New York bets on factory-built homes to ease Long Island's housing crunch

As Long Islanders struggle with rising housing costs, New York State and local homebuilders are betting one part of the solution will be delivered via flatbed trucks, hauling homes from factories in Pennsylvania and upstate New York.

Modular and manufactured housing offer potential to create housing faster and cheaper than traditional homebuilding, according to local builders and national research studies.

Now, New York State hopes to spur factory-built housing to create affordable starter homes that have fallen out of favor as builders focus on luxury houses and new apartments, said RuthAnne Visnauskas, who leads the state's affordable housing agency.

With manufactured homes, the state is trying "to step into what we see as the missing middle," said Visnauskas, commissioner of New York State Homes and Community Renewal. 

The state recently awarded East Hampton Town $7 million to build 16 manufactured, three-bedroom homes that are expected to be priced below market value.

But there are limitations to the promise of factory-built housing on Long Island, where land is scarce and expensive. Long Island builders who spoke with Newsday said homebuyers interested in modular skew toward the luxury end of the market.

Research comparing the costs of factory-built and site-built homes showed a roughly 27% savings when building CrossMod manufactured homes compared with traditional building methods, according to a 2023 analysis by researchers at the Harvard Joint Center for Housing Studies. The study compared costs using a nearly 1,600-square-foot house and factored in building, foundation, transportation, installation and administrative costs.

However, the researchers noted the cost advantage declines as land cost rises. In a scenario where a ready-to-build lot costs $185,000, the savings fell by almost half, to just 14%.

Listings on OneKey MLS show it can cost hundreds of thousands of dollars to acquire a vacant lot in Nassau or Suffolk counties and cheaper options often require clearing land or seeking a zoning variance.

"If the cost of land is very high, it could be that you can't justify putting a lower-price home on that piece of land," said Laurie Goodman, founder of the Housing Finance Policy Center at the Urban Institute in Washington, D.C.

Building modular

Everything is solid. It's just really efficient and well-built.

— Armando Polanco, of Massapequa

When Armando Polanco and his wife, Debra, considered building modular, it was a Christmas tree that sold them.

The Polancos had purchased a nearly 100-year-old house on an 80-by-250-foot lot in Massapequa, which they planned to replace with their dream home. When they closed in 2020, at the start of the COVID-19 pandemic, they expected to use traditional building methods. 

But then worries started to creep in that they'd made a mistake. The price of lumber rose more than 300% because of surging demand and supply shortages, and the cost of new construction rose sharply as well.

That led Polanco, 50, to consider modular building on the advice of a friend. He and his wife toured several factories in Pennsylvania and upstate New York but a conversation with Westchester Modular based in upstate Dutchess County sealed the deal.

The couple had always wanted a double-height living room to fit a 14-foot Christmas tree and worried that wouldn't be possible with a modular home. But the company showed them in a digital rendering how the tree would fit.

"We're big Christmas junkies, and he was able to give us the height on the tree that we wanted," Polanco said.

Polanco said the cost to build modular was about 25% lower than the quote he had received from a Long Island builder — he declined to share the full construction cost — and it cut down the construction timeline by about half.

Polanco, who served as his own general contractor, obtained a building permit in late November 2022. By February 2023, his house arrived aboard a flatbed truck in pieces with Sheetrock, plumbing fixtures, electrical wiring, windows and cabinets already installed.

Once it arrived, plumbers and electricians helped connect the house to water and electricity, and contractors installed flooring and completed upgrades to the primary bathroom. The family moved into their new home that April, Polanco said.

That created significant savings by cutting in half the time the family of five needed to live elsewhere in a rental house. It also allowed Polanco to convert his construction loan to a home mortgage, which had a lower interest rate, more quickly than with a longer construction period.

"The time is the biggest savings," he said.

The quality of the build also won the approval of Polanco's father, who spent his career in construction and was initially skeptical of his plan to build modular. Polanco's father was impressed with the thickness of the Sheetrock, the plywood used for flooring and how straight the floors were, even where the different pieces used to build the house connected.

"Everything is solid," Armando Polanco said. "It's just really efficient and well-built."

