Wednesday, September 9, 2020

Going Modular Can’t Fix Affordable Housing Crisis

Usually I am the first person in line shouting the benefits of modular construction to help the affordable housing market but not this time.

That’s because it doesn’t matter how you approach the affordable housing market if there isn’t enough factory capacity to keep ahead of the need, it simply comes down to the law of Supply and Demand.

If you want housing to be affordable, you need to build more of it. And when housing demand increases because of economic growth, prices surge upward unless supply can keep pace. It isn’t the demand’s fault if supply lags.

Even if every modular factory in the world began building affordable housing for the US, they couldn’t meet our present demand. 

This is where the heavy foot of Federal, State and local governments enter to picture. Between over-regulating the affordable housing market, especially if it is modular construction, the constraints to build more housing becomes very restrictive.

Local government continues to look to increase restrictions in zoning at the same time HUD Secretary Ben Carson is fighting to open all residential zoning to manufactured housing. 

Then you have very powerful people within every single community in the US that use that power to stop growth. 

State and local governing bodies are also faced with rising infrastructure costs if they want to have affordable housing projects and also the cost of actually building them. COVID-19 has eaten away most of the money that was earmarked earlier in the year for those projects.

There is also the rising costs associated with meeting tougher building codes that have been proven to add over 25% to the cost of new housing. Tighter air infiltration regulations, more energy saving devices and even the cost of adding sprinkler systems plus the enormous amount of impact fees for public utilities, additional schools and conservation efforts hurts affordable housing.

If this cycle of needing more affordable housing while at the same time strangling the efforts to accomplish it continues, the only thing that happens is rising costs which push the very people that need affordable housing to look for alternative shelter.

That is one reason many communities are amending zoning laws to allow ADUs and even Tiny Houses on lots that already have a single family home. ADUs and Tiny House don’t have to meet those tough building codes that IRC regulated modular homes have to meet.

With US modular factories seeing a resurgence in business after the initial COVID-19 shutdowns and interest rates at an all time low, middle class new home buyers are once again entering the market in huge numbers pushing modular home factories to increase their production line capacity. Building low profit affordable housing units for local governments and non-profit organizations isn’t where the money is as long as custom and semi-custom new home sales continue to come in.

There are many commercial modular factories that want to build multi-story affordable housing projects and have done so for years. Their business was built on that type of project but even if they doubled their capacity by going with two shifts, they couldn’t keep up with demand.

They are waiting for the money to once again start to flow a little bit to build those affordable housing projects.

Site builders using panelized construction are also hitting many of the same barriers as modular construction plus a few that are unique to them. The shortage of skilled labor being the most obvious.

That slows down the advantage panelized construction gave the developer in the first place. Finishing a project after the bare walls, trusses and roof sheathing are in place brings the project to the mercy of available labor.

Modular may not be the total answer to affordable housing but it is still a lot better than building on-site as the modular factory has the skilled labor pool to complete up to 80% of the project on the production line.

Gary Fleisher is a housing veteran, editor/writer of the, blogs and the ‘coming soon’, Construction Consultant’s Directory. 


1 comment:

Unknown said...

Good article Gary. The other item is a lack of capital and lending from financial institutions. The demand is there, there are financial incentives from communities to help, but banks are still requiring 30% equity.