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Where are the economies of scale in homebuilding?

construction-physics.com

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Re: Where are the economies of scale in homebuilding?

#11

Post by akst »

A question about prefab construction came up at a talk this year in Sydney with Lucy Turnbull (Former Sydney Mayor) and Alain Bertaud (planner and author order without design), Lucy mentioned someone tried this in Sydney and went under and they never heard from them again despite promising the world. Alain mentioned that tastes (think in terms of from finishes to floor plans) change often enough where prefabricating an entire house doesn't really make sense. Not to mention construction codes can change as well (I know in the US it can vary on a county level), they mentioned they saw more success with prefabricating components like windows or fireplaces or whatever.

Something like a factory requires an intensive upfront captial investment, if tastes change often enough the process would need to be amendable to adapt to changing tastes.

Combined with that, I think the fact there is no uniform standards for acceptable floor plans, compliant layouts and construction codes across the different jurisdictions really makes it hard for there to be economies of scale.

> note I don’t think construction codes are strictly a problem within the US, there’s apparently a manufactured housing code. However planning controls are a seperate thing and possibly still an issue.

An example from Sydney (which likely relates to other jurisdictions) Outsides construction code, in Sydney there is a quasi instrument called the apartment design guide which issues requirements on floor plans, floorspace, how far a bedroom wall can be from a window in a bedroom, ceiling heights a lot of things that act as constraints on the possible layouts of a home, and I have no doubt some form of this exists in other jurisdictions as well. I imagine when there is so much variation in different legislative constraints in different jurisdictions there isn't really economies of scales as there are actually several different non homogenous market segments with incompatible set of constraints, and where there's overlap it may not be a high demand end product.

I don't think this as much of a problem but I imagine there are cases where some unionised construction industries may refuse to use work on site using prefab components. I haven't really heard of such cases so I'm not convinced this is a real blocker.

Re: Where are the economies of scale in homebuilding?

#12

Post by nfw2 »

socalgal2 wrote: post #4
Avicebron wrote: post #2

Interesting essay. There is this factory for lack of a better word near me that makes houses, packages them on a truck in pieces, and will ship them around the US to a foundation. All is said and done it's _maybe_ 100k cheaper to go with them than to buy the land and find your own contractors (and when the cost is between 300k-750k either way it doesn't really matter). The essay touches on why this is the case, but f…

The reason prices are high is lack of supply. Lowering costs of construction is one way to get slightly more supply but it's mostly governments and NIMBYs preventing construction. The high prices would bring in lots of people willing to build but they're blocked constantly.

Regardless of the supply, the floor of a price of a new home will be the cost to build though?

Re: Where are the economies of scale in homebuilding?

#13

Post by r-bryan »

Why does a carpenter cut the end off a 10-foot board to get a required 9ft-2in, thereby wasting 8% of the input and incurring dumpster charges? Suppose the architect's design specified the cutlist, to be transmitted to the board "factory", which would cut boards to the required lengths, tagging them with RFID serial numbers indexed to the design, stacking them so the first ones to be used are on the top, and truck to the site without passing through Home Depot?

Re: Where are the economies of scale in homebuilding?

#14

Post by wanoir »

One thing that can’t be scaled is “prime location”

There will be locations that are more desirable than others, and even if you keep building houses where there’s space, the need to congregate in particular areas (such as for work) will result in particular locations being more desirable.

And, it’s hard to increase the density of an area once the housing supply is already built out.

So instead, that supply stays fixed, demand increases, and the price increases in turn.

This actually made me think then that an accelerator for scalability could be: public transit into population centers that ensure areas with abundant space (and cheaper housing supply) can still easily access the areas that would otherwise be hugely expensive to live near

I believe this was done near DC where the public transit buildout helped foster further housing development in those emerging areas. Not sure if other HCOL areas, e.g. CA Bay Area, have similar things going on for East Bay mobility / other cross-county transport

Re: Where are the economies of scale in homebuilding?

