California lawmakers believe the long-promised housing factory revolution may finally have its moment.
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For decades, architects, policymakers and investors have imagined homes rolling off assembly lines and being shipped to job sites ready for installation. The idea — faster timelines, lower costs and greater efficiency — has repeatedly flared up and fizzled out. Now, amid a deep housing affordability crisis, state leaders are revisiting the concept with renewed urgency.
When the first factory-built home rolled off the line in Kalamazoo, Michigan in 1971 — described “like a boxcar with picture windows” — then-HUD Secretary George Romney declared it “the coming of a real revolution in housing.” He predicted that within a decade, two-thirds of U.S. housing construction “would be industrialized.”
That forecast proved dramatically wrong. Operation Breakthrough, the federal initiative backing factory-built housing at the time, collapsed within five years due to cost overruns, delays and political opposition.
Yet the idea never fully disappeared. From colonial prefabricated homes in the 1600s to post-World War II starter-home experiments, industrialized housing has repeatedly been framed as the solution to labor shortages and cost pressures.
Today, California lawmakers argue the conditions may finally be aligned.
Assemblymember Buffy Wicks, an Oakland Democrat known for her housing policy efforts, is leading the latest push. Since the start of the year, she has convened select committee hearings focused on “housing construction innovation,” with particular attention on factory-based building methods.
“Over the last eight to 10 years or so the Legislature and the governor have really taken a bulldozer to a lot of the bureaucratic hurdles when it comes to housing,” said Wicks. “But one of the issues that we haven’t fundamentally tackled is the cost of construction.”
Researchers at the Terner Center for Housing Innovation at UC Berkeley are preparing a white paper to summarize findings from the hearings. A package of bills aimed at encouraging off-site construction is expected in the coming weeks.
Interest in modular construction has grown steadily in California’s urban centers, especially in the Bay Area. Developers increasingly use prefabricated panels or full three-dimensional modules assembled in factories before shipment to building sites.
Randall Thompson, who runs the prefabrication division of Nibbi Brothers General Contractors, said developer attitudes have shifted dramatically.
What was once a tough sell has evolved into growing demand. Many developers are now “modular-curious,” willing to explore whether factory-built units can reduce risk and cost in a high-priced market.
Construction has long lagged behind other industries in productivity growth. Since the 1970s, labor productivity in construction has declined sector-wide. In 2023, the average construction worker generated about as much value as one in 1948.
That stagnation fuels comparisons to Henry Ford’s assembly line model.
“When you go to buy a car, you don’t get 6,000 parts shipped to your house and then someone comes and builds it for you,” said Ryan Cassidy, vice president of real estate development at Mutual Housing California.
In theory, factory-based construction allows materials to be purchased in bulk, tasks to be standardized and timelines to shrink. Off-site construction can cut timelines by 10% to 30%, according to research cited during legislative hearings. Some estimates suggest even greater savings under optimal conditions.
“Factory-built housing has the potential to reduce hard (labor, material and equipment) costs by 10 to 25% — at least under the right conditions,” said Ben Metcalf, director of the Terner Center, during testimony.
But as history shows, achieving those “right conditions” is complicated.
Factories are expensive to build and operate. They only make financial sense if they run at high, steady capacity. Housing development, however, tends to move in boom-and-bust cycles and is heavily shaped by local rules, custom designs and project-by-project approvals.
“In a world in which housing projects are approved one at a time under various local rules and designs and sometimes after years of piecing together financing sources, it’s hard to build out that pipeline for a factory,” Metcalf said.
Jan Lindenthal-Cox of the San Francisco Housing Accelerator Fund explained another challenge: industrial construction requires higher upfront capital.
“Industrial construction costs less overall but costs more in the short term. Everything is frontloaded,” she said.
Real estate lenders are often reluctant to commit large sums early in a project. To address that, the Accelerator Fund is offering short-term, low-cost loans to cover early expenses while the model proves itself.
Risk perception remains a major barrier. Apoorva Pasricha of Cloud Apartments noted that unfamiliar subcontractors and building officials often price in uncertainty.
“As the industry grows, creating familiarity with the process helps drive that risk down,” Pasricha said. “The question is, who is going to be willing to pay the price to learn?”
Skepticism is heightened by high-profile failures, most notably Katerra, which collapsed in 2021 after spending $2 billion attempting to industrialize homebuilding.
Brian Potter, a former Katerra engineer and author of “The Origins of Efficiency,” cautions against overselling the concept.
“There are just fundamental nature of the market, nature of the process, things that you have to cope with,” Potter said.
He suggests that some cost advantages attributed to factory efficiency may actually stem from geographic wage differences — for example, factories located in lower-cost regions supplying expensive urban markets.
Labor politics also complicate matters. While some trade unions are open to modular construction, the State Building & Construction Trades Council has historically resisted broader off-site expansion.
Though no formal bills have yet been introduced, discussions at hearings have centered on three policy levers:
Some experts caution against over-targeting factory construction specifically.
Stephen Smith of the Center for Building in North America advocates broader regulatory reform.
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“You find walls built in factories, you see elevators, you see escalators,” said Smith. “You need to consider the small victories and think of it as a general process of (regulatory) hygiene.”
Wicks acknowledges factory-built housing is no silver bullet.
“I don’t think factory-built housing is going to solve all of our problems. I think it’s a piece of the solution,” she said. “We’re not talking about actually funding the building of factories. We’re talking about creating a streamlined environment for these types of housing units to be built.”
After decades of false starts, California lawmakers believe they may finally have aligned regulatory reform, political will and economic pressure.
Whether this time proves different remains to be seen — but in a state grappling with chronic shortages and soaring rents, many argue it can’t hurt to try again.
Originally reported by Ben Christopher, CalMatters in VC Star.
