🔒Regulatory snafu stalls Maine’s modular industry

Maine’s modular construction industry, considered essential to helping meet the state’s critical housing needs, hit a regulatory roadblock this month in the Legislature, with the failure of LD 2229. The bill was intended to correct a code issue, but was presented to the Housing and Economic Development Committee late in the session, without input from developers, and was never voted out of committee. As a temporary — and limited — fix, close to $900,000 was added to MaineHousing’s $37.5 million FY 26/27 budget during midnight negotiations, to help keep a handful of projects on track, but the lack of an immediate regulatory fix is expected to derail hundreds of housing units. The issue is that not all factory construction practices for larger modular buildings fully meet the requirements of the Maine Uniform Building and Energy Code. The code requires plumbing and electrical systems to be installed by Maine-licensed tradespeople, rather than just inspected by license-holders, which has largely been the practice. Factories in-state and beyond have been constructing modular units for Maine, to standards common in other states, but which in Maine apply only to single- and two-family modular buildings, not larger modular projects. “It was an unfortunate series of events and miscommunication; there was no ill will," GreenMars Development partner Chris Marshall, who has projects that will be affected, told Mainebiz.

Modular projects will take longer, cost more

Close to 300 housing units already in development, plus countless more on the drawing board, are in limbo because hiring the necessary number of Maine-licensed electricians and plumbers to handle factory installations here in Maine — and at out-of-state facilities — would be costly, if even possible. A key issue is that just one factory in Maine builds modular, KBS Builders in South Paris. The facility produces about 400 units per year; not enough to meet growing demand. Company president Thatcher Butcher said, “We could certainly expand our capacity, if the underlying statutory issues were resolved.” For developers who augment KBS’ production by working with out-of-state factories, the immediate future is uncertain. Those factories will need to bring in Maine-licensed plumbers and electricians to work on modulars coming to Maine. Chris Lee who owns Brunswick-based Backyard ADUs, sees real problems with that scenario. “It’s very challenging to integrate Maine-licensed plumbers/electricians into these facilities without impacting the manufacturing process.” He references a factory he works with in Pennsylvania. “Picture a 100,000-square-foot modular manufacturing facility that produces seven modular boxes per day. The electricians and plumbers are highly trained in the processes that allow this level of efficiency and output. “You can't just replace a trained modular electrician with a Maine-licensed electrician who hasn't worked in a manufacturing facility. And, you can't just get the skilled manufacturing electrician a Maine-issued Master or Journeyman license overnight.” “Losing the Pennsylvania modular capacity would be devastating,” Lee said. Out-of-state manufacturers shipped 900 modules to Maine last year.”

Back to ‘stick built’?

Marshall predicts developers will either have to move all of their work to KBS’s one factory, which will slow deliveries and delay projects, or retool projects to be "stick built," or built with traditional framing techniques. GreenMars’ Stroudwater Commons modular development that's under construction in Portland, will now be slowed by close to three months, Marshall said, as he waits for some of the units to be built. “The reason we chose modular for Stroudwater was so that we could build rapidly,” Marshall said. “Modular isn’t always cheaper than stick built. The reason we do it is 100% because of the speed. If you take away that advantage, there’s no reason to build modular.” Some developers are already shifting to stick built, including Kara Wilbur, who owns Dooryard, a Rumford-based housing catalog company offering both modular and traditionally-built homes. She’s retooled upcoming multifamily projects in Yarmouth and Madison to be built ground up.

Going forward

Greg Payne, senior advisor on housing policy for the Governor’s Office for Policy Innovation and the Future, told Mainebiz that he expects LD 2229 to be taken up by the Legislature in 2027. If it passes, it most likely wouldn’t go into effect until the fall Payne said, unless it were passed as emergency legislation, making it law immediately. Marshall said, “An LD229 fix might happen next year,” he said, “but I can’t plan my projects based on maybe next year.” GreenMars has thousands more housing units in the pipeline. “These are very strong projects that work under modular, but they don’t pencil with traditional type 1 construction: steel and concrete,” Marshall said. “You’d need rent prices to be substantially higher.” “Our company doesn't give up easily,” he added. “We're going to continue to find ways to build housing.”