In the United States today, nearly one in three American households spends more than 30 percent of their income on housing. These numbers are more pronounced in high-cost regions like the Bay Area, where skyrocketing rents and home prices mean that even middle income earners are struggling to find a place they can afford to live.
This new reality is the result of a number of converging factors such as the chronic under-building of housing in the face of consistent population growth (resulting in a constrained supply of housing) and an explosive growth in the costs associated with building new homes. Additionally, the production of housing - especially infill multifamily housing – has become so costly to produce it demands rents or sale prices that are unaffordable for most people. While the cost of construction is not the only reason housing prices continue to increase, it certainly remains a major factor.
Off-site construction of housing, which leverages the efficiencies of factory production to achieve significant cost savings, represents a much needed solution to this problem. It has the potential to revolutionize the way homes and apartments are built. In a new paper published by the Terner Center for Housing Innovation, researchers examine off-site construction as an alternative production method that has significant potential to bring costs down.
Authored by Carol Galante, I. Donald Terner Distinguished Professor of Affordable Housing and Urban Policy and Faculty Director of the Terner Center with Associate Director Sara Draper-Zivetz and CED alumna Allie Stein (MCP ‘16), “Building Affordability by Building Affordably” looks specifically at the production of three to five story wood framed multifamily buildings (both rental and condominium) built either on-grade or over a concrete parking podium, with 50 units or more of housing. They document the cost and time savings potential of this method, compared with traditional construction, and explore the contributions off-site construction could make to the labor market, sustainability efforts, and the technological efficiencies in housing production. The paper then explores challenges that developers and manufacturing facilities currently face in their efforts to bring off-site construction to scale.
The authors propose a number of strategies to help overcome current challenges, and ultimately, call on the leaders in the construction sector to leverage this business opportunity to its maximum impact, for the benefit of the industry and the millions of working American families struggling to find an affordable place to live.
Solving the complex housing affordability challenges facing many high-cost regions in the United States will ultimately require innovation and leadership from all sectors. Local land use policy decisions, state approvals processes, and federal housing expenditures are all important, but just as essential is the willingness and audacity of private sector leaders to work through the complexity of innovation and bring good ideas like off-site multifamily construction to scale. As a business opportunity and a pathway to addressing the growing lack of affordability in the United States housing market, there is much to be gained by expanding the practice of off-site construction.
Read more about the Terner Center’s latest work on the Terner Center Blog.