Leaders in San Diego are promoting a new way to help solve the local housing crisis: apartment complexes fully constructed inside factories and then transported to a city neighborhood for quick installation.

Such apartments can rent for less than units in new apartment complexes constructed traditionally at a site. That’s because they can be built more quickly and cheaply on factory assembly lines.

Called factory-built housing by city officials, the units are a version of affordable housing that don’t require a government subsidy.

Developers and city officials say rents are often similar to apartment complexes that are 40 or 50 years old, but not enough factory-built complexes have been installed locally for reliable comparisons.

About 2,000 units of factory housing have either been installed, are in the process of being built or are being reviewed for approval by San Diego city officials.

They include a 483-unit complex in Grantville on Mission Gorge Road, a 324-unit complex in the College Area on El Cajon Boulevard and a 120-unit complex in Mission Hills on Fort Stockton Drive.

And many more are expected in coming years as city officials streamline regulations and modify the city’s inspection process, which covers setbacks, soil, fire safety and other details.

Gary Geiler, assistant director of the city’s Development Services Department, said city officials are pleased with the progress they’ve seen the past three years and expect even more in the near future.

“We’re seeing a lot of this and we anticipate more,” said Geiler, stressing that factory-built housing can be installed on a site in roughly six weeks. “The beauty of this construction is that it isn’t a year or a year-and-a-half long.”

That saves developers money by reducing how long they need to make payments to control a site before they can start charging rent to tenants. There are also no construction days wiped out by rain.

Quick installation also means neighborhoods with new housing projects only get disrupted for about six weeks, instead of more than a year. But installation, which often involves cranes, can be notably disruptive and typically requires street closures.

Councilmember Kent Lee, chair of the council’s Land Use and Housing Committee, said last week that factory housing can be another tool to solve the local housing crisis.

Other city efforts include loose rules for construction of backyard apartments known as accessory dwelling units, and a range of incentives and density bonuses to encourage developers to build aggressively.

“We need every type of housing we can find,” Lee said.

Saad Asad, a spokesperson for a pro-housing group called the San Diego YIMBY Democrats, said the city should do everything possible to foster and promote factory-built housing.

“This is a great opportunity,” he said.

Subsidized housing units that come with rent restrictions typically cost much more to build and take much longer because developers must secure tax credits and then build a project on-site.

Developers say rents for factory-built housing are more comparable to older apartment complexes built with fewer amenities that rent far below market rate because they are less appealing than new construction.

Developer Andrew Ranallo of Impact Housing, one of San Diego’s two leading developers focused on factory-built housing, said another key to the cost savings — and lower rents — is economies of scale that come with building many units at once.

“We are substantially lower than new construction that is market rate,” he told the Land Use and Housing Committee last week.

Ranallo, who owns a factory in Yorba Linda, said his company has built 1,200 factory housing units so far — all in San Diego.

Some critics worry that developers of factory-built housing won’t pass all — or even most — of their savings on to tenants because they can probably charge rents close to market-rate in certain neighborhoods.

Others worry that many units of factory-built housing could become short-term vacation rentals instead of traditional for-rent units that would help solve the housing crisis.

Gary London, of London Moeder Advisors, said there is significant long-term potential for lower rents if developers manage to scale up production and install larger buildings.

“If we could get to scale, we could probably see significant savings,” he said.

If states adopt universal building codes for factory-built housing, that would also reduce costs, London said.

But he stressed that construction costs are only one of several factors affecting price, and that land costs are the No. 1 driver — especially in San Diego.

Councilmember Sean Elo-Rivera raised concerns that factory-built housing, as construction and installation becomes steadily faster because developers get more savvy, could wipe out a large portion of the local housing construction industry.

But Elo-Rivera said those concerns are probably overblown based on how strong demand for housing is in San Diego and how far behind the city is on its state housing production goals.

San Diego has approved about 30,000 new housing units since 2020, far below the pace needed for the city to approve a state-prescribed 108,036 new housing units between 2020 and 2029.

Overall, Elo-Rivera said he is enthusiastic about factory-built housing.

“I see a ton of potential here,” he said.

Ranallo agreed that things will become steadily more efficient, noting that he has hired consultants from the auto industry to help make his assembly line more efficient.

A process that previously took 13 or 14 months now takes about seven months, he said.

The other leading developer of factory housing in San Diego, Edward Kaen, said he’s seeing a similar acceleration in the number of units his company can build.

Because his company, Domo Modular, uses steel, it can build factory housing complexes more than two stories tall, Kaen said. His factory is across the border in Tijuana and his company is headquartered in Barrio Logan.

The city held meetings this spring and summer with factory housing developers and state officials to help streamline the approval process, Geiler said.

The next step is to hold a second set of meetings to find ways to make inspections more efficient, said Geiler, suggesting those meetings could start next month.

_____

©2025 The San Diego Union-Tribune. Visit sandiegouniontribune.com. Distributed by Tribune Content Agency, LLC.