Modular Housing Boosted by ROAD Act

The 21st Century ROAD to Housing Act targets the barriers keeping modular homes at just 3% of new U.S. housing. Offsite construction accounts for only three out of every 100 new U.S. homes built each year, according to the National Association of Home Builders. The recently passed act contains multiple provisions designed to increase that share.

Lawmakers and industry experts see factory-built homes as a potential solution to the nation's housing shortage. They argue modular construction can deliver homes faster and at lower cost.

Frank Cassidy, a former Federal Housing Administration commissioner, is a prominent advocate. He believes the focus must shift from subsidizing demand to increasing supply. "We can’t subsidize our way out of a housing shortage. We have to build our way out of it," Cassidy told HousingWire.

Federal Policy Targets Key Barriers

The ROAD Act seeks to bolster off-site construction in several ways. One change removes the permanent chassis requirement for manufactured housing. This could allow for better-designed, higher-density homes.

Two specific sections target modular construction's unique challenges. Section 302 directs HUD to identify and remove barriers. These include rigid construction draw schedules, FHA loan limits, and inconsistent building codes. This section also authorizes a study to create a standardized national building code for modular homes.

Cassidy said the technology exists but regulation lags. He advocates for performance-based federal standards that encourage innovation while protecting consumers.

He also cited restrictive local zoning as a major hurdle. Federal policy can improve, but states and localities must adopt more favorable land-use rules.

The Financing Hurdle

Section 303 of the act aims to update federal rules to streamline financing. It will expand FHA loan limits for off-site builders and introduce more flexible financing options.

Financing remains a critical bottleneck. A 2026 report from the Modular Home Builders Association detailed the challenge. A large share of costs is incurred in the factory before the home reaches its site. Lenders must create atypical draw schedules. Some lenders see this as risky.

Cassidy argued that agencies like FHA, Fannie Mae, and Freddie Mac must adapt their rules. Without financeable products, efficiencies promised by modular building cannot be realized at scale.

The Modular Building Institute praised Sections 302 and 303 as positive steps.

Learning from Past Failures

High-profile failures have made the construction industry skeptical of modular housing. Katerra spent over $2 billion before collapsing in 2021. New companies believe they can succeed where others failed.

ARO Homes, backed by a venture firm co-founded by former Google CEO Eric Schmidt, is one. CEO Simon Boag said his firm spent a year researching the industry before launching. He pointed to successful builders like Clayton Homes and Volumetric Building Companies.

ARO Homes treats housing like automotive design. It uses data to create a single net-zero home design for most lots in a target area. The firm builds high-end replacement homes in older San Francisco Bay Area neighborhoods.

Boag said speed is a key advantage. The company's 86,000-square-foot Sacramento plant can produce 100 homes a year.

Remaining Obstacles to Growth

Boag and the MHBA report cite several persistent challenges. Transportation logistics are difficult. Issues include tight access roads, low wires, bridge restrictions, and weather delays. On-site coordination requires tight synchronization.

Perception is another hurdle. While countries like those in Scandinavia have embraced modular construction, the United States remains far behind. Cassidy sees the most promise for modular in high-cost suburban markets just outside major cities.