Modular Housing Act Authorizes $2.5 Billion Grant Program to Boost Factory-Built Home Production

The high cost and low supply of housing are hitting everyone—from renters to first-time buyers. The Modular Housing Production Act is stepping in with a massive federal push to tackle the problem by funding the factories that build homes, not just the homes themselves.

The Factory Floor Solution: $2.5 Billion for Modular Production

This bill establishes a competitive grant program run by the Department of Housing and Urban Development (HUD), authorizing $500 million annually for five years (Fiscal Years 2025 through 2029), totaling $2.5 billion. The money isn't for buying land or subsidizing mortgages; it’s specifically for states, local governments, and tribes to build, expand, or upgrade factories that produce modular and manufactured homes (SEC. 1).

Think of it as an industrial policy for housing. Grant funds can be used for things like acquiring factory sites, buying new, high-tech equipment, or training workers. HUD must award grants to at least 10 different recipients, ensuring the funds are spread out, though no single recipient can grab more than 15% of the annual pot. When HUD reviews applications, they’ll prioritize proposals that show the greatest potential to increase the supply of affordable housing, commit to paying prevailing wages (a bonus for skilled trades), and locate factories in areas that have struggled with high unemployment or lost manufacturing jobs (SEC. 1).

For the average person, this means two things: First, a potential increase in local, well-paying factory jobs in areas needing an economic boost. Second, if this works, it means more homes hitting the market faster, which is the key to cooling off housing prices. The idea is that building homes in a controlled factory setting is faster, cheaper, and less disruptive than traditional stick-built construction.

Clearing the Bureaucratic Roadblocks for Factory Homes

It’s not just about money; it’s about red tape. Currently, financing a factory-built home can be a headache because federal programs like the Federal Housing Administration (FHA) weren't designed for this kind of construction. When you build a house, the bank typically pays out the loan money in installments, called 'draws,' as construction milestones are met. But factory construction moves differently than site construction.

This Act requires the Secretary of HUD to conduct a detailed review of FHA construction financing programs to identify barriers—especially those related to construction draw schedules—that restrict modular home developers (SEC. 3). Within one year, HUD must report its findings and then, within 120 days of that report, start a formal rulemaking process to create an alternative draw schedule specifically for modular and manufactured homes. If successful, this change could make it much easier and faster for developers to secure financing for factory-built homes, accelerating production and getting those units into communities sooner.

Standardizing the Parts

The bill also authorizes a grant to study the feasibility of creating a standardized uniform commercial code for modular homes (SEC. 4). Right now, a modular home’s components have to meet the specific building codes of the town where it lands (SEC. 2). This study would look into whether a standardized coding system could streamline design, construction, and even financing. Think of it like standardizing USB ports—it makes everything easier to connect and use. This could encourage innovation and help manufacturers scale up without having to redesign every product for every jurisdiction.

The Bottom Line

This Act is a significant federal investment aimed directly at increasing housing supply by industrializing the construction process. The $2.5 billion grant program is a major boost for factory expansion and job creation, while the regulatory changes mandated for FHA financing could remove long-standing hurdles that have slowed down the adoption of factory-built homes. While the bill gives the HUD Secretary broad authority over how some of the grant money is spent—allowing for “other costs the Secretary determines are necessary”—the focus is clearly on tangible outcomes: more factories, more jobs, and ultimately, more housing units.