Can Modular Homes Solve the Affordable Housing Crisis?

The United States faces a severe affordable housing shortage, with millions of families priced out of homeownership and rental markets stretched to breaking points. As traditional construction costs continue to climb and regulatory barriers slow development, investors and policymakers are searching for innovative solutions. Enter modular housing—a factory-built approach that promises to deliver quality homes faster and cheaper than conventional stick-built construction.

In this episode of The Real Estate Investing Club, host Gabe Petersen sits down with Galiano Tiramani from Boxabl, a Las Vegas-based modular housing manufacturer that’s pioneering assembly-line home production. The conversation reveals both the enormous potential and significant challenges facing this emerging sector of real estate.

Quick Answer: The Modular Housing Solution

Modular homes can dramatically reduce housing costs by applying mass-production principles similar to automobile manufacturing. Companies like Boxabl are building code-compliant homes in factories at scale, with units starting at $60,000 plus installation. However, regulatory pushback remains the biggest barrier to widespread adoption, though markets like California and New York are opening up opportunities.

What Exactly Are Modular Homes and How Do They Differ from Manufactured Housing?

Understanding the distinctions between housing types is critical for investors considering this space.

Modular homes are factory-built structures constructed to regular residential building codes, making them legally equivalent to site-built homes. Unlike manufactured homes (mobile homes) built to HUD code standards, modular homes can be placed on most residential lots without zoning restrictions.

Galiano explains the key difference: “What we build is modular, which is regular residential building code that you would see with any house on the block. And then the manufactured mobile homes remain on wheels on a trailer chassis. And those are built to a different code.”

This distinction matters enormously for real estate investors. Manufactured homes face severe zoning limitations—they typically can only be placed in mobile home parks. Modular homes, by contrast, can be deployed as:

• Accessory Dwelling Units (ADUs) in residential backyards
• Standalone homes on individual lots
• Workforce housing on commercial properties
• Multi-unit apartment buildings when stacked and connected

The regulatory classification also affects financing, insurance, and long-term appreciation potential. Modular homes qualify for traditional mortgages and are assessed as real property, while manufactured homes often require specialized financing with higher interest rates.

For investors exploring affordable housing investment strategies, understanding these differences is fundamental to evaluating opportunities in the space.

How Does Factory-Built Housing Actually Work?

The modular construction process represents a fundamental reimagining of how homes are built.

Modular homes are constructed as complete room modules in climate-controlled factories, with all electrical, plumbing, fixtures, and finishes installed before shipping. The modules fold for transport, then unfold on-site and connect to foundations and utilities, often becoming move-in ready within days.

Boxabl’s approach mirrors automotive manufacturing. “In a Tesla factory, they put out one car every 60 seconds,” Galiano notes. “And we think that’s totally possible with housing and really the only way to bring down the cost of housing dramatically.”

The company operates three buildings totaling 400,000 square feet in Las Vegas with approximately 150 employees. Their flagship product, the Casita, is a 360-square-foot studio unit (roughly 20×20 feet) that includes kitchen, bathroom, bedroom area, and living space—all built-in at the factory.

The manufacturing process delivers several advantages:

Cost Efficiency: Factory settings allow for bulk purchasing, specialized trained technicians (rather than licensed plumbers and electricians), and elimination of weather delays. “We don’t have a plumber or an electrician in our factory,” Galiano explains. “We have someone that’s trained to do a repeatable job and super efficient.”

Quality Control: Controlled environments and standardized processes produce consistent quality that’s difficult to achieve with on-site construction subject to weather, varying contractor skill levels, and supply chain disruptions.

Speed: Once site preparation is complete, modular installation takes days rather than months. The bulk of construction occurs simultaneously with foundation work, dramatically compressing timelines. This speed advantage rivals even turnkey real estate investing approaches.

Transportation Innovation: Boxabl’s key innovation is creating modules that fold for shipping at standard highway width, avoiding expensive wide-load permits and escort vehicles. “Most of the traditional modular or manufactured HUD home guys are shipping the wide load,” Galiano points out. “When you ship the wide load, you have an escort vehicle. So that explodes the cost.”

What Are the Real Costs of Modular Housing for Investors?

Understanding total project costs is essential for evaluating modular housing investments.

