory and delivered to the site.
It can also include panelized or volumetric construction, which includes big, flat components like walls, floors, or roofs being built in a factory. Either way, just 5% of new construction in the U.S. was modular in 2024, even though this kind of construction is growing at a rate that outpaces the construction industry overall.
“We’re really excited about the momentum we’re seeing right now for different, innovative construction techniques,” Barrow Strauss said. “We’re seeing a lot of momentum.”
Bricks-and-sticks will remain the main way to build more housing, but innovative techniques could bolster supply in unusual housing types. That’s true especially for affordable housing, Stockton Williams, executive director of the National Council of State Housing Agencies, said in a webinar by the Harvard Joint Center for Housing Studies.
“The industry has really changed and evolved,” Williams said. “Manufactured housing is a lot more attractive, it’s better constructed, and it can fit in a lot more types of communities.”
Still, the manufactured building industry hasn’t yet reached its full potential. A patchwork of state and local rules gets in the way.
Rules changes guide manufactured housing
JPMorganChase suggested alignment of land use codes, permitting, and inspection so that builders can construct the same product regionally. It also suggested public incentives that reduce some of the “frictions” that developers face.
JPMorganChase also called for training inspectors, builders, and other specialists around the industry to be better prepared for modular building. That way, the industry can see an “evidence base” for broader market adoption.
JPMorganChase called out several cities and regions for positive approaches to manufactured housing. Virginia recently legalized manufactured housing on single-family lots. Maine and Maryland have similarly loosened their rules.
And the Department of Housing and Urban Development recently announced proposed rules that could do away with chassis requirements on multistory homes. That might make it easier to build multistory manufactured homes.
Paired with the abolishment of chassis requirements in the 21st Century Road to Housing Act, new construction techniques could abound with more legal clarity, said Matt Jones, deputy assistant secretary for Single-Family Housing at the HUD.
“There’s still a stigma problem there that we have to work to address,” Jones said at a conference on Tuesday hosted by the Bipartisan Policy Center. “But it’s difficult to overstate how significant the changes that are coming in the manufactured housing world are going to be.”
Hurdles remain for the business
JPMorganChase pins two major constraints on the modular construction world. For one, regulatory rules, like land use, zoning, and building codes, add time and complexity to building projects. Builders must design products differently for different municipalities, thus preventing them from building at scale and speed.
Financial friction is another constraint. These manufacturers want to have a strong book of business before they commit to operations. That upends the traditional construction world, where upfront financing needs often don’t match traditional construction loans. Time savings aren’t always a given.
U.S. homebuilding techniques are largely static. And they’ve fallen behind those of other nations that embrace modular building, JPMorganChase says.
Sweden, for instance, builds 85% of its housing with modular techniques, with 19% lower construction costs and a 10% increase in labor productivity. Singapore boosted adoption by 20% in three years after it required modular construction methods on state property.
