A regulatory fix that nearly everyone expected to pass sailed through the Maine Legislature - until it didn't. The defeat of LD 2229 in committee in March 2026 has left nearly 250 planned modular housing units in limbo across Portland, Brunswick, and Rockland, exposing how fragile the state's modular construction pipeline remains under current code. For a state grappling with a severe housing shortage, the setback underscores a deeper structural problem: Maine's permitting and building code framework was never designed with factory construction in mind.
The Code Conflict at the Root of the Crisis
The immediate trigger for Maine's modular standstill is a narrow but consequential distinction in the Maine Uniform Building and Energy Code (MUBEC)1Maine Uniform Building and Energy Code (MUBEC). Certain factory construction practices for larger modular buildings do not meet MUBEC requirements. Specifically, the code requires plumbing and electrical systems to be installed by Maine-licensed tradespeople - not merely inspected by license holders.
This distinction matters enormously in a factory setting. Assembly-line workflows depend on specialized laborers performing discrete tasks under professional supervision, not on having a licensed master electrician or master plumber physically install every fitting. Factories both in-state and out of state had been constructing modular units for Maine projects, unwittingly building to standards common elsewhere but that in Maine apply only to single- and two-family modular buildings - not to larger multifamily projects.
Two years ago, Maine officials and developers celebrated the construction of an 18-unit affordable modular housing project in Madison, hoping it would usher in an era of faster, less expensive multiunit construction - and it did inspire other projects. But those projects 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" that caused these projects to violate Maine's building codes, but the measure died in committee, putting nearly 250 planned units in limbo and threatening the growing momentum around multifamily modular housing.
LD 2229: A Fix That Almost Wasn't Debated
LD 2229 would have brought Maine in line with other states, allowing unlicensed workers to install plumbing or electrical systems in a manufactured home under the supervision or inspection of a master plumber or master electrician.
The bill had broad support from state and industry officials, who said the current rules are impractical in a factory setting. Supporters did not bother going to the State House to advocate for it. "Nobody bothered to calculate the impact if this didn't happen," said Chris Marshall, co-founder of GreenMars real estate.
Intended to correct a code issue, the bill was presented to the Housing and Economic Development Committee late in the session without input from developers and was never voted out of committee. Suddenly, five projects in the pipeline - adding 246 units across Portland, Brunswick, and Rockland - faced seriously escalating costs, scheduling disruptions, and in at least one case, a major restructuring of plans.
The Maine Association of General Contractors was one of the few dissenting voices, concerned the bill proposed drastic changes too quickly.
Project Delays and the Affordable Housing Stakes
The real-world impact lands hardest on affordable housing. GreenMars's Stroudwater Commons in Portland - a 130-unit project - exemplifies the stakes. "The reason we chose modular for Stroudwater was so that we could build rapidly," said Marshall. "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."
Supply-side constraints compound the problem. Just one factory in Maine builds modular: KBS Builders in South Paris. KBS President Thatcher Butcher noted his factory produces about 400 units per year, with close to one-third ending up in Maine, and that he already hires Maine-licensed electricians and plumbers as subcontractors. Some developers predict builders will either funnel all work to KBS's single factory - slowing deliveries and delaying projects - or retool to use traditional stick-built framing.
The governor's senior housing policy adviser warned that without a long-term solution, there will be a "serious chill" in multifamily modular development in Maine.
As an emergency measure, close to $900,000 was added to MaineHousing's $37.5 million FY 2026-27 budget during midnight negotiations to help keep a handful of projects on track. However, the lack of an immediate regulatory fix is expected to derail hundreds of housing units.
The broader demand context is urgent. A legislative working group report estimates Maine must create 84,000 housing units by 2030 to meet demand. Against that backdrop, stalling modular's growth carries direct consequences for housing affordability and availability statewide.
A Patchwork Code Framework - and the Path to Reform
The LD 2229 failure is a symptom of a longer-standing structural problem in Maine's regulatory architecture. Modular housing in Maine is governed by a patchwork of codes. For one- and two-unit residential buildings and townhouses, separately adopted iterations of International Code Council codes apply, updated only through formal rulemaking at the Manufactured Housing Board. For buildings of three or more residential units and commercial buildings, no separate code or inspection system exists - meaning MUBEC applies directly.
Achieving the full potential of modular and closed-wall-panel construction requires greater economies of scale. In Maine, that scale is currently limited by varied local regulations, code interpretations, builder processes, and consumer preferences.
