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Wednesday, November 16, 2016

With Workers Scarce, More Tract Builders Turn to Modular Construction

Modcoach Note: This WSJ article just about gets it right. Their assumption that housing’s labor shortage can be solved by going modular and they have a point but in order to feed that big tract home market hundreds of new modular factories would have to be added and our industry is already suffering from its own labor shortage. The answer to this problem is not tract builders turning to modular, it is the shortage of young people that want to enter the physical labor market. Fix that and housing will once again be the 500 pound gorilla.

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By CHRIS KIRKHAM in the Wall Street Journal
Updated Nov. 14, 2016 7:47 p.m. ET

A persistent shortage of construction workers across the U.S. is prompting some of the nation’s largest home builders to experiment with a model they once derided: factory production.

KB Home last month unveiled a model home equipped with an energy-efficient kitchen and a rotating audiovisual wall that serves either as a television or video-conferencing system for two adjoining rooms. The high-end, high-tech components all were built in a manufacturing plant and meant to be assembled at the home site, requiring far fewer workers in the field.

KB’s concept home represents the latest technological evolution in the residential construction industry, one of the U.S.’s last bastions of manual labor performed in the elements.

“Automobiles, airplanes and others have been able to utilize these same techniques,” said Dan Bridleman, senior vice president for sustainability, technology and strategic sourcing at KB Home. “Ultimately this is about cost, it’s about efficiency and it’s about speed.”

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Home builders long have criticized so-called manufactured or modular housing, in which entire floors of a home are built in a factory, trucked to a site and dropped into place with a crane. Purists favor the “stick-built” home—erected from scratch at the site starting with the foundation and piles of lumber.

In the U.S., only about 2% to 3% of homes built in recent years are classified as modular, according to the Census. In other parts of the world, that share is significantly higher. More than a third of all homes in Austria and Sweden are built using off-site methods, and in Japan more than three-quarters of all detached homes are pre-assembled, according to industry research.

But throughout the U.S. housing recovery, builders have suffered from a shortage of skilled labor, making it tough for them to keep up with demand. The number of workers employed in the industry this year is nearly 30% below the peak in 2006 and more than 15% below the average during the 2000s, according to the Labor Department.

Toll Brothers Inc. was a pioneer among volume builders in the U.S., introducing the concept of pre-fabricated wall panels and roof trusses in the late 1980s. The company has four manufacturing facilities—two in Virginia, one in Pennsylvania and another Indiana—that service more than half of the homes the company builds each year. Executives said that by assembling walls offsite, they can avoid damage that might occur in harsh winter weather conditions and cut down on waste.

“We don’t need as many skilled workers on the job site,” said Rob Parahus, a regional president at Toll Brothers. With offsite construction, “a four- or five-man crew can put together a house in the field that might take a lot longer and a lot more skilled people to put together if they had to build every wall panel on the site.”

Joseph Wheeler, an architecture professor at Virginia Tech, worked with KB Home to design a kitchen “cartridge” for its concept home that was pre-fabricated and assembled later on site. Mr. Wheeler said it makes more sense to embed advanced technological features such as climate-control systems into modular components ahead of time, in a controlled environment.

Mr. Wheeler and fellow researchers last year built and sold a house in Charlottesville, Va., with their own money using the “cartridge” concept—pre-assembling entire rooms, fitting them into place on site with cranes and sealing them together. He believes labor shortages and a demand for more technology in homes will force more builders to “rethink conventional construction processes.”

KB Home’s Mr. Bridleman said he expects the company to introduce the pre-fabricated movable wall from its concept home into markets early next year in Southern California. The idea is to create technology-enabled “flex space” within a home: a large living area that can be sectioned off to create a separate bedroom or study with a large monitor embedded in the wall.

Bensonwood has shifted virtually all of its home construction to an indoor factory site. Above, workers pre-assemble exterior walls at the company's facility in Walpole, N.H. ENLARGE
Bensonwood has shifted virtually all of its home construction to an indoor factory site. Above, workers pre-assemble exterior walls at the company's facility in Walpole, N.H. PHOTO: BENSONWOOD
He said engineers at the company also were interested in pursuing the kitchen cartridge idea.

Research in recent years, including from the National Academy of Sciences, a nonprofit research society, has pointed to offsite assembly as a way to address inefficiency and waste in the construction industry. But the upfront costs—such as building factories and investing in manufacturing technology—along with the risk of shifting to new production methods are often cited as deterrents.

But builders who have made the investments cite the benefits. Tedd Benson, chief executive of Bensonwood, a Walpole, N.H., builder and designer, has shifted virtually all of his company’s home construction to an indoor factory site since the 1970s.

Through the years the technology has improved, allowing for more precise manufacturing of insulated walls and interior settings that can be assembled on site in less than three days and completely finished within a month, Mr. Benson said. The result has been better-paying jobs for his employees, who are fluent in design and engineering software.

“It’s more jobs in America, because you’re not going to outsource home-building jobs,” he said. “We see it as an upgrading of millions of jobs that are already happening out there.”

Write to Chris Kirkham at chris.kirkham@wsj.com

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