Modular Multifamily Housing as an Affordable Supply Strategy
The high cost of developing multifamily housing is a major contributor to the affordable housing supply crisis. Studies have reported that hard costs comprise 65% to 73% of total development costs. Modular construction, which can significantly cut hard costs, could provide a good opportunity for cost savings in the building process. With this potential for cost savings and shorter construction timelines, modular multifamily construction can be part of the strategy to address the affordable housing supply crisis currently taking place in the U.S.
One of the challenges of modular construction is the lack of familiarity and experience with a process that warrants unique planning and financing. Fannie Mae has provided permanent financing on a small number of modular multifamily deals over the past 5 years. Most were the first of their kind in their local market, meaning everyone from lenders to local government officials needed to be brought up to speed about how the process works.
To address this challenge, Fannie Mae and the National Institute of Building Sciences have developed a multifamily modular construction toolkit for lenders and other stakeholders in the multifamily industry. Our goal is to equip stakeholders with information and resources on the advantages and opportunities of modular construction, so they can appropriately assess their risk and be prepared to finance high quality properties.