When affordable housing starts in a factory

A Phase 2 rendering of a modular housing development in suburban Seattle. A joint effort by the modular startup Blokable and the mission-based Compass Housing Alliance, the project will create up to 85 units at full build for a mix of residents, including people who were recently homeless. (Courtesy of Blokable)

Amid a housing crisis, several North American cities are turning to modular construction to get new buildings off the ground more quickly and less costly.

May 18, 2018

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Edited by Eric Jaffe

The vacant field beside a Lutheran church in the Seattle suburb of Edmonds, Washington, will soon take on a critical new form. It will be home to one studio apartment, then a group of up to two dozen, then 60 more — potentially 85 in all for residents of mixed incomes, including people who were recently homeless.

A rising cost of living and housing has led to a sharp uptick in homelessness in Seattle’s King County in recent years, with 11,643 homeless people counted in January 2017 — the third-highest amount nationwide. To play an active role in addressing the issue, the church decided to use the real estate to build much-needed housing. To do that quickly and affordably, they’ve turned to Blokable, a Seattle-based modular housing startup that’s one of a growing number of companies in North America engaging in the factory-based production of buildings.

Public and private developers in cities like Seattle are increasingly turning to off-site construction methods to meet housing demands in the face of an affordability crisis and limited budget resources. In January, the San Francisco Mayor’s Office announced a plan to develop a modular housing production facility in the city to help address the city’s housing shortage. A Chicago developer says it will soon build a modular housing factory on the city’s southwest side to construct hotels and apartments. Vancouver affordable housing authority has begun using temporary modular units to build out housing for homeless individuals.

In North America, factory-built housing has long existed for single-family homes as well buildings based on standard designs, such as hotels or dorms. A new crop of companies like Blokable is trying to take this approach mainstream — to build everything from mid-rise apartment towers to micro-unit complexes to affordable housing. And given advances in technology and an increasing demand for urban housing at a variety of price points, the time may be right for off-site construction to finally take hold.

But how quickly that happens — or if it happens at all — depends on how these companies address longstanding barriers that have prevented many others in the past from making factory-based construction a bigger part of the way houses get built.

A Solution for Today

The factory-built house has long been seen as a solution for the postwar housing needs of a booming population, for a dearth of affordable housing, for a simpler and better way to build. But it has also long been an idea that never quite catches on.

In the U.S., designers like Frank Lloyd Wright launched a short-lived prefabricated housing project in the 1910s, but the onset of World War I made the procurement of materials difficult and the venture was abandoned. From 1908 to 1940, Sears sold roughly 75,000 mail-order homes, including the high-quality Honor Bilt line; the factory process relied on machine-cut wood pieces instead of the traditional cuts made out in the field by two-person rip saws. Towards the end of World War II, Buckminster Fuller sought to reuse wartime factories as spaces to build prefabricated units to accommodate the Baby Boom, but only a few of his so-called Dymaxion houses were built. In the late ’40s, the Lustron Corporation managed to build a few thousand of its steel and ceramic homes that could be packed and shipped across the country, but rising steel prices proved too much for the company to survive.

But as technology improves the design and manufacturing processes — through key advances in robotics, lightweight materials, and digital building information — the risks faced by earlier modular and prefab builders are becoming more manageable. Europe remains ahead of the field, led by companies like Lindbäcks Bygg in Sweden and Legal & General in the U.K. The prefabricated housing industry in Japan is also among the world’s most advanced — a highly mechanized and automated manufacturing business that has increased efficiency and brought down material costs to make homes cheaper to produce and more affordable to buy. Today, Japanese builders like Sekisui House and PanaHome use robotics and precision manufacturing machines to create standardized-yet-customizable housing that ranges from modest buildings for low-income families to multi-story mansions.

In North America, the industrialized housing industry is far less developed and far more compartmentalized, serving specific niches of the housing market. But the same technology is making its way into the factories of the U.S. and Canada, helping to bring costs down and giving rise to companies like Full Stack Modular. A result is that industrialized building is increasingly being used to construct housing for low- or no-income residents.

Vancouver has made temporary affordable housing a priority and turned to modular techniques to get projects like 220 Terminal Avenue (above) done more quickly and at lower cost. (City of Vancouver)

As in Seattle and many other cities, Vancouver is experiencing an acute rise in the number of people sleeping on its streets. To deal with its chronically homeless, Vancouver’s Affordable Housing Agency plans to build about 2,500 permanent homes, but the timeframe for getting them built can stretch to three or even five years. “Unfortunately for people experiencing homelessness, it’s a problem of today, it’s not a problem of two or three years down the road,” says Luke Harrison, head of Vancouver’s Affordable Housing Agency.

Through modular building techniques and temporary projects, the agency found it could cut the time to house people down from years to months. It’s now building three-story apartments on properties slated for future development. The buildings are expected to stand for three-to-five years as the rest of the sites get built out — and as permanent supportive housing can be constructed. Located in areas that require minimal site preparation and only temporary foundations, these projects are easily approved through the city planning process, and their standardized architectural design means they can be built quickly.

