Why Most Modular Housing Manufacturers Don’t Follow High-Quality Manufacturing Standards

I am currently serving as a Program Management contract consultant for a nonprofit organization dedicated to revitalizing the Southland (the southern suburbs of Chicago). Earlier this week, during one of my engagement meetings, I had the chance to meet with a development firm planning to launch a Housing Development program that could soon bring 600 homes to the Southland. They have partnered with a modular housing manufacturer who has faced challenges in recent years and are preparing to begin production on the initial properties. When I inquired about the methods being used to ensure quality (a question I have raised in previous meetings), the answers I received gave me pause.

As a Six Sigma Master Black Belt, I’ve spent years applying advanced manufacturing and process improvement frameworks across industries. From complex supply chains to high-stakes production environments, I’ve seen how structured quality systems transform not only product outcomes but also customer confidence. When I look at the modular housing industry, I see both the untapped potential of factory-built construction and the gaps created by an overreliance on minimum code compliance.

While I am not fully convinced that modular housing is the answer to the shortage of "affordable" and attainable housing in America, I will admit that factory-built housing has the potential to transform the way we build in America. By moving construction into controlled environments, modular housing could achieve the same levels of precision and efficiency as the automotive or aerospace industries. Yet, in practice, most modular housing manufacturers do not operate under high-quality manufacturing frameworks like ISO 9001, Lean Six Sigma, or Advanced Product Quality Planning (APQP).

So why does this disconnect exist? Let’s break it down.

1. Industry Origins and the Regulatory Divide

The modular and manufactured housing industries have very different regulatory foundations:

• Manufactured homes (HUD Code) are built to a federal performance-based code that emphasizes affordability and safety but not continuous improvement.

• Modular homes (IRC/IBC) must comply with state and local building codes, which set a minimum bar for construction but stop short of requiring advanced process quality.

In both cases, compliance is often seen as “good enough.” There’s no systemic requirement for factories to adopt the kind of rigorous, OEM-style quality planning seen in other industries.

2. Market Pressures That Prioritize Cost Over Quality

Housing is a cost-driven market. Buyers, whether individual homeowners or affordable housing developers, are often most concerned with price and speed.

• Thin margins: Many factories operate with limited profitability, making it hard to invest in training, automation, or quality certifications.

• Fragmented demand: Unlike automotive OEMs that order thousands of parts, modular housing projects are typically small-batch or one-off. This makes it difficult to justify the fixed cost of advanced quality systems.

The result? Factories tend to prioritize minimum code compliance rather than long-term process excellence.

3. Supply Chain and Workforce Challenges

Modular housing also faces unique challenges in the factory:

• Inconsistent suppliers: Materials are often sourced from commodity markets rather than tightly managed OEM supply chains.

• Workforce turnover: Many factories depend on semi-skilled labor with high turnover rates, which limits the impact of training in specialized quality systems.

• Limited automation: Processes still resemble “construction with hand tools” more than industrialized manufacturing.

Without stable inputs and consistent talent, it’s harder to enforce rigorous quality standards.

4. Lack of OEM-Type Customers

In industries like automotive or aerospace, OEMs (Original Equipment Manufacturers) demand that suppliers follow strict standards (APQP, PPAP, ISO/AS9100).

In modular housing, however, the customer base is different:

• Individual buyers.

• Small and mid-sized developers.

• Public housing agencies.

None of these groups consistently enforce advanced manufacturing quality requirements. Without external pressure, factories remain focused on code compliance, not continuous improvement.

5. Cultural and Historical Factors

The cultural history of factory-built housing also plays a role.

• The industry grew out of mobile homes and trailers, which were long associated with being “cheap and fast.” That stigma influenced the mindset of many builders.

• Many modular manufacturers are led by professionals with construction backgrounds, not manufacturing engineers. This means the mindset is about “meeting building codes” rather than “engineering precision.”

This cultural DNA slows the adoption of advanced quality frameworks.

6. The Exceptions: Who Does Follow Higher Standards?

Not all modular manufacturers are the same. A few are moving toward higher standards:

• Healthcare, education, and defense projects often require modular builders to operate under ISO 9001, Lean, or other QA/QC systems.

• Luxury and high-end modular firms sometimes adopt OEM-style standards to differentiate themselves.

• Large affordable housing developers are beginning to use quality frameworks to reduce warranty claims and improve lifecycle costs.

These exceptions prove that the model can work — it just hasn’t yet been scaled across the industry.

Modular Housing: Minimum Code Compliance vs. OEM-Level Quality Standards

Aspect	Minimum Code Compliance (Typical Modular Housing Today)	OEM-Level Quality Standards (Future-Ready Modular Housing)
Regulatory Driver	Meets state/local codes (IRC/IBC) or HUD Code only	Meets codes plus ISO 9001, Lean Six Sigma, APQP-style frameworks
Quality Goal	“Pass inspection” and deliver units on schedule	Continuous improvement, defect prevention, customer satisfaction
Process Control	Limited factory inspections, visual checks	Documented SOPs, SPC charts, process audits, preventive controls
Design Validation	BIM drawings + state approval	DFMEA/PFMEA, mock-ups, prototype testing, structured design reviews
Supplier Management	Materials sourced as commodities, variable quality	Approved vendor lists, supplier audits, incoming material certification
Workforce Training	Semi-skilled labor, on-the-job learning	Formal training programs, cross-functional quality teams
Customer Role	One-off buyers, small developers, limited leverage	Institutional buyers (healthcare, defense, affordable housing) driving quality requirements
Culture	Construction mindset: “meet the code and move on”	Manufacturing mindset: “continuous improvement, zero defects”
Outcome	Affordable but inconsistent quality; higher warranty risk	Higher upfront investment but consistent, scalable, long-term quality

The Bottom Line

Most modular housing manufacturers don’t follow high-quality manufacturing standards because the regulatory framework, market incentives, and industry culture don’t demand it. They are rewarded for meeting the minimum — speed, cost, and code compliance — rather than excelling in quality.

Until customers, financiers, or government programs begin requiring OEM-level quality, most factories will continue operating under “minimum code” standards. But the industry’s potential is much greater. If modular housing is going to deliver on its promise, adopting OEM-style quality systems may be the key to transforming public perception and driving long-term success.

The future of modular housing depends on whether manufacturers are willing to move beyond minimum code compliance and embrace true quality-driven systems. Having led quality initiatives as a Six Sigma Master Black Belt, Quality Engineer, Reliability Engineer, Reliability Engineering Manager, and Continuous Improvement Program Manager, I know first-hand how disciplined frameworks like ISO 9001, Lean, and APQP-style processes can elevate entire industries.

If you are a developer, policymaker, or manufacturer ready to position modular housing for long-term success, I’d welcome the opportunity to share how these principles can be tailored to your projects. Together, we can transform modular housing into a sector defined by precision, reliability, and trust.