Tuesday, January 15, 2019

An Insider's Response to my "Fragmentation and Regulations Continue to Impede Modular Housing Growth" Article

On January 12th I wrote “Fragmentation and Regulations Continue to Impede Modular Housing Growth” about two problems facing the modular housing industry today.

This morning I received an “Anonymous” comment written by someone still working with what appears to be a long history in our industry.

Their observations of these two highly charged problems sheds more light on why the modular housing is the best option for future construction but more importantly why that is not materializing.

A "must read" comment:

Coach, Having been around when the states in the Northeast gradually changed over to allow modular to be factory inspected and not invasively field inspected I would like to offer the following for you and your readers. The states fear at the time was that the industry would build and inferior product and that their inspectors had more real knowledge than any inspector or third party doing sections in a modular plant.

Talk to any Third party agency and ask them what they had to go thru to get certified, accepted or licensed by a state and you will see that the process is not easy. Read thru any Q.A.M. and you will see that the documentation is not just few copies placed In a book someplace and ignored. But the process was established to give credibility to the Third Parties and the process being used for inspections. This was the best most states could come up with to prove to their locals that the state as protecting their constituents. Initially it was a rocky start with locals demanding the right to know more than what the states were saying needed to be provided.

Most states helped the industry fight back against the locals with phone calls, letters and copies of the way the legislation was passed. It did help,but it still was not easy.

In my opinion the system took a turn for the worse when the codes consolidated and the code became more and more restrictive and prescriptive. Building officials or the agencies they hired required more and more information to satisfy this higher degree of structural design and compliance. What was simple header built into a wall became a structural element that required at least a page of calculations that had to be sealed by a licensed professional, while all along our stick built cousins go submit and plan with structural elements extracted from the Wood Frame Construction Manual.

Now to your point of fragmentation. Consider that there is such a thing as an "On Frame Modular" available in the southeast and not a product widely recognized in the Northeast and that is the start of the industry going off the rails.

Next consider that in some regions the Modular industry is still confused with the "HUD" industry and it gets even worse. How many articles do you have to read about a manufactured home (HUD) being thrown out of a subdivision, but was labeled as a modular home, before you begin to see why the industry does not get traction.

Another point to consider is that as an industry it is hard for us to work together and agree on a cohesive marketing plan that will benefit the entire industry and just those special few.

What do we do to foster or nurture the future of our industry? Do we actively train or offer training to potential builders of our product? What will the future hold for us is we are not bringing up the next generation of builders to promote our building system and grow the industry?

Look, this industry is not anywhere near what it was many years ago. Our ability to build more complex products to expand our market place has improved immensely. We handle the complexities of the building code requirement that are thrown at us to survive and we make it a standard operation procedure in our factories. I jokingly think to myself that if the coal mining industry thinks that over regulation makes doing business almost impossible they should spend a day in our shoes in our factories.

In closing I am more concerned about the overall future of the single family detached home building industry as we know it.

Does anyone have clue as to what the millennials want for housing? And how will those needs fit into our business plan?


Anonymous said...

Having worked in this industry for over 30 years on both the retail and wholesale side, I am in agreement with the anonymous comments. I believe one of the things that has put our industry at competitive disadvantage is because of all of the regulations, approvals, engineering, special calculations and so forth that we have to do.

Site builders are not held to the same standard and get away with doing a lot less to build a new home. We have to over engineer everything we do which forces us to either absorb more costs or pass those costs on to the customer. With the efficiencies of modular construction, our homes used to be much less than site built and still should be today. However with all the regulations we have to meet, that is no longer the case and that is why the large track builders are not looking at modular housing as an alternative way to build. They have done their research and they know they can still build it for less on-site.

Anonymous said...

I could not agree more with the comments made.
This industry used to sell speed, simply put we can do plan prep, pricing and fabrication in the time it would take a site builder to get the foundation up and rough frame and by then we would be done. Now, that plan prep (engineering and other ) takes the same amount of time we used to do all of the above in. I agree that this is an over regulated industry compared to our stick built cousins.

I can remember when we could deliver a module for $ 1.25 per mile. Now we pay that amount or more just for an escort vehicle. I can remember when we could rent a crane for $1500.00 a day, now we pay that just for an oiler sent on the job with the crane. So with time has come some serious increases in costs that have offset the savings we used to provide to a builder with our in plant efficiency.
As far as doing business with the BIG boys. Many have tried it and many have been rejected while doing so. They( the Big Boys ) know that they can write contracts that tie down to the penny what a sub is going to charge them and that is their main focus. Variables in pricing are not allowed in their system and profit structure. So a lost crane day do to weather is not tolerable. They have sold a set price with a set profit and that is their primary driving force.
Our industry, for the most part has been relegated to supplying quality homes for the scattered lot builder. And obviously by the market share we have we should be doing a better job, but we are not.
Through the years I have often wondered what our real market share is?. Many have tried to gin out a real number on this, but have failed.
What is our real potential market share? If, as a country we are doing 1,000,000 single family starts, how many of those are being built by the National or larger stick builders? Is it half ? then there are only 500,000 left to build . What other segments of the building industry are counted in that 500,000? Then how many do we build, as an industry going after that 500,000 and what is our real percentage of the market out there?
And Ill go back to one of my original points, what are we doing as an industry to grow that number of scattered lot builders? What do we offer that builder in the form of training and support to have them buy into our process?

ATINVEST said...

After reading this article does anyone know a good HUD compliant manufactured home builder or fabricator?