California Construction News staff writer
California is short roughly 2.5 million homes, and the cost to build a single apartment now routinely exceeds $500,000. To fix it, housing experts say the state must stop building exclusively on dirt lots and start building on assembly lines.
Ben Metcalf, managing director of the Terner Center for Housing Innovation, told the Assembly Select Committee on Housing Construction Innovation on Tuesday that California’s housing production is the second lowest per capita in the nation. While the state has reformed land-use laws, Metcalf warned that skyrocketing construction costs are now the primary barrier to affordability.
“Multi-family construction costs in California can be 2.3 times higher than in Texas for the same product,” Metcalf testified during the committee’s first hearing of the 2026 session. He noted that construction costs have risen at double the rate of inflation since 2019.
Metcalf urged lawmakers to pivot toward “industrialized construction”—methods that include 3D printing, robotics, and factory-built modular units.
In some cases, these units are shipped as “flat packs” with integrated plumbing and electrical systems, resembling furniture from Ikea. In others, entire apartments are built as “boxes” in a factory and stacked on-site.
According to Terner Center research, factory-built housing can reduce construction timelines by 20% to 50% and cut “hard costs” by up to 25%. Metcalf cited the Tahanan project in San Francisco as a success story, which saved 30% in time and 25% in costs compared to traditional builds.
Beyond the bottom line, moving construction into factories could solve the state’s worsening labor shortage. As skilled tradespeople age out of the workforce, the industry is struggling to attract younger workers.
Metcalf noted that factory environments are safer and more stable than traditional construction sites. This has helped attract a more diverse workforce; women make up 20% to 30% of the factory-built housing workforce, compared to just 4% in traditional on-site trades.
Additionally, factory settings allow for better waste management and more precise energy-efficiency standards, aiding the state’s climate goals.
Despite the potential, the sector is small. Only a few thousand factory-built units are produced annually in the West. Metcalf identified several “roadblocks” preventing the industry from scaling:
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Financing: Most lenders are structured to pay for work performed on-site, making it difficult for developers to pay the upfront deposits required to reserve factory space.
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Regulatory Red Tape: Local governments often require “bespoke” design changes that undermine the cost-savings of standardized manufacturing.
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Pipeline Instability: Without a steady flow of orders, factories cannot maintain a consistent workforce or production schedule.
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Fragmentation: California lacks a single agency to coordinate the various departments—such as housing, code enforcement, and finance—that oversee the industry.
Metcalf pointed to Japan and Sweden, where factory-built housing is a systemic norm that produces hundreds of thousands of homes annually.
“It doesn’t have to mean that every house is built in a factory,” Metcalf said. “It just has to mean that we get to a place where a sizable share is consistently, year after year.”
The committee is expected to hear specific policy solutions and best practices during its next hearing.
