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Modular Construction: Assessing the Challenges Faced with the Adoption of an

Innovative Approach to Improve U.S. Residential Construction

Conference Paper · June 2019

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 CIB World Building Congress 2019
Hong Kong SAR, China
17 – 21 June 2019

Modular Construction: Assessing the Challenges Faced

with the Adoption of an Innovative Approach to Improve
U.S. Residential Construction
Humberto Cantu,
University of Florida
(email: hcantugarcia@ufl.edu)
Charlie Canal,
University of Florida
(email: canal.charlie@ufl.edu)
Aaron Costin,
University of Florida
(email: aaron.costin@ufl.edu)

Abstract

Becoming a homeowner has become less common in the middle class in the U.S. as there has been a
shortage of affordable housing. The recession of 2008 forced residential construction companies to
build less affordable homes for middle-class and low-income families. The affordability of mortgages,
generally not more than one third of household incomes, has declined tremendously. The recession
showed the magnitude of the negative effect a major economic change can have on society. Smart and
Industrialized Construction techniques are enabling new methods to reduce the cost of building and
owning residential homes. Modular construction attempts to change the market by introducing an
innovative home design that incorporates high quality and energy-efficiency at an affordable price. This
would potentially encourage families to become home-owners rather than renters due to more
affordable prices and lower utilities bills. However, preliminary results revealed that there are barriers
that prevent the adoption of modular construction, such as local building codes, structural requirements,
and size limitations. The purpose of this study is to conduct a review to identify and assess the
challenges faced with modular construction in the U.S. residential industry. Furthermore, this paper will
introduce modular construction and other Smart and Industrialized Construction techniques that can be
utilized in constructing affordable homes. The methodology to obtain data on the challenges and
constraints of modular constructed homes will be a survey performed to professionals and stakeholders
in the residential industry. Finally, the sustainability advantages of modular home building vs
conventional homes in the U.S. will also be discussed.

Keywords: Smart Construction, Modular Construction, Residential Construction, Affordable

Housing
 CIB World Building Congress 2019
Hong Kong SAR, China
17 – 21 June 2019

1. Introduction
The Architecture, Engineering, Construction, and Operation (AECO) Industry has had significant
advancements in the smart and sustainable construction practices. There has been an increase in
technologies that make cities smart and sustainable, in which it has been argued that smart cities and
sustainability go hand-in-hand (Costin and Eastman 2019). The world’s population is predicted to reach
nearly 10 billion, with many residing in urban environment. In addition to putting major burdens on
many current urban systems (e.g. transportation, energy, healthcare, etc.), the increase will have even
more devastating consequences for the environment, as cities currently consume roughly 75% of the
world’s resources and energy and produce 80% of greenhouse gases (Mohanty et al. 2016).
Furthermore, the increase in the urban population is increasing the cost of living, making access to
affordable housing a major challenge. Ever since the recession in 2008, residential construction
companies have been building less affordable homes for middle-class and low-income families.
Mortgages have become less and less affordable over time and home affordability in the U.S. has
dropped to lowest level in since 2008 (ATTOM 2018). Therefore, it’s imperative for smarter and more
sustainable construction practices to be utilized that can produce affordable and sustainable housing,
while enabling a high quality of life for the growing population.
The use of Smart and Industrialized Construction can be a potential solution to achieve affordable and
sustainable housing. One technique is the use of off-site modular construction. In fact, modular housing
is one of the fastest growing sectors in the construction industry (NMHC 2017). A modular home is
defined as a structure designed and built for residential use; it consists of multiple modules built in a
factory according to the local building code which varies depending on the jurisdiction where the home
is to be built. The modules are transported from the factory to the site for final assembly and completion
on a permanent foundation. Their popularity is rising, as there has been a shortage of affordable housing
in the U.S. Modular constructed homes attempt to introduce high-quality homes at an affordable price,
with the objective of making it easier for families to become home-owners rather than renters (MHI
2017). Being able to manufacture components off-site increases productivity by avoiding delays,
quality control issues, skilled labor shortage, and fluctuating material costs (NMHC 2017). More and
more construction companies are switching to the factory-built construction and gaining momentum
towards their competition. On-time and bulk purchasing makes it possible for manufacturers to provide
amenity-filled homes at an affordable cost, and design flexibility provides many different alternatives
from which to choose (NMHC 2017).
The purpose of this research is to identify the challenges faced with the adoption of utilizing modular
construction for the U.S. residential industry. First, a background review was performed in order to
identify the current methods used and the effect they’ve had over time. Second, the research method is
discussed. Here, the objectives, purpose, hypothesis, scope/delimitation and methodology are listed.
Third, the test/experiment performed is explained. Fourth, the results and data collected from the survey
are presented. Finally, a recap of this research is written, conclusions are made based on the results of
the survey, new contributions developed are mentioned, the significance of the new findings are
examined, future outlooks encountered during the investigation are listed, and any limitations to the
collection of data are indicated.

