New report says factory-built construction could help California build homes faster

CALIFORNIA — A new report from UC Berkeley’s Terner Center for Housing Innovation says factory-based construction methods could help California build housing faster and at lower cost.

The report examines technologies such as prefabrication, modular housing and other industrialized construction techniques.

Researchers say these methods could improve efficiency and shorten construction timelines.

According to the California Department of Housing and Community Development, California must build 2.5 million homes by 2030 to meet the state’s housing needs.

Terner Center researchers say traditional construction methods can be slow and expensive. Many housing projects struggle to move forward because costs are too high.

The report highlights industrialized construction as one potential way to reduce costs.

Industrialized construction moves part of the building process into factories. Housing components are manufactured off-site and then assembled at the project location.

Supporters say the approach can reduce delays and improve consistency in building quality.

However, the report found several barriers preventing these methods from scaling across California.

Fragmented building regulations

One challenge is fragmented building regulations. Local codes and permitting processes vary widely between cities.

Financing is another issue. Factory construction requires large upfront investment and early design decisions that may not align with traditional real estate financing.

Researchers also say manufacturers need a steady pipeline of projects to keep factories operating efficiently.

Without consistent demand, companies may struggle to justify building new facilities.

The report also cited liability concerns from lenders and developers, along with workforce training challenges as construction shifts toward factory production.

Policy changes could boost factory-built housing

Researchers interviewed more than 65 stakeholders involved in housing development, including developers, contractors, investors, government officials, and technology firms.

The study identified dozens of potential policy changes that could help expand innovative construction.

These include streamlining building codes, improving coordination between state and local agencies, updating housing funding programs and expanding workforce training.

Researchers say addressing these barriers could allow innovative construction methods to play a larger role in helping California meet its housing goals.

Areas for future research

Researchers also identified several ideas that may warrant further study.

One proposal is a sales tax exemption for materials used in factory-built housing production. Supporters say it could encourage companies to open factories in California and lower transportation costs.

Others suggested reviewing California’s highway escort requirements for transporting large housing modules. Some stakeholders say the current rules increase costs compared with neighboring states.