Modular’s The Magic To Make Workforce Housing Work

Across the country, the essential workforce is being pushed out of affordable housing options. To work in a community, essential workers frequently have to purchase housing so far out that it takes hours to commute back and forth every day.

In some places, these lower paid workers resort to living in cars to stay close and to not take on the burden of a housing payment that is continually escalating, along with the insurance and taxes associated with it.

“People need to live near where they work and that is everyone across the economic spectrum – teachers, government, they shouldn’t get priced out of the markets they work in,” said Adam Berger who serves as manager at modular housing company Adam Berger Development. “You need these people to have housing nearby to serve their role in your local economy.”

These essential workers account for more than 80% of the U.S. workforce according to the National Association of Business Economics.

Yet, with housing costs outpacing income growth, the numbers of those impacted is rising. City officials are starting to recognize the impacts to their communities and local economies, and therefore focusing on the opportunity to provide housing at the right cost, serve the essential workforce, and create sustainable economics.

“We believe deeply that every good thing in this country is one degree of separation from housing,” Martin Muoto, housing advocate and CEO of SoLa Impact and Model/Z. “By enabling essential workers to own homes, we not only provide them financial stability today, but give them a pathway for their children and grandchildren to thrive within the communities they live.”

Robert Dietz, senior vice president and chief economist at the National Association of Home Builders, emphasized the need for more townhome developments that would serve well for workforce housing during a presentation at this year’s National Housing Supply Summit.

“The success story is townhouse construction,” he said. “This type of light density where it is zoned can grow 18%.”

In February, he wrote that 2- to 4-unit rental properties have been on a development decline since the Great Recession, but recently saw a small uptick. For the last quarter of 2024, 2- to 4-unit housing unit starts increased by 25% from the fourth quarter of 2023. However, from 2000 to 2010, these types of developments made up about 11% of total multifamily construction, dropping to about 4% in the decade after that.

These trends point to zoning challenges, but the cost of construction also puts up major obstacles. Most builders cannot make these projects pencil, but some innovators are making it work with the magic and capabilities of modular construction.

Modular The Key To Workforce Housing

The city and County of Denver, the Colorado Department of Housing, and the Colorado Housing and Finance Authority worked with Adam Berger Development on a 6-story, 77-unit workforce housing project targeting those in the range of 80% to 120% of the average median income, or AMI.

A challenge workforce housing often faces is funding, but the state of Colorado saw the value and promise of the technology and efficiency of modular construction and developed a creative funding structure.

“The West Holden project has 50 boxes stacked on a concrete podium,” Berger said. “Colorado is forward thinking in supporting modular construction and we were a bit ahead of the state in where they are today, and I have been doing modular since 2017. The state has fully embraced modular.”

The “boxes” were designed and constructed by a firm in Boise and shipped to the site, then set in just 7 days. Berger estimates the efficiencies of modular saved 25% in hard costs and more than 40% on the construction schedule to be able to deliver at $215,000 per door in hard costs. The modules were configured into both 1- and 2-bedroom units at West Holden Place, becoming the largest modular project in Denver to date.

The project made believers out of the state’s leadership who later approved $38 million in funds to support Colorado-based modular housing factories.

“Modular is a tool that can address housing affordability – we are doing it,” Berger said. “We’re proving it to state, lenders, residents. You have to do your homework, you have to be prepared, and be sure you are going to deliver and leverage the things that modular offers.”

Berger shares that leveraging modular requires getting modules to 99.9% complete inside the factory so that when the boxes are set onsite the connections are as efficient as possible. Then, onsite logistics have to be streamlined, from shipping to staging, the orchestration of the set company has to be flawless.

Adam Berger Development acts as a vertically integrated firm, incorporating the design, development and construction into one.

“We did it out of design and necessity—we are approaching modular very methodically,” Berger said. “We committed to using modular as one of the tools in the toolbox. We also need to pull out all the other stops, like cost effective capital. The City of Denver has a division in permitting for workforce and affordable projects and incentives with zoning to help with density.”

