Two years ago, Maine officials and developers celebrated the construction of an 18-unit affordable modular housing project in Madison that they hoped would usher in a new era of faster, less expensive multiunit construction in Maine and provide a balm for the inventory squeeze that has for years exacerbated the housing crisis.
And it did inspire other projects.
The only problem? They were technically — and accidentally — built without following all of the state’s complex rules.
Lawmakers considered a bill this session to fix the “gray area” in modular housing development that caused these projects to violate Maine’s building codes. But the measure died in committee last month, putting nearly 250 planned units in limbo and threatening the growing momentum around multifamily modular housing.
The code ‘disconnect’
Under Maine statute, single- and two-family modular housing is regulated under building codes that have plumbing and electrical inspection standards that differ from those for larger-scale multifamily modular developments.
Buildings with three or more units are governed by the Maine Uniform Building and Energy Code, which, as with stick-built multifamily units, requires that individual workers installing electric and plumbing systems be licensed in Maine. A local code enforcement officer has to inspect the property on site.
One- and two-unit modular projects, by contrast, fall under the Maine Manufactured Housing Board, which states that only companies must be licensed, not individual employees, and inspections are done in the factory.
This discrepancy went unnoticed for years, but there had only been a handful of large multifamily projects, so it snuck by. Developers and local code enforcement officers assumed everything was covered and proceeded accordingly.
Projects in Madison, Newcastle and Rumford were all built without the licensed installers and local officials accepted the factory inspections, rather than requiring a separate one.
“We literally didn’t know,” said Kara Wilbur, president of modular housing company Dooryard, which worked on all three projects.
“People were going off this understanding that a factory-built building gets inspected in the factory and the (code enforcement officer) inspects the onsite portion, and everyone took that at face value,” she said, calling it a “weird disconnect” that the manufactured housing board only has jurisdiction over one- and two-unit buildings.
It wasn’t until a city employee in Portland started working on Maine Cooperative Development Partners’ Dougherty Commons project and would not accept the factory’s inspection, that the issue came to light.
An important fix
The need for a fix was identified last year in a report from the Legislature’s Housing Production Innovation Working Group.
LD 2229 would have brought Maine in line with other states, allowing someone without a license to install plumbing or electric systems in a manufactured home, as long as it is under the supervision or inspection of a master plumber or master electrician.
That the bill would pass almost seemed a foregone conclusion, said Chris Marshall, co-founder of GreenMars real estate.
“Maine had been operating right up until last summer as if (LD) 2229 had passed years ago,” he said.
The bill had broad support from state and industry officials, who said the current rules aren’t practical in a factory setting. They didn’t bother going to the State House to advocate for the bill.
“Nobody bothered to calculate the impact if this didn’t happen,” Marshall said.
But then it failed.
Suddenly, the five projects in the pipeline, which would add 246 units across Portland, Brunswick and Rockland, were facing seriously escalating costs, scheduling issues and in at least one case, a major restructuring of plans.
Out-of-state producers, who do the majority of Maine’s modular building, were booted out of the equation. A factory in Pennsylvania is unlikely to hire Maine-licensed electricians and plumbers.
And Maine’s only large-volume modular factory, KBS Builders in South Paris, lacks the capacity to build all the units fast enough.
More time needed
The code issue is “arcane,” and the industry as a whole is ripe for reform, according to Sen. Rick Bennett, I-Oxford.
“I thought we were on the path to solve it,” he said.
It was supposed to be an easy fix. It wasn’t even particularly controversial. But the work session was brief and there was minimal public discussion among legislators. The vote was unanimous.
“For whatever reason, there wasn’t an appetite because of some of the complexities of tackling it,” Bennett said, adding that he supported the bill but opted to cast his vote to prevent a divided report. “As a consequence we haven’t solved this problem.”
The Maine Association of General Contractors, one of the few dissenting voices, was concerned that the bill proposed drastic changes too quickly.
The public hearing and subsequent work session weren’t on the calendar until the committee’s last week of meeting. Rather than rushing it through the session, there is an opportunity to bring the stakeholders together for a balanced approach, said Kelly Flagg, the trade association’s executive director.
“We believe Maine must maintain consistent safety standards, strong workforce pathways, and a level playing field across all types of construction, especially as modular expands into larger, multiunit buildings where more lives are at stake,” she said in an emailed statement.
In the absence of strong industry support for the bill, many legislators were swayed to wait, Bennett said.
A lifeline
In the interim, the Legislature tossed out a roughly $900,000 lifeline for the projects already in the works.
According to an estimate from Backyard ADUs, which worked on the Dougherty Commons project in Portland, using Maine-licensed tradespeople in the factory will add an estimated $3,000 per module. That would mean cost increases for each project ranging from $24,000 to $468,000.
The money, added to the governor’s supplemental budget last week, will allow MaineHousing to deploy licensed plumbers and electricians to factories so that the projects (three of which are partially funded by MaineHousing) can make it over the finish line.
Meanwhile, the Housing and Economic Development Committee instructed the Governor’s Office of Policy Innovation and the Future to explore a more long-term solution.
It’s unknown how many other projects could be stalled or abandoned altogether while the state works out a fix.
“Unless we can figure out a long-term solution to this code incompatibility there’s going to be a serious chill in multifamily modular development in our state,” said Greg Payne, the governor’s senior housing policy adviser. “We have important work ahead of us.”
Chilling effect
Thatcher Butcher, president of KBS, said the legislation’s failure is a bit of a “double-edged sword.”
On one hand, the bill aimed to make it easier for out-of-state modular manufacturers to work in Maine, which means its failure gives KBS “a considerable competitive advantage.”
On the other, fixing what he called “statutory faults” would streamline and reduce the cost of multifamily projects for the company, which could help expand the market and therefore create more business opportunities.
But like Payne, Butcher worries about the chilling effect this could have on multifamily modular housing in Maine.
It adds “a lot of administrative obstacles, hurdles and headaches to get those projects ready for production. … It’s an incredible amount of preconstruction coordination,” he said. “The modular programs were designed to streamline the process.”
Marshall, at GreenMars, plans to build 130 condos in Portland, 26 of which will also include an accessory dwelling unit, which the company is pitching as a “new age starter home.”
GreenMars planned to split the project, known as Stroudwater Commons, between KBS and a Pennsylvania company to get more units out at once. Now Marshall expects to have to cut ties with the out-of-state producer.
If building modular housing is no longer faster and no longer less expensive, it negates a lot of its value, Marshall said.
Butcher agrees.
“There are some developers that are … ready to embrace it and start to transform the number from 50 to 100 to 200 to 500 and beyond,” he said. “I think this is absolutely changing their perspective and their outlook.”
This story was originally published by the Maine Trust for Local News. Hannah LaClaire can be reached at [email protected].
