Homeownership stands as a cornerstone of the American Dream. However, with a national housing affordability crisis highlighted by a soaring median price for single-family homes exceeding $422,000, a 30-year fixed mortgage rate decreasing yet remaining relatively high, and a stubborn, nationwide housing deficit of close to four million units, that dream eludes many individuals and families.
Modular home manufacturer Fading West aims to be part of the answer to this extensive challenge. Established in 2016 in Buena Vista, Colorado, the firm constructs modular homes within a 110,000-square-foot factory. In contrast to conventional on-site stick-built construction, Fading West asserts that its streamlined manufacturing techniques can cut costs by as much as 20% and deliver a finished home in half the usual time.
“Our innovation lies in being manufacturers, not construction laborers,” stated Eric Schaefer, chief business development officer at Fading West, which fabricates not only single- and multi-family homes but also townhouses and apartment complexes. “Modular has existed for quite some time,” he remarked.
The sector has a century-long history and is experiencing growth again in recent years although from a low starting point compared to national residential real estate figures.
“We perceive ourselves as disruptors through our value engineering, efficiency, superior quality, and architecturally appealing designs,” Schaefer commented.
A notable example, albeit an unusual one, is Lahaina, Maui, the historic Hawaiian city ravaged by wildfires in August 2023. The disaster resulted in the loss of 102 lives and nearly 2,000 homes. Collaborating with the Federal Emergency Management Agency, state and local officials, and New York City architecture firm DXA Studio, Fading West manufactured 82 vibrantly colored modular houses within two months, operating two 12-hour shifts daily. The homes were transported to Seattle before being shipped to Lahaina. The complete production process was accomplished in under five months from construction commencement to finished houses.
The one-, two-, and three-bedroom homes, designed by DXA’s Liv-Connected offshoot, varied in price from $165,000 to $227,000 each, as per FEMA, which financed them. The Kilohana initiative — ultimately intended to comprise 167 modular units — represented the first instance where FEMA provided displaced individuals with modular homes instead of trailers for temporary housing, according to an agency representative.
From disaster response to a national affordable housing crisis
Employing its modular housing for disaster relief victims was also a first for Fading West. “We began our enterprise with modest goals,” Schaefer stated. The company originated as developers, crafting housing that was attainable for workers in the small mountain and rural communities surrounding Buena Vista, including Colorado ski resorts such as Breckenridge, Copper Mountain, and Vail, where real estate costs are as elevated as the mountains themselves. “We realized that due to the area’s shortage of general contractors and subcontractors, constructing affordable new homes would prove impossible,” Schaefer added, noting that prolonged, snowy winters also posed challenges for outdoor construction.
At first, Fading West promoted clusters of modular housing designed by other developers. However, after several years, founder and CEO Charlie Chupp opted to reassess its business strategy to meet the rising need for affordable housing, both locally and nationally. Thus, in 2021, with investment from four private backers and state loans, it constructed a cutting-edge factory.
Measuring the size of two-and-a-half football fields, the U-shaped facility is equipped with 18 workstations, each designated for a specific building task. The modular manufacturing process commences with floors, walls, and roofs, followed by electrical and plumbing installations, insulation and drywall, and lastly, the addition of cabinets and countertops.
“The houses are constructed atop air casters, enabling them to rise a couple of inches off the ground. Workers shift the units from station to station every four hours,” Schaefer explained.
On average, it takes about seven days to finalize each 10-ton house.
Fading West currently employs 110 non-union factory workers, earning hourly wages ranging from the low to mid-$20s, in addition to 50 administrative staff and general contractors, who are present on-site to place the houses on foundations and connect utilities. “Our competition isn’t other modular companies,” Schaefer remarked. “It’s traditional homebuilders. We still operate as a $50-million business, which is considered minor in the construction sector.”
Presently, approximately 3%-5% of newly constructed single-family homes in Colorado are factory-built, including modular homes, as noted by Schaefer. Nevertheless, interest in this model is expanding, with New York State Governor Kathy Hochul recently revealing a strategy this week featuring modular homes as integral to enhancing the state’s affordable housing supply.
Nationally, increasing market share remains challenging. Modular construction of single-family homes typically comprises between 1-3% of all new starts, per last year’s Census Bureau data. “That figure has been fairly stable over the last decade or so,” commented Devin Perry, assistant vice president at NAHB, who focuses on system builders, including those utilizing modular methods. The proportion was as high as 7-8% during the 2007-08 period. The decline, “mirrors the overall post-bubble housing sector,” Perry noted. “The modular manufacturing sector has consolidated and diminished, resulting in fewer factories producing modular homes.”
Clarifying the somewhat perplexing classifications of which structures qualify as off-site constructed housing is essential. Two main categories exist: manufactured and modular. Manufactured homes — also known as mobile homes or trailers — adhere to a singular national code overseen by the U.S. Department of Housing and Urban Development.
In contrast, modular homes comply with the same codes utilized by traditional on-site homebuilders, encompassing the International Building Code and various state and local regulations, according to Tom Hardiman, executive director of the Modular Building Institute and its companion organization, the Modular Homebuilders Association. MBI advocates for manufacturers of multi-family residences and commercial buildings — including hospitals, schools, office complexes, and hotels — while MHA focuses on those constructing single-family homes.
While modular, in all its forms, represents a small fraction of total homebuilding in the U.S., it addresses many national housing challenges compared to on-site construction. They are more cost-effective and constructed more rapidly by skilled laborers in secure, controlled indoor environments. They decrease waste by nearly 25% and lower the risk of weather-related damage to materials. “All of this leads to a more sustainable, less costly, better-constructed product,” stated Jordon Rogove, partner and co-founder of DXA Studio.
Michael Neal, a principal research associate and equity scholar at the Urban Institute who has delved into this sector, shares this perspective, asserting that modular housing can yield an affordable product through its production model. “Site-built, stick-built construction, particularly in the single-family market, has not seen significant productivity enhancements overall in recent decades,” Neal noted, emphasizing his research indicates that modular builders can halve production time compared to traditional methods, which often involve cumbersome permitting processes.
This method can also address the shortage of reliable labor that conventional homebuilders face, with modular factories tackling this issue by employing a permanent, local, well-compensated workforce shielded from the unpredictability of outdoor weather conditions. “Perhaps modular is the key to achieving affordable housing,” Neal remarked.
Fading West “still operates somewhat like a startup four years into our affordable housing endeavor,” Schaefer elaborated. “The right environment for this concept involves a broad spectrum — housing for educators, law enforcement personnel, firefighters, and a wide array of prospective homeowners,” he added.
With this goal in mind, it has initiated projects in Wyoming, Utah, Montana, Texas, and New Mexico. Nonetheless, Fading West is also open to elevating the income scale while tying it to the disaster relief mission it established in Hawaii.
The company collaborates with Home/Town Developments — a consortium of design, building, development, and real estate experts located in Los Angeles — to deliver a range of permanent modular homes for wildfire victims in Pacific Palisades and Altadena, communities with demographics spanning from affluent to middle-class. Fading West has plans for multi-million-dollar, 3,000-square-foot, five-bedroom residences, alongside more budget-friendly 1,200-square-foot, two-bedroom models.
The modular business model fundamentally centers on constructing homes tailored to homeowners’ preferences and financial capabilities. “Consider these as building blocks,” Schaefer suggested.
