According to HousingWire, modular housing currently makes up only a tiny fraction of new home construction in the United States, but lawmakers are pushing hard to change that through new federal legislation. The recently passed 21st Century ROAD to Housing Act contains specific provisions designed to remove the barriers that have kept factory-built homes from becoming mainstream. The thinking is straightforward: if we can build homes faster and more affordably through factory construction, we can help address the severe housing shortage many regions are facing.
Frank Cassidy, who previously led the Federal Housing Administration before moving to the private sector, is one of the strongest voices advocating for modular construction as a solution to affordability problems. His perspective is that we need to focus on producing more housing supply rather than just subsidizing demand. He sees modular as legitimate mainstream infrastructure that should be treated the same way as conventional building methods, and he believes the federal government should create a single national building code for modular homes rather than having manufacturers navigate dozens of different state and local requirements.
Two specific sections of the ROAD Act target real bottlenecks in the modular industry. Section 302 directs the Department of Housing and Urban Development to identify and remove the barriers that make factory-built construction difficult, including rigid loan draw schedules, restrictive FHA lending caps, and the patchwork of inconsistent building codes across states and localities. Cassidy emphasizes that regulations should focus on performance standards and safety outcomes rather than dictating exactly how manufacturers achieve those goals, which would allow room for innovation while protecting buyers.
Section 303 addresses the financing challenges that have plagued modular builders. Because so much of the construction cost happens in the factory before the home reaches its final site, the typical construction loan draws don't work the same way as traditional building. This unconventional financing structure has made many lenders wary of modular projects. The new section aims to expand FHA loan limits for modular builders and create more flexible financing options so that both developers and homebuyers can more easily access capital for these homes.
The industry has seen some high-profile failures that have made investors and lenders cautious, with the collapse of Katerra being perhaps the most notable example. Despite this skepticism, newer companies entering the modular space say they have learned from past mistakes and believe they can succeed where others have stumbled.
What I am seeing locally in the Bay Area and East Bay is that housing costs remain stubbornly high, and our shortage of supply keeps getting worse. These federal policy changes could be meaningful for us, particularly in the suburban and outer-ring communities where land is still available and building costs are eating up developers' budgets. If we can get financing to work better for modular construction and reduce the regulatory burden, it might actually help bring more affordable options to Fremont and communities like it. The key will be whether lenders here get comfortable with the modular financing structure and whether local jurisdictions embrace the new standardized approach.
