The pre-fab skyscraper? Bay Area housing crisis brings new era for modular homes
By Louis Hansen
May 7, 2018
San Jose Mercury News
Image courtesy Bay Area News Group
Inside a nondescript warehouse in a nondescript industrial park, workers for RAD Urban are assembling the building blocks of a modern apartment building.
Piece by piece, along a factory line, workers erect walls, string electrical wires, fasten plumbing, hang drywall and paint until a bare 12-foot by 30-foot steel chassis looks almost like a move-in ready apartment.
These almost-finished units will be delivered to an Oakland construction site, then fastened together into full apartments in a five-story complex. Advocates hope the project will also help fuel a renaissance for modular housing.
Once a punch line for developers, a sturdier and improved version of pre-fabricated housing could be making a comeback as Bay Area developers try to speed up construction, cut building costs and add desperately needed housing.
Proponents of pre-fabricated or modular housing point to studies showing factory-built apartments and buildings can cut construction costs by about 20 percent, and can be built in almost half the time. It’s emerging as a small, alternative attack on the housing crisis. RAD Urban and another startup founded by CED alumnus Rick Holliday (M.C.P. ‘77), Factory OS in Vallejo, have set up factories to build modular housing for the Bay Area and beyond.
“It’s an old idea with new twists,” said Carol Galante, director of the Terner Center for Housing Innovation and I. Donald Terner Distinguished Professor of Affordable Housing and Urban Policy at UC Berkeley. She cautioned about challenges ahead for a young industry. “This does require a total change of mindset by lenders, by architects, by general contractors.”
Terner Center research traces versions of off-site construction back as early as the 1830s. It’s been common in Finland, Japan and Sweden for decades as one solution to a short building season, where bad weather could throw a project off several months.
In the Bay Area, the need has returned. The Terner Center estimates construction costs grew by at least 25 percent in the Bay Area between 2014 and 2017. Those costs make it hard for developers to get financing and make a profit on middle class housing — a market segment badly neglected in recent new development.
Building off-site and transporting modules to a property can save up to 20 percent of the cost of a three or four-story, wood frame apartment complex. Developers save time by preparing the construction site while the factory is building units.
Builders can squeeze savings from several other steps in the process: lower labor costs, as workers trade lower wages for shorter commutes to factories outside the core Bay Area; lower material costs from factories buying in bulk; and fewer middlemen. Developers also believe workers are more efficient in a factory, where jobs can be completed sequentially, uninterrupted and with fewer delays.
But startups in the field have had challenges. Modular builder Zeta Communities closed its Sacramento factory in 2016, citing lack of funding and laying off about 100 employees.
Galante said the companies have to convince banks to think differently about financing, and realize that even though factory construction is cheaper in the long run, it requires more upfront costs than traditional building.