Modular Workforce Housing

This market is proving to be a natural fit for modular construction.

• States and municipalities are encouraging workforce housing through subsidies and zoning changes.
• Recent projects demonstrate the fit between modular construction and this market.
• The developer will need to find a lender who is willing to finance modular construction. Not all are.

The Modular Building Institute’s 2024 Permanent Modular Construction Report states that modular holds just 6.6% of the total construction market (as of 2023). For that percentage to increase, and for a broader and more seamless transition to modular construction overall, education will continue to be extremely important.

One area where modular construction methods can have a big impact is in workforce housing. At this year’s International Builders’ Show (IBS) in Las Vegas, Nevada, Ken Semler, Eric Schaefer and Thomas Coronato presented to an audience of over 100 people on the benefits of modular construction for single- and multifamily housing — particularly in the context of alleviating workforce housing shortages across the country.

Builders and developers made up about half of the audience, and around 20% percent of them said they were actively looking to use modular building methods in 2025. The session was designed for those seeking more information on how to successfully utilize modular in workforce housing projects.

Ken Semler, Publisher of Offsite Builder and President & CEO of Impresa Modular, a national modular franchise, opened the session with an overview of the current housing crisis, addressing issues like increasing costs and supply chain challenges, the lack of available labor and the current deficit of housing around the country. Semler spoke about a February 2025 report from the McKinsey Institute for Black Economic Mobility entitled: Investing in housing: Unlocking economic mobility for Black families and all Americans, which stated there were “8.2 million fewer housing units than needed in 2023 to meet the needs of American families” and “…that gap could grow to 9.6 million units by 2035.”

Semler also provided an overview of modular terminology that commonly causes confusion, and emphasized that “modular is a ‘method’ of construction, not a type of housing, or class of structure.”

Missing Middle

Eric Schaefer, Chief Business Development Officer at Buena Vista, Colorado-based modular manufacturer Fading West, shared how his factory is building workforce housing to help alleviate this category of missing middle homes.

Workforce housing, sometimes also referred to as “attainable housing,” allows essential workers like teachers, emergency services (police officers, fire fighters) and healthcare workers to live near their jobs. Workforce housing not only helps create economic stability, but also allows local businesses to attract and retain much needed talent, ultimately supporting the growth and stability of the communities in which they live. In short, workforce housing is a long-term community investment.

The Urban Land Institute defines workforce housing as housing where the occupant makes 60% to 120% of the Area Median Income (AMI). In comparison, affordable housing is usually built with one or more types of subsidies, and the occupant must make less than 60% of the AMI, although these percentages can sometimes vary.

One way in which cities are supporting the development of workforce and attainable housing is by loosening rules on Accessory Dwelling Units (ADUs). ADUs are a housing option that can allow homeowners to both subsidize their mortgage payment and increase housing affordability for other individuals and families. ADUs­ can be attached, internal units (think basement apartment); attached, exterior units (think addition to an existing single-family home); or detached units on the same property as the existing single-family home.

As of June 30, 2025, certain municipalities in Colorado (with a population of 1,000 or more and within the area of a metropolitan planning organization) will allow “one ADU as an accessory use to a single-unit detached dwelling in any part of the subject jurisdiction where the subject jurisdiction allows single-unit detached dwellings.” Alternatively, ADUs will be allowed if a portion of a county is both “within a census designated place with a population of forty thousand or more… and within the area of a metropolitan planning organization.”

Washington State recently passed House Bill 1337, which requires local governments to revise regulations and allow two ADUs per lot in urban growth areas, in addition to the principal unit, for lots that meet the minimum lot size required for the principal housing unit (effective early 2024). 

Financing Issues

Creative financing is usually required for workforce housing numbers to work. Fading West has been involved with projects using a few types of financing models including Public-Private Partnerships, Public-Private-Philanthropic Partnerships and Employer Subsidies (where an employer funds a specific amount per door).

Along these lines, the IBS seminar also included a presentation and Q&A with Tom Coronato, Senior Vice President Offsite Construction Lending at Calcon Mutual Mortgage, a nationwide home financing company. Coronato is the current Chair for NAHB’s Building Systems Councils, and his talk focused on the nuances of financing modular construction projects.

“Technically speaking, it is not much different [from other construction projects],” he says. “When you’re dealing with modular or offsite construction, you are talking about a ‘method’ of construction (using the same IRC code as site-built homes) versus a ‘type’ of construction.” The ability to explain financing for modular construction projects to potential adopters is a simple way to help move the industry forward.

Coronato explained that with construction-to-permanent financing (his company’s most common loan program) if the borrower generally qualifies for a loan on an existing home or site-built home, they also qualify for a new home using modular methods. Usually, lenders will have an overlay of risk or preference in lending. For example, some companies will offer 100% financing whereas others will overlay their risk and provide 80% financing.

The main difference, once financing options have been determined, is in the payment schedule to the Builder/Manufacturer. On a traditional site-built home, the payments are generally more evenly spread out during the build as work gets completed — payment grows as work moves along; it is evenly paced.

Modular financing moves along in the same pattern, however, there may be modular-specific payments required during manufacturing, before the home is transported from the factory and when the home is placed on the final site location.

“With modular construction, the big difference is there is usually always an upfront deposit the financing institution has to pay to the manufacturer in order to start production of the home,” says Coronato. “Most banks are not committed to offsite lending and performing payments in a way that keeps the manufacturing facilities flush with cash and moving projects along.”

Recent Projects

As part of his IBS presentation, Schaefer gave examples of two specific workforce housing projects.

Fading West had the opportunity to participate in a landmark public-private partnership with the Town of Breckenridge in Colorado. In March of 2023, the factory began construction on the 52-unit, Larkspur Apartments-Breckenridge, and delivered the project four months later. Leasing began in Q2 of 2024.

Additionally, Fading West has worked with Habitat for Humanity Vail Valley (Habitat) to provide 16 high-quality modular homes for Eagle County, Colo. 75% of these homes will go to Eagle County School District employees.

The units include a mix of 3-bedroom duplex designs with attached garages and this was Habitat’s first project using modular construction. Historically, Habitat for Humanity projects can take anywhere from six to 12 months to complete, per home. The 16-home Eagle County project was completed in just 10 months, proving that modular construction can help organizations like Habitat make a greater impact in a much shorter timeframe.

With flooding and wildfire disasters destroying tens of thousands of homes across the country, modular construction offers a fast, durable and cost-effective solution for all types of housing needs. Working with FEMA, Fading West also delivered 170 homes to Hawaii to be used for four years as temporary housing, after which they will be moved and will become permanent housing. With no current modular regulations, Hawaii has a huge opportunity to provide a pathway for rebuilding with modular construction.

The need for workforce housing is not likely to dissipate anytime soon. Collaboratively, the industry can work together with local policymakers, developers and financing institutions to make it easier for this missing housing to be created by a broader adoption of modular methods.

Heather Wallace is Director of Communications and Project Manager, at Momentum Innovation Group, LLC.