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Modular construction will make homes affordable

Sarah Paynter
·Reporter
·3-min read

Manufactured-home communities will become a better investment than luxury houses and condominiums in 2021, according to a new report.

Manufactured construction is the process of creating buildings or building parts in a factory and assembling them on-site like Legos. Because manufactured and modular (a type of manufactured construction) construction can cost 20-30% less and speed up construction timelines by 50%, the industry has grown over 34% since 2015, according to Census data.

“I’m watching new technologies emerge — panel construction, modular housing… There are some interesting things that are happening in the construction industry that are driving down costs,” said Byron Carlock, U.S. real estate practice leader of London-based professional services network PwC, which released its Emerging Trends in Real Estate 2021 survey report last week.

Virginia, Fredericksburg, Clayton Homes, modular homes for sale, red tag clearance. (Photo by: Jeffrey Greenberg/Universal Images Group via Getty Images)
Virginia, Fredericksburg, Clayton Homes, modular homes for sale, red tag clearance. (Photo by: Jeffrey Greenberg/Universal Images Group via Getty Images)

The average manufactured single-family home cost $55,200 in May 2020, according to the U.S. Census Bureau, less than a fifth of the typical $330,000 price tag on a U.S. home, according to May 2020 Realtor.com data.

Price advantages prompted U.S. Housing and Urban Development Secretary Ben Carson to make modular homes a major agenda item during his term. Carson prescribed deregulation of manufactured housing as a solution to America’s affordable housing crisis during his “Driving affordable housing across America” bus tour early this year.

“Today we’re proposing changes that remove more of the red tape that stands between the production of safe, quality homes, and the nation’s families and individuals that need these homes to make homeownership a reality,” said Carson on a tour of a Clayton Homes modular housing factory in Russellville, Ala. in February.

Rendering of S2A Modular manufacturing factory in California (delivery scheduled for early 2021). Provided by S2A Modular.
Rendering of S2A Modular manufacturing factory in California (delivery scheduled for early 2021). Provided by S2A Modular.

Affordable and mid-priced housing is more in-demand than ever before, as the coronavirus pandemic drives migration to the suburbs across the U.S. new home sales were up over 32% in September compared to the same time last year, driving home prices to a median $350,000 in September, up 11.1% compared to the same time last year. Builders are actually trying to slow sales to keep pace with incoming orders.

“The answer is new and affordable housing. The question is how do we get there efficiently. And I’m pleased to see the industry taking leadership roles to try to do that,” said Carlock.

United Dwelling modular unit design rendering, provided by United Dwelling.
United Dwelling modular unit design rendering, provided by United Dwelling.

‘Pandemic will nudge firms toward modularization’

The industry was already ripe for change before the coronavirus pandemic. Construction has suffered a labor shortage since the Great Recession of 2008, and labor costs, material costs and labor availability were still the top three developer complaints in 2020, according to PwC. But manufactured construction allows companies to build houses where labor and supplies are most accessible.

“I think with more prefabrications, trying to do more in a controlled environment, in a shop, some companies are working towards that and less on-the-job work. [They’re] more in control in the factory,” said Jarrett LiBuono, a consultant at New York-based CREtech Global Innovation Consulting Practice, at the CREtech consulting talk webinar on October 20.

The coronavirus pandemic only added to the practicality of moving construction indoors, where processes are systematized and often automated. Thousands of construction projects were delayed during the pandemic because of disrupted supply chains, regulatory shutdowns and continuing labor shortages — delays that could have been mitigated in a controlled environment, according to analysts.

“The coronavirus pandemic will likely nudge firms toward modularization and prefabrication of components. Assembly line efficiency and the controlled environment of a construction ‘factory floor’ can bring cost savings with higher efficiencies in labor productivity and shortened project schedules,” said the Deloitte 2020 engineering and construction industry outlook.

Sarah Paynter is a reporter at Yahoo Finance.

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