#15

Post by taneq »

dyauspitr wrote: post #6

We have effectively managed to demonize factory made houses by referring to the people that live in them as trailer trash. I honestly think 3-D printed concrete houses at some point will be how most things are built you’ll get tons of Americans talking about how do you can’t access the wires/plumbing and stuff and it basically just comes down to having enough windows or access points into the inner wall. Not to menti…

3D printing isn’t going to make houses hugely much cheaper. The lion’s share of the cost of a house is fit-out. Doors, windows, lighting, plumbing, cabinets, tiling, painting. What needs to happen is modular designs where the house is made out of standardised ready-made components that are mass produced in a factory and plug together to form a finished house.

Re: Where are the economies of scale in homebuilding?

#16

Post by JumpCrisscross »

akst wrote: post #11

A question about prefab construction came up at a talk this year in Sydney with Lucy Turnbull (Former Sydney Mayor) and Alain Bertaud (planner and author order without design), Lucy mentioned someone tried this in Sydney and went under and they never heard from them again despite promising the world. Alain mentioned that tastes (think in terms of from finishes to floor plans) change often enough where prefabricating…

> think the fact there is no uniform standards for acceptable floor plans, compliant layouts and construction codes across the different jurisdictions

FTA: “Conventional homebuilding is subject to different building code requirements in different jurisdictions, depending on what version of the code has been adopted. But manufactured homes are built to one set of national requirements, the federal HUD code.”

Re: Where are the economies of scale in homebuilding?

#17

Post by JumpCrisscross »

wanoir wrote: post #14

One thing that can’t be scaled is “prime location” There will be locations that are more desirable than others, and even if you keep building houses where there’s space, the need to congregate in particular areas (such as for work) will result in particular locations being more desirable. And, it’s hard to increase the density of an area once the housing supply is already built out. So instead, that supply stays fixe…

> One thing that can’t be scaled is “prime location”

Literally density.

Re: Where are the economies of scale in homebuilding?

#18

Post by JumpCrisscross »

taurath wrote: post #10

I wonder how much it’s due to the fact that homes are such an incredibly expensive endeavor compared to other things. I could see significant economies of scale in most of the materials and parts, but perhaps there has been a steady increase in quantity in those materials?

> homes are such an incredibly expensive endeavor compared to other things

Jet engines are more complex and complex than homes. We still see productivity increases in their manufacture year after year. Same for turbines, rockets, et cetera.

Re: Where are the economies of scale in homebuilding?

#19

Post by nonethewiser »

wanoir wrote: post #14

One thing that can’t be scaled is “prime location” There will be locations that are more desirable than others, and even if you keep building houses where there’s space, the need to congregate in particular areas (such as for work) will result in particular locations being more desirable. And, it’s hard to increase the density of an area once the housing supply is already built out. So instead, that supply stays fixe…

That's not exactly true. Its possible to bootstrap entire cities successfully. Look at China. In the US, redeveloping Gary Indiana would be a good option for this sort of thing.

And I guess some billionaires are trying to do something more greenfield in Solano County, California.

"Prime location" is not some static thing.

Re: Where are the economies of scale in homebuilding?

#20

Post by jmward01 »

One problem in development is we keep trying to think big 'build a lot of homes at once'. That creates the suburbs which, long term, is very unhealthy for a city and its residents (and unfair to the core which ends up paying for their services). We need to push for smaller development, but more of it. It is a lr for cities. When you hear 'redevelopment' it generally means too big of a step is being attempted. It is too often a make or break, and too often that just means break so you get nothing bus held up development, and even when it does happen it is too much and you likely overshot in many ways and undershot in many more. Then, years down the line all those houses age out at the same time and their infra ages out at the same time leading to a sudden problem for the city. Smaller projects lead to a diverse and healthy city. You want to make homes cheaper? Publish, and maintain, pre-approved plans for homes and ADUs, but make sure the plans meet city density needs. Give incentives to clear out brownfill. Encourage development in ways that improve the health of a city and you will get healthier cities.
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