2. Background Review
Overall, alternative construction methods are needed to reduce cost, increase quality, maintain
sustainability, while still being profitable for the companies. One objective of implementing different
alternative construction methods is to reach affordable housing. Traditional construction methods could
be optimized to increase profitability mainly by dematerializing and improving labor productivity.
However, productivity improvement methods are much more easily implemented in factory-built
construction alternatives such as modular homes and manufactured homes (Yates 2014). Modular
homes and manufactured homes are similar, but have major differences. They are both constructed
off-site, under controlled conditions. One major difference are the building codes and regulations each
are subjected to (Wickell 2018). All manufactured homes are subjected to the federal HUD code, while
 CIB World Building Congress 2019
Hong Kong SAR, China
17 – 21 June 2019
modular homes are subjected to the final delivery and building location. Another difference is often in
the structure and permanence, in which modular homes are placed on a permanent foundation, where
manufactured homes (formerly called mobile homes) are built on a steel chassis with wheels attached.
The wheels are removed to set the manufactured home into place, but they could be reattached to be
moved in the future. Manufactured homes are pre-constructed completely in the factory through
assembly lines, where modular homes come pre-built in sections from the factory. Laborers turn-over
rates are statistically lower on factories and productivity improvement methods are more successful due
controlled conditions and the consistent location of assembly-lines rather than dynamically moving
around like the case of on-site construction. The differences and similarities among traditional, modular
and manufactured home construction are shown in Table 1.
Table 3. Comparison of Alternative Construction Methods
Traditional Modular Manufactured Attributes
X X X Prefab
X Assembly lines
X X X Lean construction
Rare X Just-In-Time
Sometimes X X Sustainable
Site Specific Site Specific HUD Building Code

The implementation of prefabricated components into construction has been successful in commercial
and high-rise construction (Naomi et al. 2013). Even though it’s been effectively used in the residential
industry, the momentum is not nearly as good as in the aforementioned sectors. The main challenge is in
the economics of disrupting site-built methodology with the modular off-site methodology, where a
solution remains elusive. The manufacturing principles derived from the car industry, such as
implementing assembly lines in the process, have been successfully used to produce customized,
attractive and affordable manufactured homes (Gann 1996). Manufacturing practices such as
Just-In-Time (JIT) manufacturing increase inventory turnover. The origins of JIT have been traced back
to Henry Ford, who strongly believed in keeping inventories to minimum. This system results in a
leaner manufacturing facility by manufacturing in smaller batch sizes, therefore reducing operative
capacity of the facility and increasing unit cost. JIT practices would only improve performance if the
inventory cost savings together with the increase in revenues exceed the increased manufacturing costs,
for that reason it only applies to manufactured homes and rarely to traditional construction (Huson et al.
1995). Off-site construction methods often require more advanced technology than traditional
construction to be performed, such as Building Information Modeling (BIM). One of the major
advantages of using BIM in off-site construction methods is sustainability (Nawari 2012).
Previous literature suggests that the primary reason why projects didn’t include modular was due to
owner resistance (Naomi et al. 2013). A major hurdle to alternative construction techniques is the cost
and capacity to bring it to a scale which would justify the initial investment in new infrastructure. A
secondary hurdle are the several architectural requirements imposed by virtually every municipality in
the U.S. The challenge in this case, is to maintain the intrinsic economies of modular construction by
limiting the complexity and size of the “boxes”. While there are many different possible modular
designs, the further the design moves from simple boxes, the less the economics make sense. Huge
challenges exist in alternatives to the on-site construction methodologies used today as the current
on-site low-tech practices are infinitely flexible and scalable as it depends on engineering and design
requirements and weathering the unavoidable business cycles which is what generally prevents
wide-scale implementation of any new ideas, as great as the may seem.

