Oregon’s effort to recoup some of the millions of dollars wasted on what state officials say turned out to be defective modular housing for survivors of the 2020 Labor Day wildfires has so far yielded a small fraction of what the state spent.

The state paid an average of $170,700 per unit to purchase the two-bed, one-bath homes in 2021. In recent months, some of those homes sold at auction for an average of $37,200, or about 22 cents on the dollar, state records show.

Through a spokesperson, leaders at the state housing agency declined to comment on the outcome. Oregon is now suing the housing broker for the deal, Pacific Housing Partners, as well as the manufacturer, Nashua Homes of Idaho Inc., alleging construction defects and seeking nearly $11.8 million.

Rep. Pam Marsh, an Ashland Democrat whose district had been slated to receive many of the modular homes, also declined to comment on the auction. But she said state officials made the right decision to offload the units rather than attempt to repair problems, saying wildfire survivors had lost confidence in the housing.

“It would have all been terrific, it would have been the hero story of the wildfire recovery, except those units were extraordinarily poorly produced, not up to code,” Marsh said.

Marsh said she still believes it’s a good idea to use modular housing to speed up rebuilding after wildfires, and a new contractor is slated to deliver replacement homes for Southern Oregon as soon as April.

The modular units originally planned for Southern Oregon had been a flagship project in the state’s plan to quickly rebuild in the wake of the destructive 2020 wildfires. But The Oregonian/OregonLive later found that the state was slow to replace housing and had not completed any permanent units three years after the disaster, which was particularly devasting to affordable housing in southern Oregon.

Oregon’s housing agency initially signed a no-bid contract in June 2021 to purchase 140 modular houses to replace mobile homes destroyed by the wildfires in the southern Oregon city of Phoenix and the community of Blue River between Eugene and Sisters. In Phoenix, the homes were supposed to rebuild the Royal Oaks Mobile Manor. The total cost was $23.9 million, according to Oregon Housing and Community Services.

Modular homes are built offsite, then transported to the project location and assembled. This can result in faster construction times than for traditional stick-built homes.

Problems with the modular housing units purchased through Pacific Housing Partners surfaced behind the scenes in April 2022. The Jackson County Housing Authority, which was involved in the work to rebuild Royal Oaks, told the state that housing delivered to the project site had “significant material defects” inside and outside of units and asked the state to halt further deliveries. Soon after, the state documented deficiencies with the structures including weatherproofing problems and signs of interior water damage, records show.

But state housing officials decided to move ahead and repair the modular housing. Wildfire survivors were told they could move into Royal Oaks as soon as spring 2023. Then in a reversal, the housing agency announced in June 2023 that the reopening of the mobile home park would be delayed indefinitely. And in March 2024, the state changed course yet again and said it was going to buy new housing for Royal Oaks.

In October, the state told Jefferson Public Radio that Royal Oaks could be ready for residents in April. This time, the Housing Authority of Jackson County handled the purchase of 118 modular housing units for $17 million from Klamath Falls-based InteliFab, according to Eric Hill, a development specialist at the authority. The purchase was funded with $12.2 million in remaining wildfire housing recovery funds state lawmakers approved in 2021, plus $5 million in affordable housing tax credits.

Lane County’s housing agency, Homes for Good, separately spent $4 million to buy 20 modular homes from Blazer Industries, Inc. in Aumsville, to rebuild Lazy Days RV & Mobile Home Park in Blue River, Ela Kubok, the agency’s deputy director, wrote in an email. Its grand opening is scheduled for Jan. 31. The project was mostly funded by the state.

The two Oregon companies selected to produce the new modular housing also each received $5 million state grants to encourage manufacturing of modular housing in the state.

It remains unclear how Oregon chose the contractors who produced the units that state officials now say are defective.

When Oregon Housing and Community Services contracted with Pacific Housing Partners in 2021, the agency skipped its usual public bidding process by relying on its emergency procurement authority, agency spokesperson Delia Hernández wrote in an email. But it appears the agency did not document the need for the emergency procurement nor the method used to select Pacific Housing Partners, as is generally required under state law. Although The Oregonian/OregonLive first requested the procurement records in 2023 and multiple staffers searched again in fall 2024, the state has been unable to produce any documentation of the need and selection process used.

“OHCS agrees that the Emergency Waiver signed by the agency head is missing from the procurement file, a procurement documentation error,” Hernández said. “The agency was acting swiftly to make sure the urgent need for housing for wildfire survivors was met.”

The state’s central administrative agency launched a review of the procurement in September and aims to complete a report on its findings by the end of the month, spokesperson Andrea Chiapella wrote in an email.

So far, the state has auctioned off 68 of the modular homes for a total of $2.5 million; the remaining 72 units could be sold in the future. Marsh, the state lawmaker, said she made sure the state disclosed the condition of the structures to would-be buyers.

One of the purchasers of the modular homes already had a history with them: Mindy Rex, president and CEO of Pacific Housing Partners. Rex bought four homes for $119,500, records show. She declined to comment and would not say whether she has any connection to another buyer, Madeleine Rex, who purchased six homes for $262,000.

In its lawsuit filed Nov. 20 in Marion County Circuit Court, Oregon Housing and Community Services alleges manufacturer Nashua Homes of Idaho, Inc. and broker Pacific Housing Partners delivered modular housing riddled with defects including missing and improperly installed flashing, incorrectly installed windows and doors and roofs that were improperly sloped and sealed. There was moisture damage around windows and doors in some of the homes, attorneys for the state wrote in the complaint, which described the homes as “uninhabitable.” Fixing the defects would cost $7.7 million, the state alleges.

The state also alleges that Pacific Housing Partners failed to “obtain proper insurance” for its work, despite agreeing in its state contract to purchase insurance coverage, including a $5 million umbrella insurance policy. Attorneys for the state wrote that the company also failed to name Oregon Housing and Community Services as an additional insured party, which was required under its contract.

No one from Nashua Homes responded to a request for comment.