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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?

#81

Post by fragmede »

idiotsecant wrote: post #58
fragmede wrote: post #37

Earlier quoted context omitted.

The number of different trades that are involved with building a house is what complicates things and drives timelines and cost up. I wonder if you mass produced a (large) widget that was water and sewer and an AC/heating unit and an electrical panel all in one, so the widget would be a bathroom/kitchen/living room central core, with electrical, that homebuilders could just drop in, if that would reduce coordination…

Sounds like an absolute nightmare. All those components connect to other things and all you did was make a single enormous node that everything hooks to.

The homebuilder would drop in this all-in-one node that is the literal kitchen sink, electrical for the stove and refrigerator, the shower, toilet, bathroom sink, duct and wiring for the heater/AC, wiring for the living room, and the electrical panel. Yes it'd a total nightmare, but people pay to have their problems solved. By constructing this node in a factory, you'd be able to get economies of scale, not just on the parts but on the labor as well. Wouldn't have to do it in the cramped confines of doing it in place either like the article mentions.

Re: Where are the economies of scale in homebuilding?

#82

Post by dqv »

pessimizer wrote: post #33
JumpCrisscross wrote: post #17

Earlier quoted context omitted.

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

Density trashes a location.

I LOVE density. I still live in the same place I grew up and they are "trashing" our location. I know this because that's what all the people age 50+ who live here are saying (it's actually just a subset of the 50+ people, but mostly in that demographic). Takes forever to take a left turn now and they HATE it. They hate sitting there waiting for 4 lanes (2 lanes in both directions) of traffic to clear so they can speed off to work out of the Bojangles parking lot.

Growing up here, I hated how walking places took a whole hour to go anywhere fun, had to walk on medians on a highway to get to the movie theater.

We finally have enough demand due to increased density that they're building out a bus stop within walking distance. I already can walk or bike to get groceries and the pedestrian infrastructure is good enough that I can walk to a few different places, adding the bus route gets me to the train station and even the airport. I experienced the tyranny of the car, first in my childhood, without a car, now in my adulthood, with a car, but soon a closer step free of that tyranny with increases in these kinds of transit services.

Not that I don't think the urbanization is perfect. One of the bigger ones I've noticed is everyone has sterile landscaping, dead grass lawns (even when not in a drought) and other stuff that provides little wildlife value. At least we have serviceberry trees in our neighborhood...

Thing is, even in rural areas, the landscaping will be messed up or sterile too. I even saw someone with a HUGE thicket of bamboo, easily a quarter acre, maybe more, I could only see it from the road. Now that trashes a location!! Not moving anywhere close to that! Yet, the rural life affords more space for less money, which allows, in the correct non-trashed location, the ability to create a valuable space for wildlife.

I find it a really hard choice to make. I'd have to live in a smaller house in a rural area accounting for the fact that I would absolutely go the cheapest I could get, down to a single wide. And giving up the nice infrastructure! I mean, I don't think density is perfect, there are tradeoffs, but I do find the version that I'm experiencing to be enjoyable. I think the only thing that would make it unbearable is if they started rolling back the transit/pedestrian/bike infrastructure progress we've made.

I do think there's an argument against over development, but that's still a "building up" problem. Build up tall, but with bigger green space - like 2-3 acres at least.

Re: Where are the economies of scale in homebuilding?

#83

Post by jmward01 »

Swizec wrote: post #29
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 betw…

What a silly dismissal. Of course you can build apartment buildings and increased density options in some cities and not take too big of a step. I'm a fan of that in the right sized cities. Go for it, if the city can handle it as a small step. Some cities however that one project would take up the next couple years of anticipated growth and would therefor likely be too big of a step. The point is the step size relative to the city, not an arbitrary count. I am advocating for cities encouraging many smaller steps, compared to their size, instead of trying to build all the housing in one big development all at once. But to get to your point about high-rises, those can also be city killers and emphasize my point. Many cities have 'redeveloped' poor neighborhoods into high-rises to 'make enough low income housing available' all at once. This type of development was bad because it often achieved its goal, all low income housing needed was created at once in one place leading to massive problems. So, yeah, high-rises can be great, or terrible. It depends on the city and the way they are implemented.

Re: Where are the economies of scale in homebuilding?

#84

Post by nradov »

Markoff wrote: post #76
nradov wrote: post #53

Earlier quoted context omitted.

All but the cheapest new residential construction has moved to 9'+ walls. Buyers like higher ceilings.

I wonder if someone explained to them difference in heating/cooling expenses + how much the extra 30-50 cm adds also to construction materials

People like to live in nice homes and the cost difference is tiny over the life of the structure.

Re: Where are the economies of scale in homebuilding?