The Housing Production Innovation Working Group - whose report was released in December 2025 - laid out a series of recommended reforms. The report recommends that Maine replace the current manufacturer license requirement with a letter-of-approval system used by other states. The working group also recommends that regulations maintain clarity that buildings and components produced off-site are held to industrialized housing code and in-factory inspection regimes, and that local inspectors are not responsible for "in the box" work.
Implementing these changes will require a full recodification of Maine's Manufactured Housing Act - "a very extensive, technical process of rewriting that whole part of the statute," according to Phoenix McLaughlin, director of strategy implementation at the Maine Department of Economic & Community Development. Regulatory changes will take at least another year.
The working group report also recommends that the state create incentives to encourage more off-site construction, including a per-unit incentive for each home manufactured in Maine, a prize competition for cost-effective home building, and extending the sales tax exemption for industrialized housing.
Key reform recommendations from the Housing Production Innovation Working Group:
- Replace manufacturer licensing with a state letter-of-approval system
- Establish dedicated in-factory inspection regimes for multifamily modular buildings
- Recodify the Maine Manufactured Housing Act to unify the split code framework
- Introduce financial incentives for in-state off-site construction
- Develop a consistent market and regulatory environment covering closed wall panels, structural insulated panels, and other prefabricated systems
Legislative Outlook: 2027 and Beyond
Greg Payne, senior advisor on housing policy for the Governor's Office, expects LD 2229 to be taken up by the Legislature in 2027. If it passes, it most likely would not take effect until fall unless passed as emergency legislation, making it law immediately.
For developers, that timeline is difficult to plan around. "An LD 2229 fix might happen next year, but I can't plan my projects based on maybe next year," Marshall said. GreenMars projects work under modular but, he noted, "don't pencil with traditional Type 1 construction: steel and concrete."
The global contrast is instructive. According to U.S. Census Bureau data, modular construction accounts for just 3% of new home construction in the United States. In Europe and Japan, that figure ranges from 15% to 80%. Much of that gap is attributable to regulatory clarity - and Maine's current situation illustrates precisely what its absence costs.
Maine's experience is not unique - Canada has faced similar fragmentation across provincial codes and is addressing it with a new national modular permitting framework. For developers and lenders evaluating modular as a scalable solution, Maine's regulatory trajectory bears close monitoring. If the state can align its building code framework with factory production realities - maintaining rigorous safety, fire protection, and energy performance requirements in the process - it has the potential to become a regional model for permitting modernization.
For now, the industry is left navigating a gray area that, in the words of one developer, "everyone assumed had been fixed years ago." The cost of that assumption is measured in delayed units, chilled investment, and households still waiting for housing that modular construction was uniquely positioned to deliver quickly.
FAQ
What is LD 2229 and why did it matter? LD 2229 was a Maine legislative bill designed to fix a code discrepancy by allowing factory workers to install plumbing and electrical systems in modular homes under the supervision of a licensed tradesperson - aligning Maine with standard practice in most other states. It failed in committee in March 2026, leaving approximately 246 planned housing units in jeopardy.
What is the Maine Uniform Building and Energy Code (MUBEC)? MUBEC is Maine's statewide building and energy code, enforced in all communities with a population greater than 4,000. It sets standards for structural integrity, fire safety, plumbing, electrical, and energy performance. For multifamily modular buildings, MUBEC currently requires Maine-licensed tradespeople to install - not just inspect - plumbing and electrical systems.
Why is there only one modular factory in Maine? KBS Builders in South Paris is currently the only facility in Maine producing modular units. Operating at roughly half its production capacity of 600 units per year, the factory is a critical but constrained resource for the state's modular sector. Regulatory uncertainty has discouraged investment in additional manufacturing capacity.
What reforms are being considered for Maine's modular code? The Housing Production Innovation Working Group has recommended replacing the manufacturer license requirement with a state approval system, establishing in-factory inspection regimes for multifamily buildings, recodifying the Manufactured Housing Act, and introducing financial incentives for in-state off-site production. A revised bill is expected to be reintroduced in the 2027 legislative session.
How does Maine's modular adoption compare nationally and globally? Modular construction accounts for approximately 3% of new home construction in the U.S., compared to 15%-80% in parts of Europe and Japan. Regulatory clarity is widely cited as a primary driver of higher modular adoption in those markets.
