Wednesday, April 28, 2021

Does Housing Need to Return to the 1970's?

I recently asked a modular home factory owner if he would rather build custom homes for his builders or simpler homes from the company's plan book. His answer wasn't quite what I had expected. 

America, once the dream of home buyers getting some land, building a small home with a white picket fence for their family, has turned into communities of affordable housing projects. Villages of tiny houses and even garden sheds converted into homes being built without permits or meeting building codes are popping up across the country.

America Dreams of Homeownership

The dream started after WWII when veterans returned home and needed housing. Forward-thinking developers founded Levittown projects on the East Coast providing small, quickly produced homes without garages and other options. They were very successful and thousands of these homes were built.

51 years ago, my new bride and I bought a simple 2 bedroom, 980 sq ft home, on a street in my hometown that was built to help those returning vets. We paid $16,000 for it. It was a great starter home where our son was born. It had a small yard, no garage or deck but it was perfect. 

Today, simple projects like Levittown have been replaced by tract home builders erecting 2,200 sq ft mansions in the half-million-dollar plus range. They are also producing affordable townhouse projects with hundreds of identical designs in the $200-400K range. 

Even those prices are not keeping people from contracting for homes well into the future as construction is being pushed to produce more while at the same time, LBM is becoming harder to get.

And all this brings us back to my question for the factory owner.

He told me back in the 1970s, modular homes were mostly ranches and cape cod homes. Easy to build and you knew your profit before they hit the production line. He turned out twice the number of homes he is today.

Today, modular home builders are demanding more custom and complicated construction for their home buyers. A home leaving the factory in the '60s was about 85% complete and finishing it after delivery and set only took a couple of weeks before turning over the keys to the new homeowner.

Now those custom homes are requiring substantially more work at the job site. Some homes leaving the factory are only able to be built to 50-60% completion because of all the on-site work needed to be completed by the builder.

With the rapidly rising costs of LBM, the builder is now the one in the hot seat trying to source materials and paying higher prices than they had budgeted. The modules leaving the factory had a known cost attached to them but what is happening at the job site to finish all that custom work is killing the builder's profit.

And that's not even the worst part. Local, state, and federal building codes, impact fees, permit costs, regulations, inspections, and reinspections are now 25% of the total building costs of a new home. 

Another modular factory owner reminisced about the good old days in the 1970s when he built, delivered, set, AND finished nearly 300 ranches and cape cod (unfinished second floor) homes for a developer in Southeast Pennsylvania in 11 months!

Today he's lucky if he can get 6 homes a month out of the factory due mostly to getting state approvals and the increase in customization required. Special order this and special order that is killing him along with standard LBM being in short supply and rationed, which isn't helping.

We will probably never see those perfect set of occurrences again that produced Levittown and allowed new home buyers to be delighted to own a new home at a truly affordable price but one can always dream. 


Gary Fleisher is the Managing Director and contributor to the Modcoach Network and its affiliated blogs. Email at modcoach@gmail.com

Sign Up to receive the Modcoach News newsletter twice a week



2 comments:

jag said...

I think old school builders can easily solve the bottle neck of customization and inspection by considering online software solutions such as offsight.com They seem to have the right product to reduce paperwork and improve efficiency in coordination from customer to the inspector.

K_Com said...

Meanwhile..."On April 28th, 2021, Portland’s City Council unanimously passed a new set of regulations that allows for recreational vehicles (RVs) and tiny houses on wheels (THOWs) to be used as a legal, viable housing option on residential properties in the City of Portland beginning on August 1st, 2021."

Another byproduct of over-regulation!