Westchester Modular completes about 20 projects a year on Long Island, said Michael Marano, the company's regional sales manager for Long Island in Westhampton. 

Those projects range from 600-square-foot accessory apartments to 10,000-square-foot mansions in Amagansett, Marano said.

Some of modular companies' key advantages include construction inside a climate-controlled warehouse where materials aren't exposed to the elements, as well as tighter control over labor and material costs.

"It helps homeowners really be able to control their budgets," Marano said.

But it would be tough for first-time homebuyers looking to save money compared to today's market prices unless they have a way to acquire land cheaply, Marano said.

Modular building also offers advantages for second-floor additions, said Scott Boerckel, owner of East Coast Dormer in Bethpage, who has been completing dormers using factory-built modules for more than 30 years.

5% to 30%

the estimated savings on modular homes compared to traditional construction, according to local builders

He estimated modular renovations can result in about 5% savings but installation takes only two weeks and he has delivered renovated homes to clients in about three months compared with about six months experienced contractors could complete a traditional renovation.

The factory building process allows for a greater focus on insulation that can also help homeowners save on energy costs, Boerckel said.

"A stick framer can't build like you build indoors," Boerckel said. "There is no air penetration whatsoever."

Interest in modular homebuilding is growing but still hasn't taken off yet despite evidence of lower costs and faster construction, said Mike Florio, CEO of the trade group Long Island Builders Institute in Melville.

The quality of new modular homes will be important for the technique to gain wider adoption, he said.

"You're dealing with the perception issue also," Florio said. "Modular homes — is it like a trailer? It's not that. It looks like a real home. It has to seamlessly blend into the surrounding community too if they're going to be accepted."

[A modular home] has to seamlessly blend into the surrounding community too if they're going to be accepted.

— Mike Florio, CEO of Long Island Builders Institute in Melville

Ben Jackson, president of Ben's General Contracting Corp. in Freeport, has built modular homes on the South Shore of Nassau County but said it's not the right fit for everyone.

Jackson said the savings could be 10% to 20% compared with traditional construction, but the more a homeowner wants to customize after delivery, such as cabinets, countertops or kitchen tiling, the less sense it makes to build modular, he said.

"The more things you change after the fact, you're losing your savings," he said.

He sees modular as a great fit for speculative homebuilders who know exactly what they want, but he doesn't believe the process gives a homeowner enough flexibility if they're pursuing a high-end new build.

"It's still, in my opinion, easier to give someone exactly what they want if you build traditionally," he said.

An affordability fix?

Uniondale Community Land Trust, an affordable housing nonprofit, offered one example of what modular building looks like on Long Island last year, when they sold a single-family home on Uniondale Avenue for $275,000 to a Queens family.

The nonprofit worked with Pennsylvania-based Simplex Homes and said the new home, built on land purchased for around $86,000 from the Nassau County Land Bank, cost $650,000 to build.

The land trust covered the rest using federal funds administered by Nassau County, state affordable housing funding and private fundraising, Newsday previously reported.

That gap between the cost to build and the price buyers can afford helps explain why modular building has prove, proved, proving more popular in multifamily housing than single-family construction, said Goodman, at the Urban Institute.

Research from the Urban Institute found modular homes represented 7% of all completed multifamily units nationwide compared with just 2.7% of completed single-family homes in 2023.

6.5%

the estimated annual growth rate of U.S. modular home market through 2033, according to the Modular Building Institute

Glen Cove-based affordable housing developer Georgica Green Ventures has used the process for developments in East Hampton, New Cassel, Roslyn Heights and for its latest building in Central Islip.

While modular building can offer savings, it also requires extensive coordination with factories to avoid costly changes as well as logistics on-site to accept deliveries of massive modules and hoist them into place by crane, said David Gallo, president of Georgica Green Ventures.

"We have seen some limited savings. More of what we have is the savings in time," Gallo said. "I am hopeful that with continued experience, we are going to see more savings on the construction side."

Visnauskas, the state housing official, said she hopes New York's support of the 16 modular homes in East Hampton will help convince private Long Island homebuilders that building smaller homes can be a viable business.

"We would love to see the market fill in," on Long Island, she said, "and be able to provide more starter homes.