Janice R. Andrews
Factory-built homes was heralded as a new answer in the ongoing fight against housing shortages and skyrocketing costs. However, questions are raised regarding the practicality of this strategy due to a number of major participants’ failures, notably the well-publicized bankruptcy of Katerra, which is financed by SoftBank.
Industry insiders like Mark Erlich believe that a large portion of these failures can be attributed to investors’ lack of prior building industry knowledge. The inability of outsiders to understand and meet market needs results in the failure of many of their ambitious efforts to disrupt the business. Erlich exposes the conceit of the Silicon Valley entrepreneurs who created Katerra, laying the groundwork for their eventual demise.
Failures such as Veev in California, Urban Splash’s modular firm ‘House’ in the UK, and the faltering Boxabl in Las Vegas are instances of businesses that have failed outside Katerra. A mismatch between lofty goals and the real-world difficulties of the building sector seems to be the unifying theme.
Many barriers prevent the broad adoption of factory-built homes, despite the potential advantages such as efficiency, affordability, and weather-independent construction. Government restrictions, such as building ordinances and zoning laws, provide a number of difficulties. There’s also the antiquated stigma associated with trailers and mobile homes, which perpetuates the idea that factory-built dwellings are inferior to traditional housing.
The Biden administration is recommending regulatory measures to boost the availability of factory-built houses as part of its efforts to reduce red tape. Erlich contends that the true barriers to the sector are the fragmented nature of the construction process, exorbitant transportation expenses, and a lack of steady demand.
In most areas, investors are still not persuaded that modular housing will continue to be in demand. Buildings with recurring elements, such as hotels or apartment complexes with multiple stories and identical apartments, are the most suitable for the sector. Modular construction can be excessively expensive when design specifics are taken into account in comparison to traditional on-site building.
Failures and Success:
Not only do businesses fail, but large-scale modular initiatives encounter difficulties. A 32-story modular residential complex in Brooklyn was beset by legal problems and construction delays, and a Manhattan project aimed at becoming the world’s tallest modular hotel encountered obstacles due to the epidemic.
There are, nevertheless, success stories mixed in with the failures. One company that sticks out is Factory OS, located in the San Francisco Bay Area. They build affordable living in factories and also do on-site building. According to Erlich, successful people who are well-versed in the needs of the market and have a strong foundation in the building sector frequently achieve this.
Factory OS, in particular, emphasizes a localized approach, eschewing nationwide expansion. This localized strategy, based on a deep understanding of regional demands, could be the key to sustainable success in the factory-built housing industry.
