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Commercial Real Estate

The Future of Modular Affordable Housing

Modular construction can shorten project timelines and reduce costs, potentially making it a critical solution to the Northeast’s affordable housing crisis.

The need for new apartment units is increasing in the Northeast and across the nation. High construction costs, however, present a major barrier to creating enough affordable housing supply.

Modular homes have the potential to reduce construction timelines and costs, making them ideal for affordable housing solutions. These buildings have caught on in Japan, Scandinavia and other parts of the world, but not in the U.S. What’s holding us back?

Modular housing—also referred to as off-site or manufactured housing—uses a unique construction process. The building is constructed in modules at a factory under controlled conditions. The individual modules or panels are then transported and assembled on-site to form the full structure.

Dispelling Modular Housing Myths

Misconceptions about modular-built homes often stand in the way of adoption.

Some of JPMorgan Chase’s developer clients are sold on modular-built housing, while others remain hesitant.

That’s usually because clients are unfamiliar with the process. For example, because construction takes place off-site under controlled conditions, some people assume that the materials aren’t as durable as those used in traditional construction. But traditional and off-site projects generally use the same materials and frequently satisfy building code requirements.

When David Gallo, President of Georgica Green Ventures, learned about off-site construction in 2015 he quickly adopted the method. Now, the New York-based real estate developer uses modular construction whenever possible.

“Off-site construction can offer employees safer work conditions,” said Gallo. “What’s more, the construction is often more environmentally friendly with less disruption to the neighboring community.”

Georgica Green Ventures adopted modular construction in 2015 and has used the method for projects across New York state.


Benefits of Modular Construction

There are several advantages to modular construction, including:


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Environmental Friendliness

Most modular construction takes place in a factory, meaning the process can reduce waste by protecting building materials from the elements. Fewer people and materials traveling to the site can reduce carbon emissions. Plus, off-site construction helps keep moisture out of materials, which can improve air quality. 

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Manufactured construction can allow for more control over the project schedule. In addition to eliminating weather delays, factory construction can take place simultaneously with on-site work, which can shorten construction schedules by 30% to 50%, according to the Modular Building Institute.

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Cost Efficiency

Because modular construction can cut project timelines, it may also reduce labor costs. Adopters may also save money on materials, transportation, quality control, subcontractors and other expenses. As an added advantage, a shortened timeline means tenants can move in sooner, which may result in quicker returns and reduced market cycle risks.


Modular Construction and Affordable Housing

A 2020 Freddie Mac Economic & Housing Research study found that, with state-level variations accounted for, the U.S. needs 3.3 million more housing units to make up for its shortage. A static estimate shows that 29 states have housing deficits, and six of them are in the Northeast, including Connecticut, Maryland, Massachusetts, New Hampshire, New York and Rhode Island. Washington, D.C. also faces the country’s largest housing deficit: 9.55%.1

The urgent need for housing cannot be overstated.

With modular construction’s efficiencies, developers can potentially manufacture and install housing on-site in less time than traditionally constructed homes. Developers can pass the time and cost savings to tenants through increased affordable housing options.

Off-site construction can work particularly well in suburban or rural areas. For example, JPMorgan Chase has helped Georgica Green Ventures finance affordable modular-built housing throughout New York state, including Long Island and Westchester County.

Grand Street Apartments, a senior housing community, features six two-story residential buildings and one community building.


Manhattan Avenue Apartments

  • Location: White Plains, NY
  • Financing: $19.2MM in fixed-rate tax-exempt bonds from JPMorgan Chase
  • Project details: The original structure on this 2.61-acre site included 30 public housing units. After demolition and new construction, the updated apartment community will more than double that number with 70 modular-built housing units for seniors.

Grand Street Apartments

  • Location: New Cassel, NY
  • Financing: $11.3MM in fixed-rate tax-exempt bonds from JPMorgan Chase
  • Project details: The apartment complex comprises six two-story residential buildings and one community building, plus a croquet and bocce court, shuffleboard and community garden. All the units will be affordable to households earning up to 60% of area median income (AMI).

Laurel Homes

  • Location: Roslyn Heights, NY
  • Financing: $24.5MM in fixed-rate tax-exempt bonds from JPMorgan Chase
  • Project details: Laurel Homes is composed of eight two-story buildings with a total of 74 modular housing units: 29 for Section 8 project-based vouchers and 45 for households earning less than 60% of AMI.


Manufactured homes can work in urban areas, too. But narrow roads and limited open space can present transportation challenges.

That problem may be short-lived. The industry continues to make advances, whether through new, lightweight materials or building information modeling technologies. The current administration has also prioritized climate change and affordable housing, which could fuel progress in off-site construction.

As modular housing gains more attention and investment, it can help increase the supply of affordable homes and eliminate housing deficits across the Northeast.

1 Provided by Freddie Mac®; Freddie Mac does not endorse JPMorgan Chase or its products and services

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