Simplex Open House

Tuesday, January 24, 2017

Is Modular Housing Willing to Become a Player

Time to ask the tough questions. Will modular home production ever reach the goals the pundits predict it should? Is the modular home industry ready to step up to the challenge of doubling our output of new homes? When was the last time a brand new modular home factory was built? And finally, who drives our industry to do better, the factory, the builder or one of the Associations?

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Our industry is experiencing only incremental change and we’ll soon need to begin reinvesting in our core. Automation will be coming to parts of the process as labor shortages continue to grow. Some factories in the East are 50 years old and the production lines are still operating like they did in the 1960’s.

Recent articles in this blog about labor shortages, the increase in commercial modular construction by traditional modular home factories and the tightening of regulations regarding our industry are here to stay and without someone taking a hard look at our industry, doing the research necessary to identify the changes needed and then an organization to begin helping factories and builders implement those changes, modular home construction may never again be a major player in new home building.

We need to become creative to change our trajectory if we are going to grow. With the factory’s relationship with builders and suppliers generally stable, change will only come about in one of two ways. Either the builder network, the lifeblood of modular housing will begin to shrink to the point that factories will fight over them by giving lower prices and big discounts or those same builders and their customers will start demanding processes and procedures that today’s factories can’t deliver.

The modular factory owner has no reason to change what they’ve been doing so successfully for decades unless one of these scenarios occur.

The builder and their factory are both ignoring these two Elephants in the Room but sooner than later one of them will become very obvious.

What needs to happen now is for someone or one of the two Associations that work for the betterment of modular housing, the MHBA or the BSC, or hopefully both working together, to take the lead in researching exactly what are the current problems facing our industry and present them to builders and factory owners. This is not a call for radical change in the industry. It is simply a way to understand where we really are today and what might be coming down the road.

It is easy to mistake what I’m saying for radical change but that is not what I am talking about.

Over the past few years I’ve observed our industry’s market share of new home sales drop from a high of almost 7% to today’s 3.5%. In the East, many state code officials and legislatures have singled out true modular homes as the enemy. Maryland alone has seen an almost 80% drop in modular home sales over the past 10 years and modular’s market share there is almost infinitesimal. Connecticut imposes hardship on modular deliveries while New Jersey requires more information from modular home builders than site builders just to get a building permit. Until recently, our collective voices have not been heard. Now both the MHBA and the BSC are starting to hear us and are taking up the banner.

The Modular Home Builders Association (MHBA) is the one that has recently started the Consumer Awareness Program (CAP) to make sure that new home buyers at least hear about modular. They also are on top of proposed legislation at the state and Federal level, fighting for the industry when it needs it. The Building Systems Council (BSC) which represents all types of construction other than site built is taking steps to reinvigorate its membership with new programs and more interaction.

Innovation and creative change occur in fits and starts. Although there are several long-standing formulas for building modular homes, occasionally a new type of home or technical approach emerges. Tiny Houses  and Auxiliary Housing Units (ADU) are examples of new homes that could fill the lines of many modular factories. But that won’t happen without training for builders and sales reps.

We all realize that we had a housing recession in 2008 that left our ranks decimated. But that was almost 10 years ago.

Now is the time to begin doing actual research into where our industry is to today and what we could become if we began working collectively and that has to begin soon.

Who will step up and start the process of change? You?

1 comment:

Harris Woodward said...

Coach, we builders can demand better training and service after delivery. But what we cannot do is change HOW the homes are built. Even I, as a smaller builder, can see the vast amount of redundancy occurring in our aging plants.

Blu and Bensonwood may be innovators but their economics don't translate to high volume. Yet. The Swedes can run circles around our construction processes via greater technology, but how do we get it in the U.S.?

If labor is the major problem, modular manufacturers better take some profits and start looking at innovation in the manufacturing process that creates jobs in high tech (ie. CNC machines). Today's line workers could be trained to take these jobs, while increases in modular sales prevents anyone swinging a hammer today from losing her or her job.

Like the Chevy dealer cannot tell GM how to build the car, we cannot tell the manufacturers how to up their game. And neither can MHBA, BSC, or even NAHB!