Doors opening for factory-built homes in Hawaii

Factory-built housing, long envisioned as a way to reduce the high price of homes in Hawaii, may be establishing a foothold in the state.

A least a couple of major local developers have plans to fill out new subdivisions with homes built in a factory and attached to foundations at the homesite.

The developers, Honolulu-­based Nan Inc. and Wailuku-based Dowling Co., both say they can deliver homes that match the quality of traditional “stick built” construction at a significantly lower cost and faster.

Until now, large-scale manufactured housing in Hawaii has pretty much been limited to disaster relief projects. But factors that include improved quality and a new federal law inviting the state Legislature to make factory-­built housing more viable are helping increase interest among local developers to pursue such projects.

“This has the potential to unlock a lot of construction innovation,” said Trey Gordner, an affordable-­housing researcher with the University of Hawaii Economic Research Organization. “The only real distinction that a nontechnical person would see is the price tag.”

Dowling Co. intends to finish most of a final phase of a Maui subdivision for the state Department of Hawaiian Home Lands with factory-built homes the company said will be 3% bigger, finished four months sooner and cost $45,000 less on average for buyers.

Previously, Dowling Co. planned to build the last 22 homes of DHHL’s Pu‘uhona subdivision in Waikapu for agency beneficiaries using traditional construction. But a $500,000 financing shortfall emerged due to a degraded value for federal tax credits being used to partly pay for the $19 million project.

So Dowling turned to factory-built homes for 19 of the 22 units to save an expected $936,000.

“We think this is a good way to be able to move the project forward, bring costs down, which get passed through dollar for dollar to the beneficiary, and deliver a superior product,” Jack Dowling, a company vice president, told the Hawaii Housing Finance and Development Corp. at a September meeting.

Dowling told board members of HHFDC, a state agency helping finance the project, that the company had been exploring factory-built housing for a number of years and had visited 13 factories, but that until recently it had not found a manufacturer that could produce homes equivalent in quality with a meaningful savings on cost that includes transportation.

“Here we think this product is superior in almost all regards,” he said.

The homes are being developed for low-income DHHL beneficiaries as rental units they can buy after 15 years at an average price of $211,000. That’s down from $256,000 under the original plan with traditional construction.

One thing that makes the factory-built homes for its project on Maui more viable, according to Dowling Co., is that everything built in the factory gets inspected there, so no traditional county building permits or inspections are needed except for the foundation, siting and utilities.

A federal law enacted in July with overwhelming bipartisan support also could pave the way for more factory-built housing, according to UHERO, which said one of the most significant provisions eliminates a requirement for manufactured homes to have a permanent chassis, essentially a trailer affixed to the bottom of the home.

This provision could allow entire homes to be flat-packed and shipped to Hawaii as kits, and also allow multistory homes. However, UHERO said the state Legislature would have to pass a law next year to take advantage of the change.

Passing such legislation could be challenging, given that local construction labor unions have in the past opposed bills aimed at opening more doors for factory-built housing.

Nonetheless, the Pu‘uhona project is moving ahead, as are plans for a much bigger project on Hawaii island using factory-­built homes.

That project with up to 1,116 homes in Kona is planned by Nan, one of the state’s biggest general contractors. In recent years, Nan branched into residential development with its own projects that include The Park on Ke‘eaumoku, a pair of condominium towers that opened last year in Honolulu.

In 2022, Nan acquired a 725-acre site in Kona that has been slated for a master-planned community for more than two decades by other developers. Nan announced earlier this year that it intends to develop the community called Palamanui using modular homes.

According to a July article in Pacific Business News, company owner Nan Chul Shin plans to develop Palamanui using modular homes with three to four bedrooms priced from $600,000 to $800,000 and aimed at middle-class households.

Nan also is a partner in another firm, Kalanianaole Development, that plans to produce 40 homes at Palamanui for low-income and lower-middle-income DHHL beneficiaries using modular homes built in a factory.

The $35 million project, Ho‘ola at Palamanui on land donated to DHHL by Nan, also is being financed partly by HHFDC and will allow tenants to buy the homes after 15 years of renting.

Christian o’Connor, a Ho‘ola project official, told the HHFDC board at a meeting in September that the development team is looking at sourcing homes from Hilo-based HPM Building Supply, Colorado-based Fading West and a factory in Vietnam called TLC Modular.

Colin Thompson, vice president of manufacturing and construction at HPM, said the company is trying to expand a small factory operation called HalePlus that originated in 2018 to produce micro-housing structures for people who lost homes in the Leilani Estates subdivision destroyed by lava.

After the Maui wildfire disaster that burned close to 5,500 homes in Lahaina in 2023, HPM delivered 32 homes for the Hawaiian Council to house fire survivors, and the state and federal government bought and installed several hundred homes built in factories on the mainland to house other survivors.

“That blew the doors wide open,” Thompson said, referring to acceptance of factory-built housing in Hawaii.

However, most of the disaster relief housing built in factories, including some in Lahaina built by Fading West, don’t look like traditional stick-built homes found in Hawaii. But the homes being pursued by Nan and Dowling do.

DHHL also is working directly with Fading West to put factory-built homes on 24 vacant lots in two existing Oahu homestead subdivisions in Kapolei and Waianae.

Under that pilot project, where beneficiaries received lot lease awards in October, DHHL said it plans to offer roughly 1,200-square-foot homes with three bedrooms and two bathrooms for $445,000 to $495,000, in contrast with $600,000 for something comparable previously, and roughly 1,600-square-foot homes with four bedrooms and three bathrooms for $545,600 to $595,600, in contrast with $670,000 for something comparable previously.

Last year, DHHL Director Kali Watson told state lawmakers the agency was interested in starting its own home-building factory on Oahu in collaboration with Fading West.

“It’s ridiculously high — the cost of housing in Hawaii — and so we got to look for ways to get the price down, and this is our attempt,” he said.

More recently, the agency touted the benefits of factory-built housing as something that can reduce labor costs and make homes more affordable for local families, while a local factory could employ hundreds of union workers and train future generations.

“Why modular housing?” Watson asked during a presentation for beneficiaries in August. “For DHHL, our challenge is not simply to develop land. But it’s also to find ways to build homes that our beneficiaries can afford.”