The receiver of the country's largest off-site residential manufacturer, eHome NZ, says the company ran into financial problems because of too much debt.
The receiver, McDonald Vague, laid off 42 of the company's 100 employees on Monday.
eHome has been working in Auckland's Special Housing Areas and had a contract with Housing New Zealand to add rooms onto state houses.
Industry insiders have questioned whether changes to that contract resulted in the receivers taking over.
However, a director of the receivers, McDonald Vague, said that was not correct.
Tony Maginness said the reason was simply too many creditors and too much debt.
Registered Master Builders chief executive David Kelly said New Zealanders were reluctant to buy factory-built homes.
"There is a valid argument that an off-site manufacturer has good quality control so it's a valid option but people are taking some time to warm up to that idea."
Mr Kelly said big contracts with entities such as Housing New Zealand were important for off-site residential manufacturers.