Rise | We've Done the Research
Housing Shortages - Is Prefab The Solution?
For at least a decade, there's been a steady drumbeat of news about the housing shortage. According to a November 2020 National Public Radio report, there are fewer homes for sale in the United States now than in the past 40 years. It's a standard economic puzzle: too many people are looking for too few houses, which then drives up prices. And these prices have risen more quickly than incomes, making housing unaffordable for many would-be buyers. According to the US Census Bureau, the median sales price of a newly constructed home in the United States in December 2020 was $355,900. Zillow puts existing median home values at $266,222. The Canadian Real Estate Association's Home Price Index benchmark is over $600,0000. This average is skewed upward by the costly housing markets in Toronto and Vancouver. The most affordably priced province, New Brunswick, has an average value of just over $200,000.
One solution that may help mitigate the housing shortage is to build homes — all or in part — in a factory and transport them to a site instead of building a house on site. Known as prefabricated or prefab housing, this type of construction has been around for over a century. Henry Manning, a London carpenter, built components for a house and shipped them to Australia in 1837. He advertised them in the newspaper as the "Manning Cottage." Sears brought prefab to the mainstream when they began offering homebuyers their kit homes back in the early 1900s.
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What Is Modular Construction?
Modular homes are built off-site, with the modules delivered on flatbed trucks to the construction site. They are made with various completions, from fully kitted out with plumbing, electrical, doors, closets, and stairs to just one or several boxes. They are completed on-site by a contractor.
What Is Panelized Construction?
Panelized constructed homes are shipped as flat units to a site and assembled like a jigsaw puzzle. They need more finishing work on-site than modular homes. Both take less time to build on-site than stick-built homes.
Prefab homes come in any style – a single-story ranch, a duplex, a Cape Cod, modern or traditional. They can accommodate off-grid living. They can be luxury homes. They can have as many bathrooms or bedrooms as specified and can be customized.
Are Construction Savings of Prefab Homes Passed On To Customers?
Since modular builders buy their materials in bulk and often have factories in regions where labor costs are lower, they save money. So, a prefab house should cost less than a stick-built home, but this is not always the case. Some reasons for this are as follows. As with any product, the sticker price depends on many factors:
- overhead
- consumer choices (fixtures and finishes vary wildly, and many buyers choose custom options)
- possible third-party salespeople
- transportation
- delivery
- on-site labor costs, and of course,
- profit.
But, keep in mind, a prefab house is likely more energy-efficient than a standard site-built home, so there are future utility savings. Also, keep in mind that many modular builders are still small and are still scaling their businesses to meet demand.
Hopefully, once manufacturers have scaled in the future, customers will see some of these savings reflected in the sale price of their future homes.
How Do Market Forces Affect Prefab Costs?
As with any new home construction, prefab builders face rising material and labor costs. This past year, COVID-19 restrictions caused first a slump in construction and then a surge, leading to increased demand on a supply chain that hadn't caught up. Take lumber, for example. Professional Builder reported a more than 170 percent increase in composite lumber, leading to an additional $16,000 cost for a new single-family home. Prices for Oriented Strand Board (OSB), an alternative to plywood, tripled last spring. And delivery times for these materials have grown.
Stacey Freed
I’m constantly on the hunt for a way to hike and write simultaneously.
