The Solution to the Housing Crisis That Nobody Has Fixed Yet

America is short 4.03 million homes—and pioneers of the factory-built home construction business are hopeful that a spate of new law changes could help turn the tide.

But the construction of these homes isn't the only hurdle they face.

The first starts at the very definition of factory-built homes. This type of housing—also called pre-fab or modular housing—is distinctly different from mobile homes such as double-wide trailers. Yet, they all share the same definition under many state and local housing laws: manufactured housing.

And that leads to the second hurdle: Lumping these definitions together means they can also share the same stigma, explains Realtor.com® senior economist Joel Berner.

"The major challenge is that big players are manufacturing both HUD-regulated double-wides and locally regulated modular homes, and no industry or government bodies are doing a good job of separating the two," says Berner. "Part of a policy revamp should be better data classification and collection."

Either way, manufactured housing, as defined by the U.S. Department of Housing and Urban Development, remains a relatively niche aspect of the homebuilding industry.

HUD recorded 112,800 manufactured home shipments in 2022, 89,000 in 2023, 103,300 in 2024, and 102,700 in 2025. Each year, it accounts for between 5.9% and 7% of the total housing starts.

January of this year marked a 16.4% decline in manufactured housing shipments, to 7,400 homes.

And the nation lost five factories devoted to housing, falling to 143 in 2025, the Lincoln Institute of Land Policy said in its annual report on the business.

Kim Vermeer, president of consulting firm Urban Habitat Initiatives Inc., which authored the study, blamed industry consolidation. Clayton, Skyline Champion Corp., and Cavco Industries Inc. control 73% of factories.

More states, especially underserved areas, need to do more to incentivize these factories, Vermeer said.

Factory-built housing is a viable alternative

In theory, factory-built housing could solve many problems at once: reducing cycle time and preventing materials from being wasted in the building process. It could also allow for year-round productivity in parts of the country where weather limits building time.

What's more, homebuilders don't have capital tied up in ongoing projects in the same way, which could allow for more building.

Different types of manufacturing suit multiple housing types. Homes that can be built entirely in a factory and delivered on a truck suit affordable housing. Module construction suits multifamily projects, allowing apartment units to be built in a factory and lowered into the building by crane.

More common in the U.S., though, are panels, walls, and trusses that can be built in a factory and lowered into the home.

The simple reason manufactured housing isn't more common is that it's historically easier to construct stick-built homes. But construction costs and labor have both risen, making the option more viable.

And so the economies of scale and standardization could make these homes cheaper to build. Again, in theory.

The problem, Berner says, is that every locality has a different zoning code, and so building "standard" products is very difficult.

"To effectively run a factory producing standardized homes, you need enough demand for the same standardized home to get past the overhead costs of producing in bulk in a factory," says Berner.

"Manufactured housing must operate at scale to be cost-effective. But to achieve that scale, there must be policy certainty about what can be delivered."

Legal hurdles remain for factory-built homes

Significant legal hurdles remain for factory-built homes. At the National Housing Supply Summit, a group of modular homebuilders said the business is beset by several rule changes, despite regulatory strides in recent years.

CertainTeed, a Pennsylvania-based manufacturer of panels and materials, projects the demand for offsite construction materials to grow 8.5% a year through the end of the decade—almost twice as fast as stick-built methods.

That includes more demand for panelized components, steel systems, and pre-cast concrete, says Dennis Michaud, managing director of offsite solutions for the company.

And the share of homes using offsite materials varies by region: 10.4% in the Midwest, 6.5% in the Northeast, 7.6% in the Southeast, 8.5% in the Pacific Northwest, and 1.7% in the Southwest.

Zoning changes bring hope, says Jenna Louie, head of strategy and policy at San Francisco-based Villa Homes. California allows manufactured housing by-right, and Villa has grown since it was launched in the ADU space in 2019.

It has built 400 units of homes in California and Colorado, including urban infill and larger traditional developments. Its typical product is a 1,620-square-foot, two-bedroom "crossmod." The home structure, patio, and deck are built in a factory, while the foundation, garage, exterior, and roof are mostly on-site.

The by-right zoning change remains a challenge, though, because only a third of states have or are considering the flexibility. An equal number are opposed, Louie says. And the density can be a sticking point—25 homes fit on 2.5 acres with minimal lots.

"It's not always the factory that's the issue; that's not the hard part," says Louie. "It's the system around it."

Manufactured housing could revolutionize homebuilding

And yet, recent changes in housing laws bring hope to the industry. Many law changes aimed at mobile homes end up benefiting factory-built housing, too.

Fannie Mae and Freddie Mac, a few years ago, opened manufactured housing to the same conventional financing programs as standard homes. That was a huge change for both mobile homes and off-site construction.

Virginia just signed a law that allows manufacturing housing by-right on land cited for other single-family homes.

More laws are coming, too. California unveiled a set of bills aimed at helping make modular and factory-built housing more feasible.

Then there are the trickle-down effects from the bipartisan housing package stuck in Congress. Its removal of the permanent chassis requirement on mobile homes will also make it easier to build multistory factory homes, Louie said.

Taken together, these law changes could create larger markets with consistent demand that allows the business to scale up, says Berner.

"It's not a pipe dream," he adds.

"Manufactured housing has the potential to revolutionize the way we build homes. They can be cheaper, safer, and get delivered more quickly if homebuilders are able to scale up this technology and approach. The big things holding it back are perceptions and policy, which can always be changed."