Boxabl’s Casita units cost $60,000, with installation costs ranging from $40,000 to $100,000 depending on location and site requirements. Total all-in costs typically run $100,000-$160,000 for a turnkey 360-square-foot studio, which remains competitive with or below traditional construction in most markets.

The cost breakdown includes:

Unit Purchase: $60,000 for the base Casita module with all fixtures, appliances, and finishes included.

Site Preparation: Foundation or support systems (can be concrete piers rather than full foundations), utility connections (water, sewer, electrical), and permits.

Installation: Delivery, unfolding, placement, and connection to utilities. This varies dramatically by jurisdiction—San Francisco runs higher than rural West Virginia.

Finishing Touches: Optional customization like decks, alternative roofing (the base includes a TPO membrane flat roof), or exterior cladding to match local aesthetics.

For investors, the per-square-foot cost may initially seem high compared to traditional construction. However, Galiano emphasizes this is a complete, immediately rentable unit requiring minimal additional investment. There’s no construction management, no contractor coordination, no weather delays, and no cost overruns.

The economics become particularly compelling for ADU applications. “I think LA has a huge need and they’ve really opened it up for the backyard ADUs,” Galiano notes. “So you can go there and you can grab a house and you can drop an ADU in the backyard and you can rent it for more than your mortgage payment and that’s a pretty good deal.”

Larger projects benefit from economies of scale. Boxabl can connect multiple boxes to create homes exceeding 1,000 square feet, or stack them for multi-story buildings, with per-unit costs decreasing as order size increases.

Investors should compare these costs to ground-up development and traditional real estate development strategies in their target markets, accounting for time-to-rent and cash flow timelines.

What Regulatory Challenges Face Modular Housing Development?

Despite the compelling economics, regulatory barriers remain the primary obstacle to modular housing adoption.

Regulatory resistance is widespread and severe, with some states blocking modular housing entirely despite housing shortages. Special interests opposing out-of-state competition, NIMBYism against affordable housing, and bureaucratic resistance to innovation create significant barriers. However, states like California and New York have passed reforms that are opening markets.

Galiano doesn’t mince words about the challenges: “We get a massive regulatory pushback. It’s been a huge problem for the company, very damaging. We’re fighting our way through it.”

The company experienced a particularly costly setback in Arizona. They had secured a major order from a copper mine to provide workforce housing. “We started a project with them. The government came in and shut it down, completely destroyed it, cost us millions of dollars,” Galiano recounts. “And to this day, they will not let us operate in the state for no legitimate reason.”

The stated justification? Arizona’s housing department insisted that because the units are factory-built, state approval was required—then refused to provide that approval.

The regulatory landscape varies dramatically by state and municipality:

Favorable Markets: California has become surprisingly receptive after passing aggressive housing reform legislation. The state now sees roughly 20% of new construction coming from backyard ADUs. New York similarly has opened opportunities.

Hostile Markets: Some states block modular housing through selective code enforcement, refusing to recognize certifications, or requiring impossible-to-meet local standards.

The Core Issues:

Economic Protectionism: States want construction jobs and economic activity to stay local. Factory-built housing from out-of-state threatens this.

NIMBY Opposition: Existing homeowners and communities resist affordable housing, fearing it will lower property values or change neighborhood character.

Bureaucratic Inertia: Building departments accustomed to traditional construction processes resist innovation and change.

Special Interests: Local contractors, unions, and material suppliers lobby against factory-built competition.

Galiano spent time in Washington, D.C., “lobbying for housing law reform to make it easier to actually build houses.” He’s optimistic that federal intervention may eventually override local obstructionism: “I’m really hoping that the federal government can come in and overhaul some of the outrageous behavior we’re seeing.”

For investors, due diligence on local regulations is absolutely critical before committing to modular projects. What’s permitted in California may be prohibited across the state line. This complexity is similar to navigating commercial real estate regulations across different jurisdictions.

Where Are the Best Markets for Modular Housing Investment?

Strategic market selection can make or break modular housing investments.

Los Angeles and California markets present the strongest current opportunities, with backyard ADU regulations creating immediate demand. Major metros with severe housing shortages and favorable regulations—plus rural workforce housing applications—offer the best risk-adjusted returns for modular housing investors.

California’s transformation from expected obstacle to leader in modular adoption offers important lessons. “I did too, but they’ve gone so hard to try and fix it that they’ve passed all these laws,” Galiano admits. “So their system actually works.”

