Modular Housing: A Solution or Just a Quantity Game?
Modular housing is stepping into the limelight as a potential remedy for the ongoing housing crisis. In essence, this approach involves constructing the bulk of a home’s components in factories, where entire rooms—including all necessary wiring and plumbing—are prefabricated. Once these modules arrive at the construction site, the final touches are merely about connecting the pieces and completing the plumbing work. This method is notably faster and more cost-effective than traditional construction. Moreover, recent advancements in technology have enabled companies globally to produce modular homes that are not only distinctive but also highly customizable and of superior quality.
Quantity vs. Supply: The Economic Tug-of-War
You might assume that these companies boost the housing supply by simply building more homes. However, it’s crucial to distinguish between an increase in supply and an increase in quantity supplied. The former signifies a greater capacity to produce housing, not just more units on the market. Engineer Ivan Rupnik recently shed light on two ways modular housing can genuinely enhance supply.
The Technological Advantage
First off, there’s the technology itself. Technological advancements have historically played a significant role in increasing production capacity. In the past, houses were built entirely by hand, relying on human strength and rudimentary tools. Today’s innovations allow a greater number of homes to be constructed by the same workforce, effectively shifting the supply curve to the right—a fancy way of saying we can produce more with less.
Regulatory Roadblocks: A Historical Overview
The second avenue to boost housing supply lies in regulatory changes. Rupnik highlighted that as early as the 1960s, Congress was exploring ways to promote modular housing. They even funded the Nixon-era HUD initiative known as Operation Breakthrough to experiment with local housing codes and zoning regulations. However, the irony is palpable: despite bipartisan support, these regulatory changes never gained traction in the U.S.
“Funded [Nixon-era HUD program] Operation Breakthrough to encourage experimentation, and to figure out the effect of local housing codes and zoning regulations on large-scale use of new housing technologies. For reasons that still aren’t clear to me, those regulatory changes — which had bipartisan support — were never implemented at scale in the U.S.”
Lessons from Abroad: A Comparative Perspective
Consequently, the potential for increased supply that new technology presents has largely gone untapped in the U.S. Meanwhile, other nations, notably Sweden, have capitalized on these lessons, with a staggering “85 to 90 percent of single-family homes” being manufactured in factories. Japan has similarly streamlined its regulations, allowing innovative technologies to flourish and contribute to a greater housing supply.
Regulation: Prescriptive vs. Performance
One of Rupnik’s most insightful points pertains to the distinction between prescriptive and performance regulations. Prescriptive regulations dictate specific requirements—like wall thickness and material types—whereas performance regulations focus on achieving certain thresholds without prescribing the methods. For instance, in Sweden, rather than using a mix of materials for structure and fire resistance, builders opted for two layers of a more efficient gypsum product. This flexibility allows companies to innovate and discover the most effective ways to meet regulatory goals.
“Performance codes say that a wall needs to prevent fire from penetrating for X hours or minutes, and you can achieve that goal with any material that works. For example, in Sweden, instead of mixing sheathing for structural rigidity and drywall for fireproofing, they used two layers of a more expensive gypsum product because for their factory processes, it was more efficient.”
The Path Forward: Balancing Technology and Regulations
Ultimately, the drive to enhance housing supply is critical. Any comprehensive conversation surrounding this issue must include considerations of both technological advancements and regulatory reforms. If we ignore these elements, we risk confusing an increase in the quantity of housing supplied with a genuine augmentation of supply—leading to inevitable price hikes without truly addressing the core issue of availability.
