When Greystar executive Andy Mest returned to the U.S. in 2018 from working in the United Kingdom, he wanted a new challenge. After spending four years overseeing the global construction team for the massive U.S.-based apartment developer Greystar, he was energized, but also struck by just how behind the American building sector was compared to Europe.

We can continue to do it like cavemen or change the way we build, he remembers thinking. Most single-family U.S. homes still get assembled using stick-built methodology, basically on-site wood framing by a team of contractors; whereas factory-built housing comprises a much larger part of European construction.

Right now, on a building site outside Pittsburgh, Mest’s vision for utilizing many of Europe’s speedier, more high-tech construction techniques has begun to take shape. Shortly after his return in 2018, he received approval for R&D funding to start developing factory-built apartments within Greystar, tapping into his experience overseeing high-rise modular towers in London. 

Modular construction—factory-built sections of buildings that are assembled on-site like Legos—can reduce variability, waste, on-site weather issues, and labor costs,  making it faster, cheaper, and more efficient when done at scale. While it’s been successfully applied overseas, modular has yet to be fully realized at scale in the United States, which has tempted many American developers and startups. 

When an industry giant like Greystar, which controls $75 billion in assets globally, begins to integrate modular building in its U.S. operation, it may show other developers how to overcome longtime barriers—and could be put to work solving the nation’s severe affordable-housing shortage. 

To do so, Greystar bought a factory in Knox, Pennsylvania, to build a whole new residential project line. Right now, crews are working on the first example of the firm’s Modern Living Solutions (MLS) concept, a 312-unit project called Ltd. Spring Run, in Coraopolis, a suburb 25 minutes from downtown Pittsburgh. The mixture of 1-, 2- and 3-bedroom units will include open floor plans, extra storage, and steel walls and frames. Modules for the six-building development will be built in Knox, then shipped about 90 miles by truck and assembled on-site. It’s set to welcome the first tenants in July.

The Coraopolis project is just the beginning of MLS, says Mest, as the Knox factory ramps up production capacity. Currently, three other sites will break ground in 2024 in Maryland, and additional projects will be slotted into the factory’s schedule. To cut down on shipping costs, every site will be within a 500-mile radius of the factory. 

Achieving a scaled-up modular-construction system, which is much more common in parts of Europe and Japan, has long been a dream of the U.S. construction industry: even Frank Lloyd Wright experimented with the idea via his American System-Built Homes concept. But American construction, especially in the residential sector, has long had an “if it ain’t broke” approach to new technology. Compared to Europe, there hasn’t been as much of an effort to improve construction quality or energy efficiency by adopting new building methods or systems. And without that effort, it’s hard to achieve the scale of modular construction needed to build and expand a network of factories to support more such buildings.

This is why modular construction has long been a miniscule part of the multitrillion-dollar national construction industry, comprising just $12 billion, or 6%, of total new construction starts in 2022, according to stats from the Modular Building Institute. Even with increasing experimentation by hotel brands, such as Marriot and citizenM, it’s still a niche. 

This reluctance to give up traditional systems, and the challenges of building up enough business to support factories and corporate expansion, have made it challenging for startups seeking to develop their own modular systems. The infamous flameout of Katerra, a billion-dollar modular building startup that closed in 2021 after raising billions of dollars, exemplifies this issue; moving too fast, without a solid pipeline of projects and an understanding of the varied regulatory environment, can sink even well-capitalized firms.

Mest found that coordination between factory and development teams was key to modular success overseas, but just being able to book six months of factory time when a deal comes up isn’t as easy as it sounds.

“Greystar’s system mimics the model that’s best succeeded in other countries,” says Tyler Pullen, a technical advisor at the Terner Housing Innovation Labs, a part of UC Berkeley, and an expert in modular-housing technology. 

Mest believes that the big advantage for Greystar is speed. In some markets, the MLS system will cut construction costs by 10%. But the real advantage will be finishing projects in 40% to 50% less time, itself a huge cost savings. 

These savings allow Greystar to make MLS units more affordable. Marketed as a workforce-housing solution–a nonlegal term that tends to mean units affordable to working-class renters making between 80% and 120% of area median income—these units have a guarantee from Greystar that rent will never increase by more than 3% or CPI, whichever is greater. The steel construction will also eliminate many common maintenance costs and ideally lower the operational costs for Greystar over time. 

Greystar has just started its modular experiment in earnest. But the rollout thus far, with one project under construction and a pipeline of new developments in the works, suggests other larger contractors and developers will see the modular concept working and implement the practice in the future, says John McMullen, marketing director for the Modular Building Institute. Pullen agrees. He’s seen a lot of other large contractors embrace research and prototyping in the industrialized construction space. With the Biden administration making small gestures toward embracing more modular construction, including funding small pilots as part of its larger housing plan, there seems to be more momentum in the sector than there has been in years. 

“I think this represents the beginning of larger contractors embracing the benefits of off-site construction,” McMullen says.

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