The Los Angeles market specifically benefits from:

• Severe housing shortage with median home prices exceeding $800,000
• Strong rental demand with high rent-to-price ratios
• Established ADU regulations permitting backyard units by-right
• Streamlined permitting for compliant projects
• Tenant bases willing to rent studio and one-bedroom units

New York presents similar dynamics with even higher housing costs and growing ADU adoption.

Beyond urban markets, specialized applications show strong potential:

Workforce Housing: Boxabl’s first major orders came from a military base and a mining operation. Remote job sites with housing shortages offer opportunities for bulk orders with creditworthy institutional buyers.

RV and Mobile Home Park Conversions: Gabe shares his experience visiting a park in Big Springs, Texas “completely filled with Boxabl units and it looked really clean… their occupancy was really high.” This application allows mobile home park investors to upgrade inventory and increase rents while addressing the affordable housing shortage.

University Areas: Student housing near campuses faces chronic shortages. Modular units deployed as micro-apartments could serve this demand effectively while generating strong cash flow.

Disaster Relief and Temporary Housing: Rapid deployment capabilities make modular housing ideal for post-disaster reconstruction or temporary workforce housing during major projects.

Alternative Short-Term Rental Applications: For investors in short-term rental markets, modular units offer a way to quickly add inventory in high-demand tourist areas or Airbnb arbitrage strategies.

Investors should prioritize markets where:

• Regulations explicitly permit modular construction
• Housing shortage creates strong rental demand
• Land costs are reasonable relative to rental income
• Local governments are pro-development

How Long Do Modular Homes Last and What’s the Quality Like?

Durability and quality concerns often surface when discussing factory-built housing.

Modular homes built to residential building codes last as long as traditionally constructed homes—typically 50+ years with proper maintenance. Boxabl units meet the same structural, safety, and quality standards as site-built homes, with factory construction often delivering superior consistency compared to field construction.

“We’re building them to the residential building code. So really no difference there than a regular house,” Galiano confirms.

This stands in stark contrast to low-cost Chinese imports that some investors encounter. “The Chinese units have a lot of issues because A, the pricing isn’t necessarily accurate. That’s kind of a bait and switch. You have to add in shipping and other things like that. And then the other issue is they don’t have the certifications,” Galiano warns.

Non-certified units create significant legal and financial risks. Building departments will reject unpermitted structures, leaving investors with worthless assets that can’t be legally occupied or financed.

Quality advantages of factory construction include:

Consistent Building Environment: Construction occurs in climate-controlled facilities without weather delays, moisture intrusion during construction, or temperature extremes affecting material performance.

Specialized Processes: Factories develop optimized assembly processes with quality checkpoints throughout production, rather than relying on varying contractor practices.

Material Quality: Bulk purchasing and controlled inventory ensure consistent material specifications without job-site substitutions.

Structural Integrity: The modules are engineered to withstand transportation stresses, often resulting in structures stronger than site-built equivalents.

Maintenance requirements mirror traditional homes—roof inspections, HVAC servicing, plumbing maintenance, and exterior upkeep. The TPO membrane roof system Boxabl uses is common in commercial applications and typically lasts 20-30 years.

For investors evaluating cash flow and wealth building strategies, modular homes offer comparable lifespans to traditional construction with potentially lower maintenance costs due to factory quality control.

Can Modular Housing Scale to Solve the Housing Crisis?

The ultimate question is whether modular manufacturing can achieve the scale necessary to meaningfully address housing shortages.

The technology exists to produce homes at automotive-scale volumes—one unit every 60 seconds—which could dramatically reduce housing costs. However, regulatory reform must happen simultaneously with manufacturing scale-up. Boxabl’s strategy of proving demand before expanding capacity provides a viable path forward.

Galiano’s vision is ambitious but grounded in manufacturing reality: “My goal is to sell more than our factory can produce and then go back to the capital markets and say, give me more money to scale and just keep doing that and keep pushing the cost down.”

This approach mirrors successful manufacturing scale-ups in other industries:

Proven Demand First: Rather than building massive capacity speculatively, demonstrate that regulatory environment and market demand can absorb production.

Iterative Expansion: Add capacity in stages, optimizing processes and reducing costs with each expansion. Similar to how investors might structure development deals with minimal capital to reduce risk.

