Modular techniques may make homebuilding safer, faster, cheaper.

Byline: Dan Emerson

Last year, a group appointed by then-Gov. Mark Dayton called the Minnesota Task Force on Housing issued a report citing the need for 300,000 new homes by 2030 to serve the state's expanding population.

With steadily rising costs cited as a major barrier to more affordable housing, construction professionals are considering one partial solution: volumetric modular construction, in which most of the building process takes place in a controlled factory environment, with significantly less of the work done on-site.

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Growing in popularity in coastal markets, the process promises to be faster, cheaper, safer and in some cases higher quality than traditional on-site building.

According to a McKinsey & Co. report, modular can speed construction by up to 50 percent and, in the right environment, cut costs 20 percent. Labor and housing shortages are the biggest predictor of where it can gain traction: the U.S. West Coast, Australia, the United Kingdom and Singapore, the report said.

Multiple factors determine whether a given market is likely to embrace modular construction, the two biggest being real estate demand and the availability and relative costs of skilled construction labor, according to McKinsey.

With rising costs excluding more people from home ownership, "it's almost inevitable that we'll have to change the way we build housing, with labor shortages becoming more intensive and the limited window of time, given our seasons, to do traditional construction," said Jamie Stolpestad, managing partner of St. Paul-based Minnesota Opportunity Zone Advisors. Opportunity Zones offer private investment a new federal tax incentive in rural and low-income communities.

"Other countries have already taken this step," he said. "Eighty percent of new housing, especially in Sweden, is installed on-site." For the U.S. to follow suit, "it's going to be a challenging evolution. We are contemplating a pretty wholesale shift from the existing housing construction ecosystem to something new."

Building lower cost, yet quality, housing would require less customization and more standardization, he said. "Right now, we have architects and developers who design custom projects every single time. Why not stick with the same format to achieve economies of scale, and then within that frame, provide whatever features you want?"

So far, the modular trend has had the biggest impact in the...