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Where are the economies of scale in homebuilding?

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Re: Where are the economies of scale in homebuilding?

#21

Post by wanoir »

nonethewiser wrote: post #19
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.

Building from scratch is much easier / when you can demolish everything that pre-exists.

I don’t think this is realistic in already-developed areas where home values may already be very high.

Not aware of the Gary story! Would be curious to see how that’s going and if there’s local support / resistance.

Re: Where are the economies of scale in homebuilding?

#22

Post by nonethewiser »

JumpCrisscross wrote: post #7

> You could vertically integrate backwards into the production of raw materials and components, in the hopes of driving down those costs This is my takeaway: to reduce home-construction costs, we need to apply economies of scale further to the inputs. What is the idiot index for lumber, drywall, et cetera ?

Inputs are definitely a big cost but thats where economies of scale are already able to work their magic I would assume. What would the barriers be for a big builder to leverage economies of scale in procuring lumber, drywall, etc?

Re: Where are the economies of scale in homebuilding?

#23

Post by crabmusket »

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…

I've been thinking about this a lot. It feels to me like we* are not good at making new places that people want to be, so we spend a lot of energy working out how to maximally utilise the existing good places.

There will of course be some places that are uniquely popular e.g. due to their geography or natural beauty. Humans tend to congregate around centres of economic activity, which means some places become popular. But creating sprawls of dormitory suburbs and efficiently piping everybody into the few places that are actually nice sounds terrible.

* my perspective from Australia

Re: Where are the economies of scale in homebuilding?

#24

Post by mcoliver »

Homes last for 50+ years and are fixed objects that establish the visual look of our communities and outdoor space. They aren't disposable products. The way you get economies of scale is by repetitive builds and a highly optimized supply chain. You could get efficiencies if every home was built and looked the same but most people don't want to make that tradeoff

There are some things that could improve the situation. Post frame construction, Pre built trusses, macerating toilets that are more forgiving for sewer tie ins, localized instant hot so you don't have to run separate hot water lines, radiant heating so you don't have to run the duct work. It's all tradeoffs though and you aren't going to get a $500k house for $30k.

The other thing holding back progress are building codes and city laws. To be fair a lot of those codes exist for good reason but the inspection and permit system is suboptimal in most cases. You can buy a $30k small studio on Amazon right now that shows up on the back of a truck but good luck with your city allowing you to use it as a dwelling.

Re: Where are the economies of scale in homebuilding?

#25

Post by nonethewiser »

wanoir wrote: post #21
nonethewiser wrote: post #19

Earlier quoted context omitted.

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.

Building from scratch is much easier / when you can demolish everything that pre-exists. I don’t think this is realistic in already-developed areas where home values may already be very high. Not aware of the Gary story! Would be curious to see how that’s going and if there’s local support / resistance.

There is no large effort in Gary. There is a growing case for a 3rd Chicago airport and proximity to Chicago, low cost of real estate, and being in Indiana instead of Illinois makes it attractive for other projects, but there is no holistic effort to redevelop it into a new city. That's just a location I'm identifying as a prime location.

Totally greenfield is easier for some things and less easy for others. Would be interesting to try and spin something up in Wyoming based off the pro-business culture but it would take huge amounts of migration. Would be cool to see and not impossible but less analogous to success stories in China, which was my point of comparison.

Re: Where are the economies of scale in homebuilding?

#26

Post by lesuorac »

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…

It can though.

The USG kinda used to do this by changing the headquarters for an agency/organization to be in the western (less populated) states.

Re: Where are the economies of scale in homebuilding?

#27

Post by TurdF3rguson »

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…

We also demonize McMansions at the other end.

Re: Where are the economies of scale in homebuilding?

#28

Post by akst »

JumpCrisscross wrote: post #16
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.”

Cheers I missed that… Updated my comment

Even with that still leaves planning controls, which dictates a lot constraint’s on development. In some jurisdictions you can effectively have planning controls that ban some floor plans. Admittedly I’ve just heard of federal HUD maybe this is some unprecedented case where it overalls local government planning and state laws, though I think that’s unlikely, I do know there’s plenty of fragmentation of planning regimes.

Point being, you may be able to construct something and it to tick the construction code boxes, whether the building you can make with it is permitted under planning is a different matter. Which can implicit ban those buildings

For example the zoning code could limits the type of dwelling to something and that thing has a pedantic definition which unique to that jurisdiction, or there’s a combination of max floor space controls and height controls that makes off the shelf prefab components ineffective at making the most of the allowed building envelope. Or a jurisdictions could require design contests for buildings at certain sites or a certain area so it may not be a given you can even use available prefab.

Re: Where are the economies of scale in homebuilding?

#29

Post by Swizec »

jmward01 wrote: post #20

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 t…

> 'build a lot of homes at once'. That creates the suburbs which

What a silly American way of thinking. Build a lot of homes at once creates high rise neighborhoods. We've had these in Europe since the 60's, they are great. Asia has taken it to the extreme in recent decades.

A couple high rises give you a few hundred residential units in a completely walkable neighborhood.

Here's an example from Ljubljana, built between 1977 and 1987. Houses 18,000+ people on 150 acres. https://sl.wikipedia.org/wiki/Nove_Fu%C5%BEine

Here's a more sciency source. Over 3000 residential high rises were been built in Europe in the 2010's

https://www.alexandrinepress.co.uk/built-environment/high-ri...

Another fun example: The tallest skyscraper in Europe will have 260 apartments and 107,000+ sqft of communal space https://www.domusweb.it/en/news/gallery/2025/09/26/benidorm-...

Re: Where are the economies of scale in homebuilding?

#30

Post by fragmede »

crabmusket wrote: post #23
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…

I've been thinking about this a lot. It feels to me like we* are not good at making new places that people want to be, so we spend a lot of energy working out how to maximally utilise the existing good places. There will of course be some places that are uniquely popular e.g. due to their geography or natural beauty. Humans tend to congregate around centres of economic activity, which means some places become popular…

In the US, in California, some billionaires tried to create a new city, but it got shot down, because billionaires.
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