And there doesn’t appear to be any relief in sight. In
California alone, about 180,000 housing units are needed
annually to keep pace with population needs, yet only
about 80,000 housing units come online annually. In a
recent New York Times article, it was reported that the
federal government now classifies a family of four earning
up to $117,400 as low-income around San Francisco’s Bay
Area. To address affordable housing in the area, tech giant
Google recently contracted with modular manufacturer Factory_OS to deliver 300 housing units to be used by
John Romanin of The Renter’s Lobby believes the nation
has reached a crisis point. The Renter’s Lobby focuses
on policies and legislation aimed at bringing a constructive
new perspective to the housing policy debate. According
to Romanin, “For the two decades between 1960 and
1980, 10 million apartments were built in the United States.
Volume supply met demand at rental rates affordable to
most American renters. By contrast, between 2000 and
2020 less than five million multifamily units will be built;
with only 20% (or one million units) considered affordable.
At the same time, renter household formation exceeded
seven million new renters creating a shortfall of six million
affordable housing units.”
What caused this supply shortfall and why aren’t
more affordable housing units being built?
Romanin continued, “There are two reasons for the
shortfall: The first relates to outdated, ineffective and
terribly counter-productive National Affordable Housing
and Housing Finance Policy. The second is the long-held
private-sector misperception that affordable housing and
management is not profitable nor sustainable without
Romanin is part of a newly formed group called the
“Housing Crisis Solutions Coalition” (HCSC) which
believes that advocacy and education programs can
solve both problems by leading efforts to change policy
and to demonstrate that Affordable Housing can be very
profitable and rewarding.
The Coalition has set a goal of 10 million “affordable”
units through 2038, or half a million units per year. “Only
Modern Methods of Construction (MMC) can meet
the technical demands of a scaled growth path on a
cost-basis that can support this unique market,” Romanin
said. “Unsubsidized Affordable Housing development
hinges on volume delivery of turnkey product-lines,
community designs, and integration of production time
efficiencies in all elements of the development and
The same story is playing out across North America.
Chicago-based general contractor Skender Construction
is going “all in” with modular construction by recently
announcing they will be building a factory on Chicago’s
In Vancouver, British Columbia, city officials have already
approved about 500 temporary modular housing units,
primarily to address homeless population. Modular
multi-family facilities are also becoming more common in
places like Boston, Philadelphia, and Seattle.
Four-story modular multi family complex in Tennessee / Source: Core Development and Aerial
What’s driving developers to modular construction now?
According to a recent article in Building Design and
Construction Magazine, the number of residential
construction workers is down 23% from 2006. Skilled
trades like plumbers, carpenters, and electricians are
down close to 17%. As a result, labor costs have risen
about five percent a year for the past three years.
Prefabrication, which is a more efficient way to build, may
be the best hope to quickly build affordable housing,
some industry insiders believe.
Chris Waters, Director of Business Development for Champion Commercial Structures offers several factors
including labor shortages, cost increases, schedule
pushes, and quality. He adds “truly, the largest underlying
factor may be predictability. In today’s environment,
developers can predict very little or nothing in the way
of cost control, the securing of labor, forcing schedule
adherence, and ensuring a quality product. Either one,
two, three or even all four can impact most every project
today. With the modular scheme, as relates to a large
portion of the project being built off-site, there is a
sense of predictability for all four elements of cost, labor,
schedule, and quality. The frontend planning process
creates and ensures cost certainty very early in the
stages, and well in advance of production. From the plant
production side, the labor is ensured. Workers show up
each day in climate controlled conditions to perform the
same build tasks, day-in and day-out.”
MBI asked, given these advantages, and based on the 25
or so multi-family projects your company has completed,
why aren’t more developers seeking this solution? Waters
stated, ‘’It’s change. Not all people like change and, often,
that is viewed as risk instead of progressive reward.
We’ve been building the same way forever, and modular
construction is a bit of a paradigm shift for many. It moves
the planning process up and every stakeholder must
Kent T. Campbell, Vice President of Core Development
in Nashville, Tennessee has completed over 30
multi-family projects but only recently started utilizing
modular construction, having completed two projects
in this manner. He echoed some of the same factors
cited by Waters. “Nashville is currently experiencing
unprecedented growth. Trade and labor availability are
stretched, and that’s resulting in rising costs, longer construction schedules, and reduced quality of the
finished product. We look to modular for greater control
in all three areas” Campbell stated. He added, “Finding
qualified general contractors and subs who understand
the modular process and scope of work has been the
Affordable Housing Project CHAMONIX in Vail, Colorado from Prefab Logic / Source: Prefab Logic
Brice Leconte, developer and founder of Colorado-based IUnit says the main drivers for his company are
better quality, a more predictable schedule and the
environmental benefits. Leconte’s company has
completed three modular multi-family units including Eliot
Flats, a 40-unit complex consisting of 350 square foot
apartments. He went on to say that his biggest challenge
now is finding the right GC and architect who are willing to
get behind it (modular construction) and see it through.
For its part, HCSC is putting money behind their words.
Modular industry building initiatives have begun with a
first formal effort to demonstrate “Economical Housing by
Design.” A Modular Affordable Home Living Community
in Arizona, in its first phase, aims to build 550+ units to
demonstrate the value of modular off-site construction for
delivering unsubsidized affordable housing.
None of this is to suggest that modular construction
by itself can address this massive shortage of housing.
However, MBI sees no possible way to close the gap
without greater adoption of industrialized processes such
as modular construction.
This article originally appeared in the Modular Advantage Magazine - Third Quarter 2018 released in September 2018.