To ease California’s linked homelessness and housing crises, it’s heartening to see government, construction and labor working toward encouraging modular or prefabricated housing.
Most of the parts for such houses are assembled in a factory, like a car, then hauled to the property and put together. That contrasts with traditional bespoke or site-built houses, put up mostly on the property.
A study by ADL Ventures found prefabs can reduce construction costs by 20%, yet make up only 5% of U.S. new homes. By contrast, in Japan it’s 15% and in Sweden 84%.
Part of the problem in California is regulatory. Local building codes, as in California’s 58 counties and 483 municipalities, complicate the uniformity needed for mass production. It’s difficult raising capital for factories in a cyclical business with periodic crashes, such as the 2007-10 subprime mortgage meltdown. Simplifying building codes, then, is part of the solution.
Changing this dynamic requires support from labor unions, which often perceive this way of housing construction as a threat. Fortunately, union leaders expressed interest at a Jan. 14 hearing of the Assembly Select Committee on Housing Construction Innovation, chaired by Assemblymember Buffy Wicks, D-Oakland.
Jeremy Smith, chief of staff for the State Building and Construction Trades Council of California, told the committee his union prefers “the model that predominates now.” Naturally. But the idea of prefab housing “intrigues” them because it could mean “actually building more housing for people of all income levels.” That’s a step in the right direction.
Smith said a model incorporating all trade union concerns works at Fullstack Modular in Carson, for example, where workers benefit from, among other things, being able to work at one location rather than ever-changing construction sites.
Fullstack President Roger Krulak said the key to making this work at scale is long-term commitment to continuous construction to avoid cyclical crashes. “Having a lot of factories is a good idea, but having a lot of empty factories is just a cost to somebody,” he said.
A positive model for California could be Colorado’s new Senate Bill 25-002, which sets statewide prefab home standards, which must not be stricter than for other new homes. That lowers some regulatory barriers. In another action, in 2024 Gov. Jared Polis announced funds from Proposition 123, which dedicates 0.1% of state income tax revenues to affordable housing, would prioritize prefabs. We oppose such “ballot-box budgeting,” but dedicating existing state housing spending to more prefabs makes sense.
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The bottom-line is that California has a housing shortage. An all-of-the-above approach to bringing supply is key, which means liberalizing our housing markets and better prioritizing public funding to deliver cost-effective solutions.
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