Can Factory-Built Apartments Solve California’s Housing Woes?

Speaker 1: 00:00 Want an out of the box solution to California's housing crisis. Think Legos, really, really big Legos. Some California companies believe they can build apartment buildings cheaper and faster by assembling them in a factory and stacking them on site. One factory made building was erected last month in Oakland in just 10 days as part of our California dream collaboration. Cal matters reporter Matt Levin has the story, Speaker 2: 00:29 so you're at station one. This is where we actually build the floor of the residential unit. Larry Pace is giving me a tour of a construction site, kind of. We're in a 258,000 square foot factory in Valeho on the outskirts of the Bay area. They used to build submarines here during world war II and they build one floor approximately every two and a half hours. It's fast picture one of those general motors plants in Detroit where a car is put together in an assembly line except instead of a Buick and a conveyor belt. Carpenters in hard hats and goggles are assembling 156 unit apartment building for development in Oakland. Once it goes to station two then we do the mechanical, electrical and plumbing rough. There's a station for cabinets and a station for roofing and a station for toilets all the way through station 33 which looks like a furniture showroom, not quite ready for the floor pieces. The code Speaker 3: 01:23 founder of factory [inaudible], a modular housing manufacturer that opened this plant last year. They're just one of several companies in California and across the country trying to revolutionize how we make housing. Speaker 4: 01:34 The particular unit you're getting a washer dryer unit or refrigerator arrange and a microwave. That's pretty good. I don't have an end unit washer dryer. Well you would if you lived here. Speaker 3: 01:44 Pace has been working in the construction industry for 40 years. He used to do what's called stick construction. The conventional method where you prep the foundation and then you wait for the carpenters and then the plumbers and then the electricians. Speaker 4: 01:55 So we believe that without a shadow of a doubt, we can demonstrate there's at least a 20% savings to your overall construction budget. Speaker 3: 02:01 But the idea of building homes in a factory has been around for a while, Speaker 5: 02:05 which brings us to the real problem providing housing for that many new people each year. We just haven't been building that much. Speaker 3: 02:14 That's an infomercial from the department of housing and urban development from the early seventies at the time the Nixon administration was facing problems that might sound eerily familiar to today's Speaker 5: 02:24 California needed was a way to eliminate or minimize these constraints to home-building a way to break through them a new way of dealing things. Housing breakthrough. Speaker 3: 02:36 Alex Anderson is a professor of architecture at the university of Washington. Speaker 4: 02:40 Operation breakthrough was really a big and pretty expensive failure and really quite an embarrassment for the, for the Nixon administration Speaker 3: 02:48 spin 190 million trying to get private companies to jumpstart factory built apartments and single family homes. Much of the housing ended up being uninhabitable after a few years and Congress pulled the plug. Pretty modular housing technology has improved a lot since the early seventies but Anderson says issues that confounded operation breakthrough still haunt the industry to this day there, but all kinds of interesting experiments but not a lot of economic successes in this part of the market factory alas is confident this time will be different. For one, the sticker press in these apartments will be market rate 3,704 this is a two bedroom unit. Jessica Goldbacher is the project manager at the first factory West project that's actually standing. We're in that furniture show room from that last station in the factory except now it's on the fourth floor in Oakland. Speaker 1: 03:37 I think what's different about what this is is we can make a whole building basically erect in 10 days. Speaker 3: 03:44 That's how long it took cranes to stack these apartments. This summer gold box has that produces economies of scale. You can build thousands of apartments a year, not just single family homes. Housing experts say in the long run, building housing more quickly will eventually cool. California sizzling housing market, whether modular housing can turn the long run into a sprint remains an open question. Speaker 1: 04:06 Johnny May is Cal matters. Reporter Matt Levin and Matt, welcome to the program. Thanks for having me. Can you explain a bit more how these prefabricated housing projects are put together? I'm thinking to the various apartment units come in prepackaged modules, Speaker 3: 04:23 basically build every apartment unit, um, from scratch. Uh, it really does look like a, a gigantic, um, general motors plant where they're, uh, they start with the floor of a apartment and then they add some cabinet tree and then they add the roofing and they have a bunch of stations that build specific parts of an