Other Low-Cost Housing Types

New construction materials, products, and techniques are emerging in the industry to address a variety of issues and concerns including resilience to climate change, shortening construction time, reducing costs, and improving the quality and consistency of construction products. Examples include cohousing, micro units, mass timber construction, and prefabricated and modular homes, discussed further below. 

Both industry professionals and local jurisdictions have been slow to adjust to the changing types of construction due to unfamiliarity with products and/or techniques. There can also be preconceived misperceptions that these types of homes are not as good or as attractive as stick-built homes. Additionally, there can be financing and local permitting challenges all of which can contribute to limiting these more affordable types of housing production. 

Prefabricated building components such as trusses and panelized construction components have increasingly become the norm in construction. A project using panelized construction techniques could incorporate pre-built walls that can vary from simple framing to those that include pre-installed windows, doors, and even exterior siding.

Mass-produced building components are typically constructed on an assembly line which can reduce costs because factories buy supplies in bulk. The cost of labor is also less because you do not have to send carpenters, plumbers, and electricians to individual construction sites. Faster construction time also saves money. The general rule of thumb is that prefabricated construction is cheaper than stick-built homes by an average of 10-20 percent.

Modular and manufactured housing is also becoming more widely accepted as the overall appearance of these homes has been greatly improved to the point that they resemble the more familiar stick-built homes. A modern take on this type of housing is repurposing old shipping containers.

Manufactured homes built entirely at factories are far more durable and attractive than the “mobile homes” of old and remain cheaper than conventional brick-and-mortar homes. During the early 2000s, HCD placed emphasis on having jurisdictions update their zoning codes to ensure that zoning regulations for manufactured homes were consistent with State laws.

Mass Timber is one emerging construction product. Mass timber uses state-of-the-art technology to glue, nail, or dowel wood products together in layers. The results are large structural panels, posts, and beams that are exceptionally strong and versatile. Mass timber products can be used to create taller wood frame buildings and reduce costs over typical steel or concrete forms of construction. Timber harvested from sustainable forests is also considered beneficial from a climate change viewpoint. Construction using mass timber became possible under the California Building Code on July 1, 2020. 

Micro units (sometimes called efficiency units) are small units (usually 220-400 square feet in size) with an open concept (typically one room) living space that includes seating, a bed, a bathroom, storage, and a kitchenette, with access to communal amenities. Because micro units are small, they are typically less expensive to build, and more units can be fit within a building envelope. Micro units have been popular in urban settings where housing costs are high and where residents may have access to amenities and services provided in the greater community. Micro units in urban settings may also be well suited to unbundled parking solutions wherein a parking space is purchased or rented separately from the unit.

Micro units can house a wide variety of ages and demographics. Micro units can be a form of “starter home” for those starting their careers, or simply a more economical form of housing than a larger condominium or apartment. They are best suited to serving individuals that do not need a lot of space (i.e., likely not suitable for roommates or larger families).

Cohousing is community housing designed to foster connection. Communal areas allow neighbors to easily interact with others just outside private homes. Communal areas typically include common kitchen and dining spaces, community gardens, and other on-site amenities. Collaborative decision-making builds relationships. Connection, environmentalism, security, and community support (e.g., sometimes child or day-care) are all draws to cohousing communities. Cohousing can be less expensive since the provision of shared communal areas or facilities enable individual housing units to be smaller.

Education. The construction industry, local jurisdictions, financing entities, and the public have all been slow to embrace change. It typically requires several successful projects to demonstrate the benefits of new techniques or modular methods to overcome skeptics. In this regard, education is key.

Hesitancy by local jurisdictions (usually due to unfamiliarity with products and or techniques) can create barriers to implementation due to extended permitting time frames. Jurisdictions that accommodate these forms of construction could market their acceptance and permit streamlining abilities as a tool to attract developers using these techniques to build more affordable housing.

Supply-chain challenges. In the short term, current supply-chain challenges will likely impact both prefabricated and stick-built construction projects; however, it is unclear if one type of construction will have an advantage over another. 

Financing for manufactured homes is also becoming easier because of a 2017 decision by the Federal Housing Finance Agency wherein the two mortgage-financing agencies  Fannie Mae and Freddie Mac, have pushed banks to make it easier to obtain mortgages.

Stakeholders noted that the high cost of construction materials, as well as permitting and fees, has made it difficult to build more affordable homes. Housing affordability is a top concern, and the diversity of housing types is challenging when costs are high. While the lower-cost materials and techniques addressed in this section alone will not solve this issue, they do present opportunities for lower-cost housing production in jurisdictions that are willing to embrace and promote them as alternatives to conventional housing production.

Relevant State Law

Manufactured Housing. Government Code Sections 65852.3 – 65852.5.

HCD. Manufactured Housing and Factory-Built Housing Laws and Regulations.

California Building Code. Mass Timber Code Amendments.


Terner Center for Housing Innovation. Recent Trends in Labor and Materials Costs for Apartment Buildings in California. 

Factory-built, Manufactured, and Modular Housing

HCD. Manufactured and Factory-Built Housing.

Terner Center for Housing Innovation. Modular Construction in the Bay Area: The Future Is Now.

Terner Center for Housing Innovation. Building Affordability by Building Affordably: Exploring the Benefits, Barriers, and Breakthroughs Needed to Scale Off-Site Multifamily Construction.

US Department of Housing and Urban Development. Regulatory Barriers to Manufactured Housing Placement in Urban Communities.

Terner Center for Housing Innovation. Off-Site Construction in Los Angeles County.

Shelterforce. Can New Construction Methods Lower the Cost of Housing? 

Fannie Mae. Manufactured Housing Product Matrix.

Mass Timber

Naturally: Wood. What is Mass Timber?

Commercial Real Estate Development Association. A Mass-Timber Building Rises in San Francisco. 

Micro Units

KTGY. Research + Development: Micro-Unit.  

ULI. The Macro View on Micro Units. 


The Cohousing Association of America. 


Fresno Cohousing.