#85

Post by akst »

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…

This kind of capture the point tbh

> For many sectors of construction, difficulty in achieving economies of scale could be attributed to the fact that only a small number of buildings of a particular type get built in the US each year. There were, for instance, only 10 skyscrapers taller than 200 meters built in the US in 2025

But so on production productivity generally, relating to that

In New Zealand Auckland they did a board upzoning in 2016, it was the largest metro governed under the same planning regieme, they allowed many dwelling types by right, and increased planning controls. Economist Matt Maltman did some research on construction productivity during this period

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5386023

His research (which showed productivity did increased) this is consistent with the idea the point above being productivity gains comes from the ability to repeat the same process over and over which was possible Auckland after they uniformly upzoned the city, after which most lots had higher zoned capacity than its existing built capacity (almost certainly with homogeneous allowed heights and floor space), allowing for this process of repeatedly building the same type of unit over and over. Matt has written more about construction productivity here in

https://inflectionpoints.work/articles/best-practice-for-sup...

Anyways if you'll note that the number of firms providing homes also increased, meaning the process of repeating construction over and over isn't isolated to a few firms. While the size of the industry almost certainly grew, the same number of builders likely were working more and more of similar buildings, and they are repeating similar processes over and over consuming similar inputs over and over.

- Those different housing projects due to some level of homogeneity will encounter similar hurdles where which creates a sufficiently large incentive and market for someone to sell solutions tailored to those problems which likely improves productivity (compliance is likely a big one).

- There was likely a greater rate of interaction of different people in these industries interacting with one another allowing for a greater distribution of construction related ideas, some more efficient than others. Think when you have a new coworker who introduces a new tool and suddenly every starts using, this process is able to happen more frequently.

- Likewise some of those inputs likely had an opportunity to efficient. Inputs from industries with fewer players would have been greater incentivised to sell as many units as possible and find ways to reduce their costs. If they performed price 2nd/3rd discrimination previously due to that market being insufficiently large relative others, they have an incentive to act otherwise.

Re: Where are the economies of scale in homebuilding?

#86

Post by jillesvangurp »

There's no good technical reason why you shouldn't be able to pick up flat pack housing at your local Ikea and fix something very serviceable with just an Allen key in an afternoon or so. But it would burst the bubble that housing is expensive and devalue the property of people that indebted themselves to own a house. That's why Ikea is not in the housing business.

Housing is not a technical problem. Our medieval ancestors build housing using just twigs and mud. It's not that complicated to build something vastly better with modern materials. Modern conveniences like heating, electricity, sewers, water, etc. add a bit of complexity of course. But there's no logical reason why you should spend north of half a million on that. If you have a few spare thousands, you can own a pretty nice recreational vehicle that come with most of what you'd need. But good luck finding a spot in most densely populated areas where you would be allowed to live in one.

We keep finding extremely petty reasons not to do pragmatic things to fix housing and the cost of living crisis. Simply stopping the process of policing this sector would in short order lead to most cities gaining uncontrolled slums, camp sites, and what not. The irony of policy failure is that this is in fact happening in lots of places.

Re: Where are the economies of scale in homebuilding?

#87

Post by jmward01 »

opsnooperfax wrote: post #68
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…

The US is not completely centrally planned by a politburo, and suburban sprawl is not a conspiracy of diabolical powers that be. Given the choice, many people with the means will pay a premium and spend hours every day commuting to not have to live in The city they work. Why? There are uncomfortable answers. You can’t make maximizing harm to a segment of the population a policy goal and expect them to stay.

I am all for people being able to pay a premium to get the burbs. The problem is they don't actually pay the premium. Their service costs are often not covered by the taxes and direct fees assessed. Consider water and sewer. I pay the same amount for water and sewer as the sprawl house built out in R1 on the edge of town but my house is on major city services that cost a fraction to maintain, per house, as that house on the edge. I am subsidizing them. And I do it for their roads. And their parks. And every service they use because them and 5 other people suck 20x the resources but pay the same as me. And it makes me mad. So, yeah, pay your fair share to live in sprawl and I will be happy, force me to pay your taxes and imply I'm a communist and I get a little less polite.

Re: Where are the economies of scale in homebuilding?

#88

Post by stouset »

bombcar wrote: post #70
josh_s wrote: post #54

Lots of interest comments on the efficiency of building homes. The bigger issue is the cost of land. The differential for land to build is often 10:1. So even if the prefab shave 10-20% the price for a custom build, it's still not making much of a difference for the normal buyer. unless a develop or government was opening up mutiple parcels of land well below the costs to build a house, prefab is not really going to…

> The differential for land to build is often 10:1. What does this mean? Land around here is cheap as free.

That is almost assuredly because nobody wants to live there. Now try this for locations that people actually want to live in.

Re: Where are the economies of scale in homebuilding?

#89

Post by stouset »

fragmede wrote: post #81
idiotsecant wrote: post #58

Earlier quoted context omitted.

Sounds like an absolute nightmare. All those components connect to other things and all you did was make a single enormous node that everything hooks to.

The homebuilder would drop in this all-in-one node that is the literal kitchen sink, electrical for the stove and refrigerator, the shower, toilet, bathroom sink, duct and wiring for the heater/AC, wiring for the living room, and the electrical panel. Yes it'd a total nightmare, but people pay to have their problems solved. By constructing this node in a factory, you'd be able to get economies of scale, not just on t…

You don’t realize it, but all you’re doing is building a Homer car[1].

[1] https://simpsons.fandom.com/wiki/The_Homer

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