Capital Efficiency: Use revenue and proven demand to attract investment capital at favorable terms, rather than burning cash on unused capacity. This aligns with strategies for raising real estate capital effectively.

The automotive analogy is instructive. “There is no reason we can’t do that with housing,” Galiano insists. “The manufacturing technology, that’s the easy part. The regulatory is what’s slowing us down.”

Tesla’s Gigafactories demonstrate what’s possible when manufacturing innovation meets market demand and supportive policy. A similar trajectory for housing would require:

• Federal preemption of obstructionist local regulations
• Streamlined national building standards for modular construction
• Recognition that housing affordability is a national crisis requiring dramatic solutions
• Political will to override local NIMBY opposition

The impact could be transformative. If factory production reduces housing costs by 30-50% while dramatically accelerating construction timelines, housing affordability in metros nationwide could improve meaningfully.

For real estate investors, the opportunity lies in being early to markets where regulatory barriers are falling. Those who establish positions while others remain skeptical of modular housing could capture significant value as adoption accelerates.

What’s the Investment Opportunity for Real Estate Investors Today?

Modular housing presents both immediate tactical opportunities and long-term strategic positioning.

Current opportunities center on ADU development in permissive markets like California, workforce housing for institutional clients, and RV/mobile home park upgrades. Long-term, investors who establish expertise and relationships in modular housing now position themselves for significant growth as the sector scales and costs decrease.

Immediate tactical plays include:

ADU Development: Purchase properties with ADU potential in Los Angeles and similar markets. Add Boxabl units to generate rental income that covers or exceeds mortgage payments while building equity in the primary residence. This strategy works particularly well for investors building wealth while working full-time.

Park Upgrades: Mobile home park owners can replace aging inventory with modern modular units, increasing rents and property values. Gabe’s exploration of this strategy led him to parks “completely filled with Boxabl units” demonstrating the concept’s viability.

Workforce Housing Projects: Partner with employers in remote areas facing worker housing shortages. Provide turnkey housing solutions with creditworthy corporate guarantors.

Small Multifamily: In favorable regulatory environments, stack and connect modular units to create small apartment buildings with compressed construction timelines and reduced costs compared to traditional multifamily development.

Co-Living Applications: The compact, efficient design of modular units aligns perfectly with co-living real estate strategies that maximize cash flow per square foot.

Strategic positioning for long-term growth:

Develop Modular Expertise: Learn the regulatory landscape, installation requirements, financing options, and operational considerations. Early expertise will compound as the sector grows—similar to how investors who learned off-market deal strategies early gained advantages.

Build Relationships: Connect with manufacturers, installation contractors, and permitting specialists. These relationships become increasingly valuable as demand grows.

Monitor Regulatory Changes: Track housing legislation at state and federal levels. New reforms will open markets suddenly, creating opportunities for prepared investors.

Patient Capital: Recognize that widespread adoption may take 5-10 years as regulations evolve and manufacturing scales. Position accordingly with longer time horizons, similar to remote real estate passive income strategies.

The comparison to early adoption of other real estate innovations is apt. Investors who embraced Airbnb early, recognized the potential of tiny homes, or understood manufactured housing evolution captured significant value.

Galiano’s own investment approach reflects this forward-looking philosophy. Beyond Boxabl, “all my investing was Bitcoin. So I got into that in 2013.” He recognized a paradigm shift early and committed to it despite skepticism—a lesson applicable to building a $200M portfolio from zero experience.

Key Takeaways: Can Modular Homes Solve the Housing Crisis?

Modular housing represents one of the most promising innovations in residential real estate, with the potential to meaningfully address affordability challenges through manufacturing efficiency. However, the path forward requires both technological execution and regulatory reform.

For real estate investors, the opportunity exists today in specific markets and applications, with significant long-term potential as the sector matures. Success requires careful market selection, regulatory due diligence, and partnership with established manufacturers who meet building codes and certification requirements.

The companies like Boxabl that survive regulatory challenges and achieve manufacturing scale will reshape housing delivery. Investors who position themselves early in this transition stand to benefit as modular housing moves from niche application to mainstream adoption.

The housing crisis is real, severe, and worsening. Traditional construction cannot solve it at the necessary speed or cost. Modular manufacturing offers a viable path forward—if regulations permit it to succeed.

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