Monday, May 9, 2016

Compliance Adds Up of $100,000 to Cost of New Homes

Modular housing’s promise used to be speed, cost savings and quality. Today that promise is in shreds for the single family modular home builder.

Local, state and national regulations and compliance costs have hit the modular home builder harder than the site builder. Not only do factories and builders have to meet every regulation and inspection that their rival site builder must meet but they have the added costs of more inspections and regulations and code enforcement before the home even hits the production line.

In some states modular housing is required to add sprinklers to every new home while site builders are exempt. Transportation costs have soared in the past few years with no relief in site.

Rising insurance costs for set crews that must be passed along and rising crane costs are just two more things the site builder does not have that keep our costs rising.

This shreds two of the three promises; speed and cost.

That leaves quality as the only promise left for our industry and that has been pushed to limit over the last year. 

The builder is the one that has to make the modules delivered to the site into the dream their customer ordered and if there is one part of the modular system that is sometimes unappreciated it is the amount of work and craftsmanship they bring into the project.

As recently reported by the NAHB and the Wall Street Journal, $84,671 was the average cost of regulationss and compliance added to each new site built home in March, up from $65,224 just five years ago. 

Now add modular housing’s additional costs for transportation, added code compliance, sprinklers, set crews and cranes, this amount quickly goes over $100,000.

This figure is approaching 30% of the cost of the typical new modular home in the US. Ouch!

I almost forgot impact fees in many areas can run into the tens of thousands of dollars. If you build in the Chesapeake Bay Watershed area for example, impact fees can run as high as 10% of the total cost of the home. Double Ouch!

The old saying, “I’m from the government and here to help you” needs to replaced with “I’m from the government and here to regulate you out of business.”


Anonymous said...

No wonder manufactured housing is thriving. That is the only affordable housing left. Time to switch from building real homes and start selling trailers.

Steve L said...

HUD code factories are not striving their production is very low on an annual basis. Texas have been the growth center. I build both brands of HUD code and Modular homes in CA. Given recent state building regulations for energy efficient housing and Fire codes. We also operate communities where Investors are now wanting to lower operating costs since Rent Control has been enacted. The factory built house is the premier choice regardless of the building code type. Once it has achieved measured performance with proven floor plans is unlike site built; it can be cookie cut to any micro climate by changing the ingredients of the building envelope. The data performance from its success is transferred to new builds easily within a factory environment. A Site builder is limited with a one off build with different local crews trying to duplicate its low cost to operate.