California’s housing crisis continues to escalate and every conversation, whether in the Legislature, at regional planning tables, or within our own member meetings seems to circle back to the same stubborn truth. We cannot meaningfully address affordability without dramatically increasing housing supply. And yet, even as the state has made progress on zoning, entitlements, and streamlining, one major barrier remains constant and that is the rising cost of construction.

A new March 2026 report from the Terner Center for Housing Innovation, Potential Pathways to Scale Innovative Construction Methods in California, digs deeply into this challenge and the role that industrialized construction including modular, panelized systems, and other factory‑based methods could play in lowering costs, speeding up timelines, and stabilizing development pipelines. The report reflects months of interviews with more than 65 stakeholders across development, construction, finance, labor unions, code experts, and state agencies.

While industrialized construction has long been heralded as a promising solution, the report acknowledges a hard reality. Despite clear potential benefits, the sector has struggled to reach scale in California. But the findings also highlight a path forward where the state plays a proactive, coordination‑focused role in reducing uncertainty, mitigating financial risk, and building a regulatory foundation that supports innovation rather than slows it.

In order to meet demand, California must build 2.5 million homes by 2030 and yet high construction costs, supply chain unpredictability, and labor shortages mean that many projects simply cannot pencil out under current conditions. At the heart of the report is a set of seven policy themes, developed through the California Assembly’s Select Committee on Housing Construction Innovation, that outline how the state can support scaling industrialized construction. Stakeholders identified these priorities as the most impactful areas for legislative and administrative action. These themes are:

1. Increase certainty through building code reform
2. Increase consistency & replicability through standards and process reforms
3. Reduce financial risk and liability to encourage industry growth
4. Support demand aggregation to stabilize factory pipelines
5. Develop a strong, future‑ready workforce
6. Update state funding programs to align with IC realities
7. Address misperceptions of risk through education and better data

For those of us committed to affordable housing production, this report is both grounding and encouraging. It acknowledges the structural challenges we face, but it also shows that thoughtful, targeted state leadership could unlock real and scalable progress in how California builds homes. And given the size of the crisis we’re working to solve, that kind of innovation should be welcomed.