3. Research Methodology
An increase in knowledge and research of modular home construction is important in order for the
modular home industry to continue to develop. The purpose of this research is to identify the challenges
faced with the adoption of utilizing modular construction for the U.S. residential industry. If modular
home construction becomes widely adopted across the United States, some major issues in the
 CIB World Building Congress 2019
Hong Kong SAR, China
17 – 21 June 2019
residential industry could be resolved. Building affordable houses for middle class families has become
harder to achieve. Modular home construction can provide a solution for obtaining affordable homes
while maintaining the goals of sustainability.
In order to be able to interpret the challenges involved in modular construction, feedback from workers
in different positions in the industry should be targeted. To gather effective responses from
professionals in the industry, a survey was created and sent out to modular home companies across the
U.S. The number of companies contacted, and a thorough interpretation of their responses can further
be examined in the results section of the paper. The main objective in sending out the survey was to
gather data from a personalized questionnaire that requests professionals to rate the challenges they see
carry the biggest weight in preventing wide scale implementation of modular construction in the
residential industry. The survey was sent out to emails obtained by personally calling modular home
companies across the United States. Thus, all the respondents for the survey were only able to answer
questions online. The survey is anonymous, so no personal information was taken such as names,
addresses, health information, etc.
The first hypothesis is that the cost and capacity to bring alternative construction techniques to a scale
which would justify the initial investment in new infrastructure is a challenge to utilizing modular
construction. Second, the intrinsic economy of limiting the complexity of the “boxes”, together with the
flexibility and scalability of low-tech on-site methodologies is another challenge to modular
construction. And the last hypothesis is that projects don’t include modular due to owner resistance.

3.1 Survey design

Companies across the United States were contacted in order to obtain personal opinions on what they
consider to be major challenges. There was a total of 142 company targets, and 64 were successfully
contacted. Surveys were sent out to those 64 companies, and there were 33 surveys started with a total
of 21 full survey responses. The number of responses generally required is 30 in order to obtain fully
viable information. Since this research paper is a preliminary study, a minimum of 20 responses are
needed to gain statistical insights. All surveys were sent out by calling modular home companies and
obtaining personal emails of professionals in those companies. The survey targets professionals in
management (other than project management), design (architects), or in project management.
The purpose of the survey is to identify and rank the challenges faced with the adoption of modular
home construction in the U.S. Companies that are surveyed are unique and may differ in resources and
size compared to other companies, so challenges for companies are expected to vary in type and rank.
Challenges for one company may or may not be challenges for another company.
The first part of the survey identifies some basic demographical information from the companies. This
first part helps us understand the following information about the companies: the region they operate,
their annual revenue, their annual production, the respondents’ title within the company, and the types
of modular homes they construct. Understanding these demographics allows us to identify regions in
the U.S. where there is more modular home building. Demographic information taken also helps us
grasp the size of the companies, what type of construction they focus on, and whether people in
different titles have differing opinions about the challenges faced with the adoption of modular home
construction. Regional information is important to analyze if local building codes and ordinances are a
factor.
In the second part, there is a list of 21 factors that could be potential challenges faced with the
implementation of modular construction for the residential industry. If the respondent clicked yes to a
factor, then a follow-up question is generated for every yes selected, in order to attempt to identify a
more specific issue. In this follow up question, the magnitude of every specific challenge selected is
weighed from 1 to 3 (1 being low, 2 being medium, and 3 being the highest). There is an additional
comment section where professionals in the industry can either mention other potential issues or
elaborate more on the selected ones.

4. Results/Data
 CIB World Building Congress 2019
Hong Kong SAR, China
17 – 21 June 2019

4.1 Demographic Results

Demographic results provide the basic information about the companies involved in the survey and the
modular home industry. This basic information includes: The type(s) of construction (and type(s) of
residential projects), the U.S. region(s) where work is done, an annual revenue estimate, the job title of
the person responding, and the person’s experience. Please note in figure 1 that all companies perform
modular home construction. Those who chose “manufactured” or “traditional,” perform these
alternative methods of construction in combination with modular. Also, in figure 4, it is important to
note that companies could be working in one or multiple regions.