The first 40-unit complex was completed in late 2017 — “six months from idea to occupancy,” says Harrison. Another 40 units were completed in February 2018; construction took less than three months and Harrison says “we’re cutting weeks off that now on our next build.” The cost of each unit is estimated around $75,000. “The equivalent for a permanent unit in Vancouver right now is probably closer to $250,000 a door,” says Harrison. “So there’s a significant cost savings.” The plan is to complete 600 of these temporary units by the end of the year.

Old Approach, New Technology

Blokable emerged out of the tech world and is funded by venture capital. Like many of these companies, it has aspirations to revolutionize the way buildings get built. Many of the new startups also see an opportunity to break with convention, using technology to improve not just the actual construction but also the pipeline of getting projects financed, permitted, and occupied.

Blokable’s Holm was inspired by frustration to start thinking about how to improve this process. He’d spent years working in the tech industry and was leading the development of Amazon’s foray into physical retail spaces in Seattle — a bookstore and an automated grocery store — when he encountered the challenging realities of getting buildings permitted and constructed.

“On the one side, I was building all kinds of hardware and software with the engineering team,” says Holm. “And then in the outside world, looking at how to scale out the physical stores, I was looking at this world that was just completely inefficient.” He was dealing with city bureaucracy, working to obtain the right permits for various parts of the construction, and hitting seemingly unavoidable delays throughout the process. “I was like: ‘This is crazy.’ ”

He co-founded his company in 2016 with real estate development veteran Nelson del Rio and spent two years studying the market, the housing industry, and the bureaucracy that they saw as being so limiting. “There was such a need for housing that I could see this new market that was coming,” he says.

Holm says Blokable won’t just be building housing for the homeless, but that there’s also a big opportunity in providing “missing middle” housing for moderate-, low-, and no-income residents. The development in Edmonds will be mixed-income to help build a community that brings together many populations; it is being done in partnership with the mission-based Compass Housing Alliance, who will identify residents and provide supportive services. Other projects in the works include apartment buildings for other non-profit developers and a series of accessory dwelling units, or backyard houses, for a company hoping to insert them as infill housing in the Bay Area.

Technology has driven many of these new companies, often through the use of precision modeling and robotic manufacturing to lower costs and improve efficiency. “One of the things that makes this movement a larger potential now is we are in a different technological environment in so many ways,” says Carol Galante, director of the Terner Center for Housing Innovation at UC-Berkeley and the co-author of a recent report about the off-site construction industry. “And that’s a positive.”

But, she cautions, there are many factors to a successful modular housing venture beyond just construction technology. “It’s important to understand how big real estate developments and large construction projects are different than building an iPhone.”

Progress Amid the Challenges

The barriers holding back off-site construction are varied. Some are endemic to the construction industry, and others are a result of the relatively novel way factory-constructed buildings get made, says Ryan E. Smith, a professor at the University of Utah and co-editor of the 2017 book Offsite Architecture: Constructing the Future.

One big challenge is that banks aren’t used to dealing with the building schedule of factory-based construction. The typical construction loans they issue trickle out in chunks of funding, or “draws,” based on the stage of construction — when framing materials are needed, as electrical and plumbing is installed, and so on. In a factory-based setting, all that work is happening at the same time, meaning companies need more of their loan money up front. “The banks are saying in the traditional construction process: ‘Why are you asking me to make an early draw?’ ” says Smith.

(Inhabitat / Flickr)

Another challenge is permitting. “There are some jurisdictions that are just not friendly to it,” says Smith. “And actually they’re not just unfriendly but adversarial.” That’s partly because it’s an unfamiliar method of construction, he suggests. There’s also the issue of inspections, which are required in the factory at various stages of construction as well as on the actual site of the building as it’s being installed. When a factory is in one state and the building plot is in another, the inspection bureaucracy — stretching across multiple jurisdictions — can become so onerous that projects can be perceived as being too risky.

Then there’s long-term viability. At the moment, the economy is in the midst of a building boom, and a growing number of developers are looking at modular and off-site construction as a way to get product built fast. But opening factories to meet that demand is a risk not many are willing to take. “Once you have a manufacturing process, a factory producing anything, you need to have continuous demand for that product,” says Galante. “And given the boom-bust of real estate, that has traditionally been a challenge.”

Some of the new modular builders are offsetting part of the risk by investing light and taking over existing factory spaces. The multi-family modular builder Factory OS, for instance, recently launched its operations in an old factory on former naval shipyard in the San Francisco Bay Area city of Vallejo — a factory space they took over from another modular builder, Blu Homes. Galante notes that Factory OS is planning to insulate itself from downturns in the real estate market by maintaining a sub-specialty in micro-units and temporary housing for homeless people.

Planning a business around the perpetual need for homeless housing may be a bleak outlook, but it’s also a sign that the off-site housing industry can be bigger and wider than just single-family homes. As more players enter the market, there will likely be more opportunities to develop a range of buildings, from mid-rise housing towers to market-rate apartments to the kind of affordable housing Blokable is building in Seattle.

They are lofty plans. Despite the aspirations of companies like Blokable, not much of this latest wave of modular housing has actually gotten built, says Galante. There are still many challenges to be addressed in making industrialized housing more mainstream, let alone a viable business. But the pieces of success, like so many modular elements, are stacking up in a very promising way, at a time when cities need new housing ideas most.

“It’s still, in my view, a pretty nascent movement,” says Galante, “but one that very obviously has the potential to be a big game-changer.”

May 18, 2018