The city’s requirement associated with state funds is to derestrict units that are 80% of the AMI at a minimum. Berger’s West Holden project will have 44 of 77 units deed restricted at 80% AMI.

“We limit the rents because we are pulling all the levers on building a more cost-effective project, and from an underwriting perspective we can afford that,” Berger said. “Modular plays a major role in delivering that.”

Berger insists that part of the success of modular is delivering a high-quality living experience.

“We want tenants and residents to experience high quality, the right finishes, appealing design like quartz countertops, contemporary modern finishes, soft close, brand name fixtures, under-mount sinks, nine-foot ceilings, LED lighting,” he said. “People should walk in and say they want to live there. It doesn’t matter if it is modular, that’s secondary in the resident experience. Design is paramount.”

Modular Again The Key To Workforce Housing

Modular construction is a critical tool to make workforce housing pencil in Los Angeles as well, one of the most expensive places to develop affordable housing.

“LA is one of the hardest of the hardest to build affordable housing and has become the best example of how not to do affordable housing,” said Muoto from Model/Z. “We’re at the lowest point we have been in 10 years in affordable housing production. We are averaging 10,000 to 11,000 units per year, and this year it is only 5,000, and it’s in a city that needs 500,000 units.”

Funding is equally difficult in this situation. A recent RAND report shows that construction in California costs nearly two and half times what it does in Texas. Muoto is finding ways to work around that by taking advantage of opportunity zones, using private capital, and using modular housing at scale.

After completing 30 projects, he admits to making every mistake possible, and with that valuable new knowledge, formed Model/Z. What he came to realize is that housing is uniquely customized for every project, whereas other industries, like autos and clothes, don’t have the same level of customization. In housing, a project is designed with unique elevators, windows, flooring, and dozens and dozens of unique factors that all mean more time and cost.

Muoto says this is also why modular companies cannot scale.

“They all take what is being done in the real world and bring it into a warehouse,” he said. “And every time they have a new customer, they have to redesign the warehouse and the assembly line to meet the specifications of the project. Everyone with a new project has new ceiling heights, so you have to go source it and train the assembly line to quality check.”

With former SpaceX engineers and 18 months of research and development, Model/Z designed a universal one-bedroom chassis that doesn’t change and represents what most residents need and want. The modules are built using structural light gauge steel designed to be stacked 5 high and engineered to last 100 years. The company has produced more than 300 units in its first year and continues to produce about 2 units per day, which Muoto claims is better than about 90% of modular builders across the U.S.

There is the opportunity for some customization, but the door and window location don’t change, allowing Model/Z to produce at scale. The other critical factor to the company’s success is using AI and automation to design the buildings and expedite permitting.

The company’s AI-powered software analyzes land parcels in Los Angeles to identify those suitable for modular by the type of grading, and by its accessibility for a crane. These factors contribute to the company’s “Z score,” or its modular suitability. The software will determine the number of units that can go on the lot, and map the appropriate building codes to optimize the property.

“We’re close to being able to build fully baked plans with no human intervention,” Muoto said. “Our hope is that over time, with those two components in place, we will be able to reverse engineer to submit perfect plans to the permitting department and cut the red tape.”

Model/Z has completed 17 projects, has 13 in construction and 10 in entitlement currently—all without government subsidies—and is able to open for occupancy in less than 9 months.

“LIHTC and traditional funding tools led to housing being built at $800,000 to $900,000 per door,” Muoto added. “We have built for under $300,000 per door, all in with land and labor, and we are building consistently at under that without government subsidies. We now have a pipeline that is around 4,000 units between multiple funds and have become the largest developer of affordable housing in LA and we shouldn’t be.”

Every project creates stable housing, job opportunities, and equity for communities in Los Angeles and beyond. The company has 120 employees from the local neighborhood.

“We want people who build the units to be the ones who might be living in them,” he said. “We need to be accessible to 95% of the population.”

Workforce Housing That Works For The Environment

Gene Myers is CEO at Thrive Home Builders, a green home builder in Colorado, and he not only wants to build the most sustainable housing available, but he also wants it to be attainable.

