California weighs new factory-built housing rules to ease construction, cost burden

Tara Barauskas threw a watch party the day the cranes lowered entire living rooms, bedrooms and bathrooms onto the 13-unit Berkeley Station housing complex in Santa Monica.

The modular units that make up the small community set to open March 27 were built 70 miles away in San Bernardino County for about $9 million.

The neighborhood got an unexpected perk when Barauskas, executive director of the developer Community Corp. of Santa Monica, opted to use the modular concept, saving the community months of construction noise and the nonprofit 30% in labor costs.

“We’d been building affordable housing for many years and it’s just gotten increasingly more expensive and difficult to build,” Barauskas said. “So we wanted to try a different construction methodology.”

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California lawmakers are looking to mainstream regulations for factory-built housing as modular construction comes with certain challenges.

Financing, workforce and contracting processes are some of the central areas that need improving, according to a legislative committee on Housing Construction Innovation chaired by Assemblymember Buffy Wicks, D-Oakland.

The committee’s policy agenda follows a year of intense permitting changes made to expedite construction in developed neighborhoods and those affected by wildfires. Because of persistently high construction costs, the state has pinpointed factory-built housing as a new priority in solving the state’s affordable housing crisis.

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With hopes of growing the industry, the committee plans to reduce companies’ financial risk and liability, formalize a uniform building code and develop a strong workforce.

“It’s not about having factories for the sake of having factories. It’s about having factories for the sake of bringing down the cost of housing,” Wicks said.

Wicks’ interest peaked after taking some of the committee members to Sweden, where 85% of housing consists of factory-built, single-family homes, and Idaho, a growing hub for housing factory projects across the Western U.S.

Long legacy in prefab building

California is no stranger to industrialized housing.

During the Gold Rush, preassembled homes were shipped to California from New York. In the beginning of the 20th century, trailer homes emerged with automobile ownership and the growing popularity of travel.

Following the Great Depression, these moveable homes became common dwelling spaces. As they maintained their popularity, the Department of Housing and Urban Development streamlined their building codes in the 1970s. Sears catalogued colonial and craftsman houses that still stand across Southern California cities including Monrovia and Placentia.

While building technologies have advanced since then, legislation hasn’t, Wicks says.

“We’re looking at how we can bring down the cost of construction, and by extension, bring down the cost of housing for my constituents and embrace these newer technologies,” Wicks added.

Prefab factories

New technology is at the heart of Plant Prefab, the company that built Berkeley Station in Santa Monica.

The company, founded by Steve Glenn, customizes home designs with architects before their modular pieces are built in one of its factories.

Glenn has seen an uptick in demand for Plant Prefab products over the last year and is working on 90 wildfire rebuild homes across Los Angeles County. His company has aided rebuilding efforts after other wildfires across the state, including Napa Valley and Sonoma after the Tubbs fire in 2017, and Malibu and Agoura Hills after the Woolsey fire in 2018.

Homes using his modular units follow all state housing codes, including earthquake and fire regulations, he said.

Glenn says modular benefits include saving time and money, and doing so reliably, which is not always the case when it comes to on-site building.

“It’s one thing to get a bid from a general contractor that says here’s how long we expect it’ll take,” Glenn said. “It’s quite another to actually realize that schedule.”

A study by UC Berkeley’s Terner Center for Housing Innovation emphasized some of the cost benefits of factory-based construction.

The March 2 report pointed to continued pressures facing construction such as elevated tariffs on imported materials and the Trump administration’s immigration policies, which are accelerating the removal of undocumented construction workers and severely limiting inflows of immigrant workers.

The report also found that off-site construction can save anywhere from 20-50% of construction costs, depending on how much of the process takes place elsewhere.

Financing hurdles

Among the proposed policy tweaks in Sacramento is reforming modular construction’s financing model.

Housing developer Paul Steidl, co-founder of BuildCasa, works with the California-based modular builder US-Offsite for some of its residential townhome developments. There are plusses and minuses to the method, he said.

“The projects may be quicker to build, but they often require more up-front capital,” Steidl said. That’s because on-site construction can access loans based on the added land value a property brings.

BuildCasa is currently working on 18 market-rate units at 10 project sites across California.

Getting everyone on board

As the legislative committee develops initiatives to help cut down red tape, Wicks is adamant that new state regulations are just one piece of the puzzle that municipalities must also solve.

“We need an all-of-the-above approach, and we need our cities to be active participants in helping to realize that all-of-the-above approach,” Wicks said.

Barauskas at the Santa Monica housing nonprofit, hopes to see more state interventions to help maintain the modular building opportunities. But with more builders in the marketplace, she worries the competition could drive up prices.

“If you’re not careful, those things can vanish quite quickly in terms of cost savings,” Barauskas said.

The experience integrating modular design has left her planning its use in future projects.

“I would try it again,” she said.