individual unit. And then after 33 stations, you pretty have, you pretty much have something that kind of looks like a Ikea showroom, not quite ready for Ikea. Um, then the shrink wrap that basically and ship it to the, uh, construction side or what they call it, the assembly site. Speaker 1: 05:02 This would limit the need for a lot of construction workers. So I can see why the unions aren't crazy about this. How is the prefab industry handling that problem? Speaker 3: 05:11 So factory O S which is the company I profiled in the piece, um, they have one union on board, the carpenter's union, which basically represents everybody in their factory. Um, you know, their argument to the unions is, Hey, this is gonna be the future, better to get on board now than to fight this. And they've had some limited success with that. Um, the, some of the other trades are pretty fiercely opposed to factory housing. Uh, the plumber's union in the Bay area, not a big fan. Some factory build housing makers have been able to get some unions on board. Speaker 1: 05:46 You know, since so many of the mass produced things that we buy are already assembled like this, like your example of automobiles. Why has housing prefabrication run into so many of the problems that told us about in your report? Speaker 3: 05:59 So economies of scale is the biggest issue. It costs a lot of money to set up a factory, especially one as high tech and just physically large as the one a factory O S has in the Bay area. And so you have to produce a lot of units. You have to build a lot of apartment buildings, um, for it to, you know, quote unquote pencil out and uh, factory made housing just hasn't achieved that economies of scale even though it seems like such a intuitive solution to some of the construction problems. California has Speaker 1: 06:30 how much of a cost differences there between constructing a multiunit apartment, the usual way and the factory made units. Speaker 3: 06:38 So there was a UC Berkeley study about this and they estimate that, um, on average, and obviously it will, it will depend project to project and geographic area to geographic area. But on average you could save about 20% on like an individual apartment unit. Um, so another way of saying that is factory built housing could be 20% cheaper on average and 40 to 50% quicker. Um, to build those two things are obviously related. The quicker you build it, the cheaper it is, but that's the potential whether those savings actually do materialize is another question. Speaker 1: 07:14 So, okay. The w it looks like the developers will be getting a big break in cost, but why should we assume that they'll pass that on to renters? Apparently that hasn't happened so far. So that's a Speaker 3: 07:25 very, very good question. They've certainly marketed these apartments as we're going to build these cheaper and as a result the consumer will benefit their factory OLS, their very first, um, market rate apartment building in the Bay area is charging pretty much the same amount as any other Mark rate apartment building that's um, now opening. It's about $3,700 for a, for a one bedroom apartment, which is, you know, pretty, pretty expensive. They also say they are moving more into a subsidized affordable housing housing for people experiencing homelessness, um, where they don't have to satisfy some of their investor demands and they can build those cheaper and pass along the savings to local governments. Speaker 1: 08:11 Now having a multiunit structure built, as you say in 10 days is a radical change to what, you know, we're used to in California. Is the prefab concept being supported by government or is it running into obstacles there as well? So some local Speaker 3: 08:28 ferments are definitely on board and they see this as a solution to make housing for people experiencing homelessness significantly cheaper. So, uh, San Francisco, Oakland, Los Angeles, they've all placed orders for permanent supportive housing with factory made, um, housing providers. Um, so in Los Angeles for example, there was a recent estimate that it costs $500,000 to create one unit of permanent supportive housing. A, they are hoping to get that number down if they use factory built housing. So in that sense, um, there is government support in terms of um, tax breaks or things along those lines. I haven't seen that, um, really materialize. Speaker 1: 09:10 Did you see any of the finished products, the apartments themselves and I'm wondering that, would you like to live in one? Speaker 3: 09:18 Um, so I saw one that was mostly done this market rate apartment in Oakland. It's not, it's not fully um, completed, but you know, it's got a pretty much everything I could squat in it. I guess that if they let me right now, I think the question is priced. There was nothing about the apartment that I said, you know, this was built in a factory and I can tell, right, so aesthetically like it looks, you know, pretty much like any other apartment that the key question is price. I mean, for $3,700 a, I don't know if I could really afford that. Speaker 1: 09:52 Okay. I hear you. I've been speaking with Cal matters reporter Matt Levin. Matt, thanks a lot. Thank you so much.