Los Angeles is in the grip of a housing emergency. Sky-high rents and rising vacancies paint a stark picture: in a city of nearly four million people, there simply aren’t enough homes to go around, and the ones that exist often cost more than working families can afford. Despite mounting political pressure—and a flurry of new laws aimed at loosening zoning rules and boosting subsidies—LA’s housing production remains stubbornly low. But a promising solution is hiding in plain sight: modular, or off-site, construction.
The Scope of the Problem
A Chronic Housing Shortage
After years of record-low vacancies, Southern California’s multifamily vacancy rate has climbed back above 5%. As of year-end 2023, the region’s vacancy stood at roughly 5.3%, and economists now forecast it rising to about 6.2% by 2025 . This shift from a near-2% trough in the late 2010s does not signal a healthy buffer—it simply shows weak demand outpacing scarce supply. In practical terms, even modest upticks in vacancies struggle to keep up with chronic underbuilding.
Unaffordable for Many
Meanwhile, rent growth has decelerated sharply. After annual increases above 6% in 2015, gross rental income growth slowed to just 3.8% in 2023 and is projected around 2.0% by 2025 . Yet average rents remain so high that over 57% of LA renters pay more than 30% of their income on housing, and nearly 30% pay over half—well above any “healthy” threshold.
If you earn the city’s median household income, you’d now need almost six months of pay saved just to cover a typical security deposit on a new apartment—an impossible barrier for many.
Why Traditional Solutions Fall Short
Zoning Fixes and Subsidies
Over the past few years, Sacramento and City Hall have rolled out a whirlwind of housing bills—streamlining approvals, offering tax credits for low-income projects, even letting developers build denser housing near transit hubs. On paper, these moves should unlock a wave of new construction. In reality, NIMBY backlash, environmental reviews, and local fees still slow projects to a crawl.
The Cost of Construction
Even if zoning hurdles vanish, LA’s construction costs remain sky-high. Labor shortages—especially among skilled trades—and tough state laws on prevailing wages drive up budgets. Add in materials price spikes and permit fees, and developers often find that pro formas simply don’t pencil out unless they charge market-rate (or higher) rents.
The Regulatory Landscape
Universal Building Codes
Every LA developer must navigate California’s 700-plus-page Building Code, which governs everything from seismic safety to energy efficiency. On top of that, there are local ordinances, fire-department rules, accessibility mandates, and green-building requirements—each adding time and expense.
Contracts and Liens
In California, contractors protect themselves with “mechanics’ liens” on properties they improve. But off-site modules built in a factory aren’t yet “improvements” until they’re set on a foundation, creating a legal gray area that can worry lenders and insurers.
Modular Construction: A Primer
What Is Modular Construction?
Modular (or off-site) construction means building apartment “boxes” or wall panels in a controlled factory environment, then shipping them to the site for assembly. It’s the same concept as prefabricated homes—but applied to multifamily and mixed-use complexes.
Early U.S. Experiments
Modular housing isn’t entirely new in America. In 1969, HUD’s “Operation Breakthrough” tried to mass-produce homes in factories—though it ultimately fizzled amid politics and funding hurdles. More recent successes, like the Star Apartments in downtown LA (a supportive-housing project built via modules in 2014), show that it can work even under tough local rules.
Worldwide Momentum
Across Europe, Asia, and Australia, modular construction is gaining steam. In the U.K., more than half of new affordable-housing units by some major associations are now off-site built. Hong Kong’s building department has embraced panelized systems, while Australian councils tout rapid factory lines as a way to tackle skyrocketing costs and labor gaps.
Why Modular Could Be LA’s Game-Changer
- Faster Schedules
Building in a factory means no weather delays, fewer on-site inspections, and parallel workflows—foundations can pour while modules are produced, shaving months off the calendar. - Better Quality Control
Factories enforce tight tolerances and continuous inspections. Less rework, fewer mistakes, and higher energy-efficiency ratings result. - Labor Efficiency
While site trades face shortages, factories can recruit from a broader labor pool and rely on a steady, assembly-line process—reducing on-site headcounts and overtime premiums. - Cost Predictability
Standardized modules mean bulk ordering of materials and repeatable processes, which tame volatile material costs and change orders that usually blow budgets.
What It Will Take for Modular to Scale in LA
- Regulatory Updates
Clarify how building codes, inspections, and mechanics’ liens apply to factory-built modules. Fast-track approval paths for panelized systems that meet code equivalency. - Incentives for Factories
Offer grants or low-interest loans to set up modular plants in the region. Proximity to L.A.’s jobs and port can make these factories economic hubs. - Parcel Zoning Flexibility
Identify industrial parcels near transit and mixed-use zones for modular campuses—keeping shipping times short and cutting trucking costs through traffic. - Partnerships with Nonprofits
Leverage experienced affordable-housing developers (who already operate under tight budgets) to pilot more modular projects, demonstrating cost metrics to private equity and lenders.
Conclusion
Los Angeles’s housing crisis is a symptom of a broader malaise in how we build homes—one that regulations have sought to alleviate, yet costs and delays persist. Modular construction offers a proven, global approach to slash timelines, improve quality, and tame budgets. By updating our codes, incentivizing factory sites, and showcasing local success stories, LA can finally begin to fill its vast housing gap—and give every Angeleno a shot at a place to call home.
If you want to learn more, [set up a call with Dr. Musson]
About the Author
Dr. Brent Musson is a real-estate developer, consultant, and urban-policy specialist whose doctoral research at Northeastern University explored barriers to modern methods of construction—so we can build the homes we desperately need.