Today's Edition
Binyamin Appelbaum
In 1969, the federal government announced that it would hand out millions of dollars in subsidies to companies willing to try something new: build houses in factories.
Then as now, America was in the throes of a housing crisis. There weren’t enough places to live. Mass production provided Americans with abundant and cheap food, clothing, cars, and other staples of material life. But houses were still hammered together by hand, on site. The federal initiative, Operation Breakthrough, aimed to drive up the production of housing - and to drive down the cost - by dragging the building industry into the 20th century.
It didn’t work. Big companies, including Alcoa and General Electric, designed new kinds of houses, and roughly 25,000 rolled out of factories over the following decade. But none of the new home-builders long survived the end of federal subsidies in the mid-1970s.
Last year, only 2% of new single-family homes in the United States were built in factories. Two decades into the 21st century, nearly all US homes are still built the old-fashioned way: one at a time, by hand. Completing a house took an average of 8.3 months in 2022, a month longer than it took to build a house of the same size back in 1971.
Federal housing policy in the decades since the failure of Operation Breakthrough has focused myopically on providing financial aid to renters and homeowners. The government needs to return its attention to the supply side.
The tantalising potential of factory-built housing, also known as modular housing, continues to attract investors and entrepreneurs, including a startup called Fading West that opened a factory in 2021 in the Colorado mountain town of Buena Vista. But Fading West, and similar startups in other parts of the country, need government help to drive a significant shift from handmade housing to factories. This time, there is reason to think it could work.
Fading West says houses from its factory can be completed in as little as half the time and at as little as 80% of the cost of equivalent handmade homes, in part because the site can be prepared while the structure is built in the factory. A 2017 analysis by the Terner Center for Housing Innovation at the University of California, Berkeley, found similar savings for the construction of three- to five-storey apartment buildings using modular components.
Factory building has other advantages, too. It can reduce waste, maintain higher standards of consistency, and produce more energy-efficient homes. It is not subject to rain delays.
But there are good reasons modular housing has remained the next big thing for a long time.
One basic problem is that houses are large objects, and unlike cars or airplanes, they are not designed to move. The result is that the savings from factory production are partly offset by the cost of transportation.
The volatility of the housing market is also a problem. Traditional homebuilders rely on contract workers who are easily dismissed during downturns. Factory builders, which have high fixed costs, tend to go bankrupt.
Neither volatility nor transportation costs might matter if factory homebuilders could match the efficiency gains found in other kinds of mass production.
Efficiency gains also come from doing the same thing over and over again, but the idiosyncrasies of local building codes make that impossible. In Colorado alone, by Schaefer’s count, there are more than 300 distinct building codes, requiring adjustments for each new batch of homes. Fading West found that it had to use different roof designs for homes headed to the city of Fairplay and to a development just outside the city, because the county has stricter snow load regulations.
A sequel to Operation Breakthrough could help the industry overcome those challenges. The Canadian government’s Rapid Housing Initiative is providing support for large-scale modular manufacturing by setting tight construction deadlines for affordable housing projects that obtain government funding, an approach the United States could emulate on an even larger scale.
The writer is the lead writer on economics and business for the New York Times editorial board.
