healing or political distraction? Our Denver correspondents join in

Bee The builder’s newspaper Focus on Excellence Conference in Denver, we had a chance over breakfast to discuss what we were seeing in offsite housing.

Although we have looked at this from different angles and seen different aspects of it, we have come to a similar conclusion. We have both been convinced for years that off-site construction is simply unavoidable; the way we do things has changed so little in a century.

Most people are familiar with it a McKinsey study stating that there has been no productivity growth in construction for decades, as well as the demographic projections for our aging workforce. It seems so obvious that modern production elsewhere is the solution. But it hasn’t worked yet for single-family home production – at least not at the fully modular level.

Why?

The core challenges

Let’s start with some of the basic obstacles:

• Shipping inefficiency. When you ship modules, you ship a lot of “air.” It is inherently inefficient. Additionally, you will likely need more on-site storage space.
• Transport damage. Let’s face it: America’s roads are not pristine. Trucks bounce and units stretch, requiring more on-site work to correct.
• Weather vulnerability. Fully finished interiors can be damaged by rain and the elements if they are not installed and sealed before the weather sets in. One of us has seen severely damaged units where the roofs and enclosures were not sealed in time.
• Trade coordination remains complex. You need all the same subcontractors on the construction site, just less time. But you don’t eliminate any transactions. Plumbers and electricians still have to make connections, drywallers still have to tape the seams, structure and paint, and the foundation (which has to be nearly perfect) still has to be completed. Ideally, the same crews would ‘stitch’ the modules together consistently. But that would turn them into itinerant oilfield workers, moving from location to location until the technology became so widely adopted that they could stay in one place.

Modules are not cheaper. When you add these factors together, modules rarely result in lower costs.

The problem of the factory economy

What would be the conditions for effective use of factories?

Factories are generally profitable with high utilization, little variation in production and predictable demand. We have none of that.

An ideal off-site project would work like a Levittown of the past: very few models, no changes, easy-to-develop lots delivered more or less just-in-time, and prices so low that demand is very predictable.

What you wouldn’t have are municipalities with different standards in the same geography, all with different ideas about what ‘looks good’, tailoring the design of each project to their taste. You can’t lose six months getting an assessment permit because the staff thinks the standards need to change. Imagine Apple getting its iPhone approved in dozens of jurisdictions, just in the Denver MSA. Do you think you would have one if that were true? Or one you can afford?

The factory should receive orders based on an even sales model that is highly predictable.

Do you see a lot of it? We don’t.

We’re tired of comparing home building to car manufacturing. When our customers and other stakeholders let us build tens of thousands of standardized homes every year, we can approach that level of efficiency.

Home is personal. We don’t want to live in the same house as all the other houses on the street. Our local governments regulate this. What they see as anti-monotony means that each house is, to some extent, its own little snowflake. And that snowflake expresses to the world the values ​​and identity of the homeowner who fell in love with it. We don’t complain. We’re just saying that the ‘legacy’ delivery system we have provides that flexibility. Manufacturing systems that don’t provide personalization have failed in the past and are doomed to fail in the future.

We offer another benefit of our “outdated” delivery system. We build houses in a virtual factory without walls. It may not be as efficient as a factory with walls, but when demand decreases, our virtual factory goes home. In that sense it is more efficient because it is tailor-made for our cyclical industry.

That’s why it survives, no matter how old-fashioned it seems.

The mirage of the mountain town

Many of the use cases to date are in resort areas, with much success in several Colorado mountain towns. But two things stand out when we think about core manufacturing markets.

First, the cost per square foot in the mountains can easily reach $350 or more, three times that of manufacturing markets. And even then, when the aforementioned costs for on-site work are added in, the result is often about the same price, but faster. That’s positive, but not groundbreaking, especially considering that affordable housing factories often determine when deliveries will occur.

For a city building affordable housing, waiting a year for a time slot might work, but it won’t work for us.

Imagine calling the factory and saying, “I think we need units starting in September 2026. But it could be 2027 or later. We’re hoping we’ll need four a month, but we’re not sure what the market will look like then.”

The reality is that our current subcontractor system, while not super efficient, is super flexible, allowing us to increase or decrease production with demand. It didn’t become this way by accident.

What works

There are positive changes in panel formation and in the way materials are bundled and shipped to locations. We routinely use fabricated floor trusses, roof trusses and wall panels. We are experimenting with adding value to these components by performing more operations in the factory and pre-assembling trusses into cassettes to reduce cycle times.

The most efficient builder in the US is undoubtedly NVR in the mid-Atlantic. They offer subs separately from the materials, which they provide to the construction sites in precise quantities. It is encouraging to work on increasing the content of the panels as they reach the site, and on standardized panels that can work for different designs.

But it is also notable that NVR in the Mid-Atlantic comes as close as anyone to the preconditions for modular projects: a high density of projects, a huge market share to influence the market and balance supply and demand. And they stopped modular.

The political distraction

On one level, there is no reason to discourage entrepreneurs from trying new modular solutions. Who knows, you may find the golden answer to all these challenges. In that sense, optimism doesn’t hurt.

The danger, however, is that many of our politicians want to believe that modular will be the game changer that will make housing affordable – because that is much easier to believe and hope in than to tackle the real root causes: rights and infrastructure.

It is important to help these politicians understand that even if a breakthrough innovation were found for remote modular construction, it would not reduce house prices in the long term. Why? Because prices balance supply and demand. If we don’t increase supply, a lower cost structure won’t lower house prices; it will only increase land residues.

Thought experiment: If Lennar is the first to discover a huge cost advantage, will they sell homes for less than market price, or will they use the advantage to buy even more land and outbid others?

The answer is obvious. While it makes sense for us, as builders, to look for all possible benefits and cost savings, politicians need to stop avoiding the hard work of real solutions: reforming entitlements and building infrastructure at scale, instead of putting it on the back of each individual project.