The City of Breckenridge had adopted zero energy ready standards, but also needed affordable housing to sustain its economic pillar—the resort industry—along with the essential workers that keep the resorts running. The city turned to Thrive to develop 61 workforce housing units, offering free land and a large subsidy.

Scheduled to complete in 2026, the project will meet the U.S. Department of Energy’s Zero Energy Ready program criteria with rooftop solar and double 2×4 panelized walls delivered from an offsite component manufacturer in Denver.

Modular again was important to complete this project by offering time and cost savings. Myers pointed out that getting the project enclosed quickly makes a big difference when construction crews are clearing snow from the job site on a regular basis.

“The housing is built for the townspeople who you need to retain, for the 5,000 permanent residents in Breckenridge, like a restaurant owner,” Myers said. “Young people move here and put up with terrible housing for a little bit, and the town board wants to retain them by offering good housing units.”

The lowest cost units are at 100% AMI, then go up to 160% AMI and are deed restricted. While not in the traditional missing middle AMI range, Myers says the most accurate description of the project is missing middle because there are not more affordable housing options around. Plus, residents will be saving on energy costs due to the design.

Thrive also used OneClick LCM to calculate the carbon footprint of all the houses and is balancing those by purchasing carbon offsets.

“This project is making a difference in the local economy,” Myers said. “The town has a fund so we took what we would have paid for a third party offset to put in the town’s fund to do local offsets, such as putting a solar array on a school. Customers appreciate something they could see, and that would drive local benefit. We also lifted the local trades with the construction work.”

Thrive will be working with the City again on another 150 attainable units with the potential for an additional 44 accessory dwelling units.

Mobile Workforce Needs Workforce Housing

One of the most popular projects in the country right now is data center construction. One data center needs hundreds if not thousands of workers, but only for a few years.

Yeves Perez is CEO at Workbnb, a workforce housing as a service startup based in Las Vegas that is focused on providing comfortable, quality housing for mobile workers.

“This workforce is marginalized by housing when they are contracted to build,” he said. “Nine times out of 10, it’s not near where they live so they have to go on the road. The alternatives are living in a hotel, man camps are prevalent in places with oil, and with data center construction.”

Perez said this workforce needs to have a good travel experience to stay on the job.

“I talk to workers every day in their 20s and 30s and they got into trades because of a family member or friend, but they are staying in sleep trailers, like semis stacked with bunk beds to fit 40 workers in the trailers,” he said. “These are wildly inefficient, have no amenities, but the workers don’t have a choice.”

Workbnb partnres with an engineered manufacturing incubator mHUB and S.I. Container Builds to deliver net-zero, climate-resilient, solar-powered container homes for workers. These 20-foot studios resemble single occupancy units that can perform off grid utilize air-to-water technology, require no power source, and feature advanced on-site water processing.

With two pilots in the works, Perez believes that this product will be what construction projects need to attract youth and offer a better quality of life on the road where workers are stretched to the max, have bad sleep quality in low quality housing, which causes more accidents on the job.

The container-based units cost about $50,000 to build, but are rented out by Workbnb at a nightly rate with the addition of a maintenance contract.

More Workforce Solutions

As the original in workforce housing, the architect firm Opticos Design recently launched the Missing Middle Neighborhood Kit to help expedite the entitlement and delivery of workforce housing.

The kit includes two types of master planned workforce housing communities and one infill option. One is a complete, walkable master planned community with all missing middle or a combination of missing middle and single family attached and detached. The second kit offers ways to integrate workforce housing types into a larger master planned community. The third kit would make use of a larger infill property that is in a walkable area.

A developer using the kit will get a selection of prototype designs and conceptual site application from Opticos, along with architectural and structural drawings, specifications, MEP design and permit revisions.

“It’s more than a product—it’s a system that can be used to rethink how we build neighborhoods to create inclusive, sustainable, and vibrant walkable places for everyone,” wrote Daniel Parolek, founder of Opticos Design.

These forward-thinking innovators are dedicated to solving a national issue—housing the people who make our local communities safe, healthy, attractive, and comfortable. Modular construction is helping create and scale workforce housing so the firemen, policemen, teachers, and healthcare professionals can live in the places they serve.