15% 8%

77%

Traditional Home Construction

Modular Home Construction
Manufactured home construction

Figure 1: Construction Type Performed by the companies.

Management (Other than project

management)
15% Project management

20% 50%
Design (Architect, drafter, interior designer,
15% landscape architect, etc.)

Other

Figure 2: Job Title of Survey Respondent

 CIB World Building Congress 2019
Hong Kong SAR, China
17 – 21 June 2019

20%
10%
70%

<$100 $100-$500 >$500

Figure 3: Annual Revenue (In million dollars)

West (Southwest/ Pacific coast) U.S.

South (Central/ Southeast) U.S.

Midwest U.S.

Northeast U.S.

0 2 4 6 8 10 12

Number of Respondents

Figure 4: Regions from the United States where companies perform modular construction work.

Townhomes

Multi-family residential building

Single-Family Homes

0 2 4 6 8 10 12 14 16 18

Number of Respondents

Figure 5: The kind of homes the companies build

4.2 Survey Results

A total of 21 factors that could possibly be challenges were presented in the survey. It was then up to the
discretion of the surveyed professionals to identify the factors they believed to be an actual challenge
based on their experience. Each of the 21 factors that were presented was identified as a challenge by at
least by 4 professionals. Of the 21 respondents, 76% have worked in the modular home industry more
than 5 years, and 24% have worked in the industry for less than 5 years. The highest number of
respondents (both yes and no) for any factor, was 17. This is due to respondents being allowed to leave
an answer choice blank.
 CIB World Building Congress 2019
Hong Kong SAR, China
17 – 21 June 2019
Table 2: Factors Identified as Challenges
# Factor (Potential Challenge) Yes No Total number
of respondents
1 Guidance and information available 64.71% 11 35.29% 6 17
2 Local building codes 58.82% 10 41.18% 7 17
3 Past experience 82.35% 14 17.65% 3 17
4 Market size 43.75% 7 56.25% 9 16
5 Policies on taxes, loans and subsidies 50.00% 8 50.00% 8 16
6 Client skepticism and resistance 88.24% 15 11.76% 2 17
7 Fragmented industry structure 58.82% 10 41.18% 7 17
8 Transportation cost 75.00% 12 25.00% 4 16
9 Skilled labor shortage 70.59% 12 29.41% 5 17
10 Amount of modular component 37.50% 6 62.50% 10 16
facilities
11 Component availability 52.94% 9 47.06% 8 17
12 Component constructability issues 25.00% 4 75.00% 12 16
13 Time for manufacturing components 25.00% 4 75.00% 12 16
14 Site constraints 76.47% 13 23.53% 4 17
15 Supply chain management 43.75% 7 56.25% 9 16
16 Coordination required prior to and 43.75% 7 56.25% 9 16
during construction
17 Hoist equipment availability 23.53% 4 76.47% 13 17
18 Funding 47.06% 8 52.94% 9 17
19 Communication among all 43.75% 7 56.25% 9 16
stakeholders
20 Aesthetics 35.29% 6 64.71% 11 17
21 Feasibility of initial investment 28.57% 4 71.43% 10 14

Table 3: Rating of Identified Challenges from a scale of 1-3.

Field Min. Max. Mean Std. Dev. Variance Count
Lack of past experience 2.00 3.00 2.55 0.50 0.25 11
Smaller market size 1.00 3.00 2.40 0.80 0.64 5
Lack of policies on taxes, loans and
1.00 2.00 1.67 0.47 0.22 3
subsidies
More client skepticism and resistance 1.00 3.00 2.22 0.63 0.40 9
More fragmented industry structure 2.00 3.00 2.57 0.49 0.24 7
High transportation cost 2.00 3.00 2.40 0.49 0.24 5
Shortage of skilled labor 1.00 3.00 2.44 0.68 0.47 9
Low number of modular component
2.00 3.00 2.33 0.47 0.22 3
facilities
Lack of component availability 1.00 2.00 1.75 0.43 0.19 4
Component constructability issues 1.00 2.00 1.50 0.50 0.25 2
Long time spent manufacturing
1.00 1.00 1.00 0.00 0.00 1
components
Site constraints 1.00 3.00 1.91 0.67 0.45 11
Inefficient supply chain management 1.00 2.00 1.50 0.50 0.25 2
More coordination required prior to and
2.00 3.00 2.50 0.50 0.25 4
during construction
Hoist equipment availability 1.00 2.00 1.67 0.47 0.22 3
Not enough funding 1.00 2.00 1.33 0.47 0.22 3
Deficient communication among all
2.00 3.00 2.20 0.40 0.16 5
stakeholders
 CIB World Building Congress 2019
Hong Kong SAR, China
17 – 21 June 2019
Worse aesthetics than traditional
1.00 3.00 2.00 1.00 1.00 2
homes
Feasibility of initial investment 1.00 3.00 2.00 1.00 1.00 2

