Interest in factory-made homes is building
We’re surrounded by things produced in factories — cars, clothing, electronics and myriad other products. But not homes and apartments, at least not yet.
But quality factory-built housing could become more commonplace before long, as builders and communities look for ways to address the affordable housing crunch.
It costs about $250,000 to build a typical apartment unit in the Twin Cities. But modular construction could shave that cost significantly, if regulators, lenders, developers, designers and other industry players embrace it.
“Modular guys are talking 20 to 40 percent,” said Minneapolis architect Paul Mellblom. “Even if you could get 5 to 10 percent that’s a lot of money on a $15 million building. So, that’s the incentive is to build more, better, faster, less expensive.”
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Modular or prefab construction has been around for a long time. Sears, for instance, sold more than 70,000 mail-order kit homes between 1908 and 1940. Still, modular housing only accounts for about 3 percent of all residential housing in the United States. It hasn’t taken off for a variety of reasons, from consumer and community acceptance to investor reluctance to invest in production plants.
But a shortage of construction workers and the severe shortage of affordable housing across the country is spurring interest in manufactured housing. New plants are opening across the country.
“Seems like the obvious answer, doesn’t it?” said T.G. Jayanth, an expert in capital projects with McKinsey & Company. He was among the attendees at a recent Minneapolis conference that focused on modular and other innovative construction methods.
Jayanth said more investors are starting to believe it’s worth building more factories to turn out housing. That’s a prerequisite for modular construction to really take off.
“The industry as a whole and the people who finance construction tend to want to see that something works before they put money behind it, which is understandable,” he said. “It’s not quite there. It doesn’t have the critical mass where investors are jumping in but we may be very close to that point.”
Modular housing would come from companies like Dynamic Homes in Detroit Lakes, Minn. The firm has turned out more than 20,000 factory-built homes, apartment units and hotel rooms since 1969.
On a recent visit, the company had several houses under construction on its factory about the size of two football fields, from a 1,000-foot “tiny” home to a 3,000-foot two-story chalet. Virtually, all the work from framing and roofing to electrical and plumbing is done in the factory.
“Assembly-line mentality,” Dynamic Homes’ president Paul Okeson said of his company’s approach to building a home. “Once it starts, it takes ten days to finish. If your home started at 8 [this morning], 10 days from now, it’d be out of the factory to go on your foundation.
Dynamic was started in 1969 by area builders looking to keep working on homes through winter. Most of them have ended up within 400 miles of Detroit Lakes.
At Dynamic Homes’ factory, walls, floors and roofs are joined to create modules that’ll be trucked to a construction site and assembled to form a complete building with some finishing work done on site.
Okeson points to a 14-by-60 foot module on the production line: “This box will be a bedroom, living room and another bedroom. And this box right here is our utility room, bath dining/kitchen, master bath.”
Some homes are composed of one module. Others, up to 10. One apartment building used 33 modules. The production-line approach to housing can really help lower costs. Dynamic is working on an apartment building in Cloquet that will cost just a little over $100,000 a unit, including land and all other costs.
Consumer acceptance will be crucial for modular housing to gain market share. Many consumers figure that manufactured housing is inferior, inevitably boxy and ugly. That may not matter much for apartments. But it does when people are looking for a new home.
Engineer Grant Ovsak said homebuyers should look closely at manufactured homes. Five years ago, he had Dynamic Homes build and deliver a two-story 3,000 square-foot home to him on a lake north of Park Rapids, Minn. It took about seven hours to put the five modules together on a foundation.
“I think I got higher quality, better-sealed home,” he said. “You wouldn't know it's a modular home if you were inside. I’ve got a loft with, gosh, I think it's a 30-foot ceiling.”
Ovsak said he was amazed to see how the modules and the cabinets, windows and other components survived their road trip. “How can it be that rigid that the windows wouldn't break going down the road?” he said.
Modular builders argue their products are as good or better than site-built homes or apartments because the modules meet or exceed state building codes and are manufactured in a climate-controlled environment using more precise and efficient methods. And the modules. which may weigh about 15 tons, have to be strong enough to survive a road trip and hoisting by a massive crane.
Christian Lawrence of Rise Modular and some business partners are betting modular construction will take off. They're putting about $25 million into a factory in Owatonna, Minn., slated to go into production in January. It'll focus on hotel and apartment projects, hoping to produce about one million square feet of housing a year.
“We've almost filled our 2020 production capacity everywhere from 30-unit affordable project to 250 unit hotel and apartment project,” Lawrence said.
And he notes those projects can be completed in weeks, not months, once modules are delivered for assembly.