Boom in Modular Home Construction Could Be Just Around the Corner

Modular home construction methods could see greater demand in the coming years as cost-conscious builders seek new ways to deliver homes at attainable prices while preserving profit margins.

That's according to forecasts from the Modular Building Institute, a trade organization representing the factory-built housing industry. The group and consultant FMI interviewed and polled about 200 homebuilders in the segment and found room for the business to grow. But they have lobbied for a legal climate more friendly to their aims.

Manufactured housing—which can include everything from prefabricated homes built on the assembly line, modular building and precision paneling and materials—remains relatively niche in the homebuilding world. Industry insiders blame regulations, such as zoning and legal designations that conflate them with mobile homes.

"Modular is very steady and predictable, we're kind of holding our own in this crazy year of tariff volatility and high capital markets," says Tom Hardiman, executive director of MBI. "Speed to market is the No. 1 driver."

Modular builders seek to expand out of niche

The manufactured housing segment—MBI focuses on things like volumetric modules and boxes, not panelized or precast systems—accounted for 5.2% of overall construction last year. That included $24.5 billion in work in the U.S. and Canada.

But the industry projects a 6.3% increase in demand by 2030, when it could see $33.2 billion in activity. Compare that with $15.4 billion in construction in 2021, according to MBI data.

That demand is driven by how quickly modular building can come together on a construction site. And with about 44% of builders saying they've been impacted by tariffs, they're hoping to win out from traditional building methods on cost, Hardiman said.

Demand drivers include multifamily housing, lodging and medical uses. Multifamily remains the leading segment of its market, but the business expects to grow share in things like small data centers.

The big mega-projects dominating headlines in the data center world don't suit modular. But think small-time centers, like one built for dedicated use at a university, Hardiman said.

"We're projecting high growth rate," Hardiman said. "That's a very new market for our industry."

And oftentimes, Hardiman said, modular gets brought in to retool a conventionally designed project. Factory capacity isn't an issue for its builders, and about 92% reported excess capacity with many factories running single shifts.

Paolo Tiramani, co-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, such as a Las Vegas tiny home community or an Oklahoma rental resort.

"The mission is to fix the housing crisis," Tiramani said.

The regulatory bottleneck for modular

The regulatory framework for manufactured housing remains a problem for the industry. Tiramani said the problem lies in the little nuances of local building code, which varies by area. Each state has its own certifications, plan reviews, and compliance measures.

"We now have an IBS [Industrialized Building System] code that is 3,000 to 5,000 pages long and is a business in and of itself," Tiramani said. "It's complete lunacy. Death by municipal overreach."

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 some language that could help the industry. For instance, encouraging cities to adopt pre-approved housing designs. That could allow manufacturers to scale designs that conform to those plans.

Ned Resnikoff, a fellow at the Roosevelt Institute, said that provision is an overlooked one in the housing bill. Pre-approved building designs would make it much easier to construct a project.

Tiramani has lobbied for just that. A statewide "catalog" of pre-approved building designs would help quickly establish reliable demand for modular projects. Why not let half a dozen different school districts in a state use the same design for a new building, he asks.

Other bills have come to light. California drew eyes with a comprehensive package that includes allowing the state to backstop some factories. Then Oregon Rep. Suzanne Bonamici introduced a bill to create a grant program for manufactured housing initiatives.

Efforts from the state and federal government could make all the difference to the business in the coming years, Hardiman said.

"We're into building enough supply, period," Hardiman said. "We need to industrialize this process more, or make it more manufacturing-centric."