Modal Living is working to solve the affordable housing crisis through sleek and stylish accessory dwelling units––made in a factory.

Collin Jube, co-founder of Modal, studied economics and worked in finance, but didn’t initially plan on entering the real estate market. “I left investment advising when I met Dallin Jolley, my future co-founder,” Jube says. “After talking with him, it was hard not to become passionate about real estate and issues in housing.”

When Modal launched in January 2019, the Salt Lake Valley signed on quickly―by the end of the year, the company sold 15 units with just one salesperson on staff. Soon after, the team realized they didn’t have the operations in place to match the growing demand. “We purposefully pulled back on sales,” Jube says. “We sold at a breakeven rate throughout 2020, even as we dealt with a number of COVID-related hurdles.” 

The team racked up about $4 million in net profit during that fiscal year, and now they’re asking investors for almost as much––$3 million––in an effort to match the growing market. As Modal Living inches closer to the funding goal, they’ve earmarked a portion of the equity for a new project: a revenue share financing program.

“We started the company with the revenue share program in mind,” Jube says. “Early on, we found that many of our customers had equity in their homes and wanted control of the new unit where they owned it outright.”

This proposed program is a big part of their pitch to investors: it targets a large part of the residential and home buying market that can’t afford to finance the price tag of a Modal, but want (or need) to own it nonetheless.

“It’s effectively a no-cash down situation,” he says. “We front the entire cost of the unit and maintain ownership, effectively leasing the ground from the homeowner. Then, we split the revenue that’s generated from the rental, and that’s one of the most exciting opportunities for affordable housing solutions coming out of this business.”

The majority of the money raised, however, will be dedicated to a big marketing push… in California.

Accessory dwelling units (ADUs) enter the market

Jube’s “foray” into real estate really started to gain traction in late 2018, when the Salt Lake City government passed a city-wide ADU ordinance.

This change, coming from a City Council vote, amended the zoning regulations that previously banned the building of dwellings beside residences in the area. Now, as long as the building didn’t disrupt driveways, was maintained by a homeowner on the same plot of land, and the homeowner nabbed a permit, ADUs were good to go.

Knee-deep in research, Jube and Jolley sought ways to make ADUs stick in the state. “Cities across the west coast had already started allowing ADUs, and it became clear to us that it was time to push the needle in Utah,” he says. “Affordable housing is really the key reason why any government––state, local municipality or otherwise––would adopt ADU legislation, and there’s definitely an opportunity to provide more of those options here.”

Across the west coast, ADUs are used for many different purposes. According to Jube, 60-70 percent of these miniature homespaces are used as investment property, often to earn income via sites like Airbnb. The remaining segment of the market, though, is dominated by multigenerational living situations.

“These averages in the west coast tack to the trends we see in Utah,” he says. “30 to 40 percent of these homes are used for multigenerational living situations. These are parents with adult children going to college and living at home, or vice versa, kids with aging parents that they want close––but not too close.”

Of course, ADUs aren’t a new thing. But the construction of an ADU isn’t how Modal is attracting investors––it’s how they’re doing it.

Modular construction becomes all the rage

Modal’s big innovation was about connecting the dots.

Modular construction isn’t new―the process of constructing a building offsite at a plant or factory, and assembling the pieces at the actual location, is typically used for large projects like medical clinics, schools, and military camps.

Jube’s team knew that the market for ADUs was growing, and decided this could be a unique, if not totally new, solution. “As we were researching affordable housing solutions, we came across modular construction,” Jube says. “Once we looked into the option, it became crystal clear that this approach to building was the perfect method to deliver our ADUs––this kind of unit is perfectly suited to be built in a factory.”

Modular construction is employed for more residential projects in other countries, but in the United States, less than one percent of projects are built this way. Jube points to the example of Japan’s building efficiency––over 20 percent of the country’s projects use modular construction––as a motivator for signing on to Modal.

“If module construction isn’t the future of construction, it’s definitely a major part of where the industry is going,” he says. “It’s a big part of why I dove headfirst into Modal.”

Expanding into California

“It’s time to scale our business,” Jube says.

Modal plans to jump from the $4 million net profit earned last fiscal year to $12 million by 2023. How? The people of California’s empty backyards. “Salt Lake has been following in the steps of the West Coast with these housing trends, but California, in particular, has been a good example,” Jube says. 

The success Modal found in Salt Lake––selling and placing 25 units in the Valley alone––prepared them for the bigger market in California. “In terms of the equity that people have in their homes over there, it’s a lot easier to finance the products,” Jube says. “It’s also easier regulation-wise, where California has mandated that every local jurisdiction must allow the use of ADUs.”

Modal’s primary shareholder and chairman of the board is a former CEO of a California-based home builder, so Jube says the transition of focus was simply in the cards. “We’ll be actively hiring representatives on the ground in California, building model complexes and increasing marketing efforts across the state,” he says. “I expect we’ll open an office in California within the next year.”

Of course, they won’t be leaving Salt Lake any time soon. “The market for these kinds of homes grows every day,” he says.