Where Did Modular’s 20% Savings Go?

Twenty years ago, the modular housing industry walked around with quiet confidence. Sales representatives stood at home shows, builder meetings, and industry events and proudly explained that modular construction could deliver a home for as much as 20% less than conventional site-built construction.

At the time, many of them were right.

Factories were relatively lean, transportation was manageable, building codes were less complicated, overhead was lower, and most modular buyers were satisfied with homes that did not test the limits of architectural design or transportation logistics. Factories could build similar floor plans repeatedly, purchase materials in volume, and move modules through production without stopping for constant engineering revisions.

Today, that story has changed.

In many markets, modular construction comes in at approximately the same price as site-built construction. In some cases, it costs more. Developers, investors, builders, and prospective homeowners are now asking an obvious question: What happened to modular’s promised 20% savings?

Having watched this industry grow, stall, innovate, reinvent itself, and occasionally break its own heart, I believe the answer is relatively simple.

The world changed, and modular did not change fast enough.

The reasons behind the disappearance of that cost advantage, however, reveal something important about where modular construction is today and where it needs to go next.

Changing the Code Is the Easy Part. Changing the Factory Is Not.

After writing two articles about how the Road to Housing legislation could open new opportunities for modular factories to build homes under the HUD Code, I decided to send them to several people whose opinions I trust. I wasn’t looking for compliments or confirmation that I had everything figured out. I wanted the kind of honest response that might expose what I had overlooked.

One of those responses came from Bob Bender, an experienced advisor to both the modular and manufactured housing industries. Bob agreed that the articles raised important observations, but he also reminded me that changing federal rules and changing the realities inside a factory are two very different things.

The legislation may open a door, but Bob’s response made one thing very clear: a modular factory cannot simply put a HUD label on one of its existing homes and declare itself ready to compete in manufactured housing.

The Fires We Remember

by Jorie Wisnefski

The current wildfires in Washington have made me reflect on old fears. 

As a little girl, I went through a phase where I wouldn't sleep over at friends' houses because I was convinced there would be a fire and I wouldn't be able to get back to my family. I understood that fire is a living, breathing beast, and it’s impossible to ignore. It still fascinates me.

As I thought about this week's Fresh Eyes article, I couldn't help but wonder about fire safety in the modular world.

As someone who has spent much of the last decade immersed in the wood industry, fire is never far from the conversation. Whether it's wildfires, lumbermills, mass timber, or new fire resistant technologies, the innovation question keeps resurfacing, How do we build safer?

Canada’s Wildfires May Be the Next Lumber Problem Offsite Factories Cannot Ignore

For years, lumber pricing has been one of those things that factory owners learned to live with. It went up, it came down, somebody blamed housing starts, somebody else blamed the weather, and the purchasing department spent a few more hours on the phone trying to get enough material to keep the line moving.

But Canada’s wildfires are beginning to look like something more than another summer headline with pictures of orange skies and firefighters standing in front of walls of flame.

The question every factory owner, builder, and developer should be asking is not whether the fires will cause a lumber shortage tomorrow morning. The bigger question is whether the wood supply system we have all depended on is becoming less dependable for the next year and a half.

I think the answer is yes.

The First Day of a Startup Should Not Begin With Designing a Logo

Every new business begins with a moment when someone says, “Let’s do this.”

For an offsite construction startup, that moment can be exciting. A new factory, an innovative product, a better way to build homes, or a service the industry needs can suddenly feel possible. Phones begin ringing. Someone starts looking at potential buildings. Another person begins working on the company name, the logo, and the first PowerPoint presentation for investors.

There is nothing wrong with any of that. But the first day a startup decides it is serious should begin with a few much more important questions. The answers will not guarantee success, but they can give the venture a far better chance of actually opening its doors and surviving long enough to matter.

What the Industry Told Me After Looking "Beneath the Floor"

When I wrote recently about the structural shift coming to factory-built housing, I expected some discussion about steel versus wood, permanent chassis versus no permanent chassis, and whether a stronger rim system could reduce foundation supports.

Those conversations happened.

But the comments took the discussion somewhere more important. They reminded me that the future of offsite housing is not really about replacing one material with another. It is about whether we are finally willing to design the entire home as one connected system instead of a collection of separate decisions made by separate people.

The floor system, the transportation method, the carrier, the foundation, the installation crew, the engineer, the builder, and even the homeowner’s impression of the home are all tied together. For too long, we have treated them as though they were not.

That may be the real structural weakness underneath factory-built housing.

Is Your Factory Healthy Enough to Implement Innovation?

I have watched manufacturing companies, including offsite construction factories, spend years talking about the next big thing. It may be a new production system, advanced machinery, robotics, software, a different framing method, a new transportation system, or an entirely new product line.

The conversations usually begin with optimism. Owners see a way to build faster, reduce labor, improve quality, open a new market, or get ahead of competitors who seem content to keep doing things the same old way.

Then the investment is approved. The equipment arrives. Consultants come in. Employees are told change is coming. A few months later, the excitement has been replaced by missed production dates, frustrated employees, rising rework, unhappy customers, and a bank account that seems to be shrinking faster than anyone expected.

Eventually, people begin saying the same thing: “That new system is what caused the company to fail.”

I do not believe that is usually true. More often, the new system simply exposed weaknesses that had been hiding inside the factory for years.

The Money That Can Build Your Factory…or Take Control of It

Very few people wake up one morning, look at their bank account, and say, “Well, I guess I’ll build an offsite factory this year.”

If that were true, we would have hundreds of new factories opening every month, and the housing shortage would be a much smaller problem. Instead, most people with a serious factory idea eventually run into the same cold reality: if you want to build something large in this industry, you will probably need someone else’s money.

That is where venture capital, private investors, private equity, and other forms of outside funding enter the picture. People tend to lump it all together, but the source of the money matters less at first than what comes with it.

Because money rarely walks in alone.

It brings expectations, deadlines, reporting requirements, board seats, opinions, lawyers, projections, and people who want to know exactly how every dollar will be spent before they agree to write the check. For a first-time founder, that can feel intrusive. For the investor, it is simply due diligence.

If I were about to put several million dollars into someone else’s factory, I would ask a lot of questions too.