Each identified challenge was rated in table #3 above. The ratings ranged from 1-3, 1 meaning people
consider it a low-ranking challenge, and 3 meaning people consider the challenge high ranking. Rows
reading a “minimum” of 2 and a “maximum” of 3 were signify that the challenge for those rows did not
have a respondent choose 1 for the rating. For this table, minimum means the lowest number the
respondent chose for that challenge. The best interpretation of the high-ranking of a challenge is the
reading of the means. The challenges with ranking means of 2.20 and above could be considered
high-ranking challenges. The number of respondents is too low for the challenges to be considered
statistically significant, however, it does give an overview of the major challenges in residential
modular construction, given that the majority of the respondents have 5 or more years of experience and
are considered to be experts in the industry.
The top five challenges identified in the survey are: 1) client skepticism and resistance; 2) past
experience, 3) site constraints, 4) transportation costs, and 5) skilled labor shortages.
From which the ones with the highest ranking in order (from highest to lowest), are the following: 1)
Lack of past experience, 2) Shortage of skilled labor, 3) Higher transportation costs, 4) Client
skepticism and resistance, and 5) Site constraints.

5. Discussion
The main hurdle to alternative construction techniques mentioned in the hypothesis, where the cost and
capacity to bring it to a scale which would justify the initial investment in new infrastructure is stated, is
most likely proven wrong, since 10 out of 14 respondents considered that the feasibility of the initial
investment is not a challenge related to the implementation of modular residential construction in the
U.S. The secondary hurdle also mentioned in the hypothesis, is not contradicted or proven wrong by any
of the challenges identified in the survey, nor is it proven right and statistically significant. Therefore,
the intrinsic economy of limiting the complexity of the “boxes”, together with the flexibility and
scalability of low-tech on-site methodologies are yet to be demonstrated to be statistically significant.
These hurdles were originally identified by an architect with more than 20 years of experience in the
field. Lastly, another hypothesis suggests that the reason why projects didn’t include modular was due
to owner resistance. The aforementioned hypothesis was proven right and was actually the number one
challenge identified in this survey.

6. Conclusion
The paper focuses on assessing the main challenges faced with the adoption of utilizing modular
construction to improve the residential industry. First, a thorough background review was performed,
where the differences and similarities among traditional, modular and manufactured homes were
mainly discussed. Next, a survey was sent to professionals and stakeholders in the modular industry, in
order to gather effective responses about the potential challenges faced with utilizing modular in the
home industry. A descriptive analysis on the responses of the survey was then performed. The results of
the survey show that a hypothesis is that owner resistance is the reason why projects didn’t include
modular, is proven right. This was also the number one challenge identified in the survey, followed by
past experience and site constraints. The second hypothesis, where the intrinsic economy of limiting the
complexity of the “boxes” and the flexibility and scalability of low-tech on-site methodologies could
not be demonstrated due to the number of respondents being too low. This is, however, an interesting
hypothesis that could potentially be demonstrated in further research, with a statistically significant
number of respondents.
The main limitation of this study is the low number of respondents. Although the minimum sample size
of 20 was met, 21 total respondents is too small to perform a deeper statistical analysis. This survey will
 CIB World Building Congress 2019
Hong Kong SAR, China
17 – 21 June 2019
continue to solicit more responses in the future to collect more data that is needed to increase the
reliability of the survey results. Another limitation may be the implicit bias from seeking out the
construction firms, which may not include complete randomness in the study. However, this is only a
this is a preliminary study to gain insights into the major challenges. A more in-depth study will be
developed in future research.

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