New note this week forecasting home prices surging another 16%.
A new record low, less than a million homes for sale at the end of December — just a 1.8 month supply.
Many cities around the world are facing an affordable housing shortage.
The Covid-19 pandemic has only made the crisis worse.
Lockdowns around the world severely disrupted global supply chains,
making it more difficult to get building materials.
Travel restrictions and social distancing rules have also added to the labor crunch,
limiting the construction of new homes.
Moreover, the way we work has changed and a lot of people have decided to relocate,
meaning the usual patterns for housing supply and demand have upended.
These conditions have created a perfect storm, and in turn, prices have shot up.
A 2021 report revealed 88 out of 92 major cities are considered unaffordable.
The least affordable of them is Hong Kong, where the median house price is more than
20 times the annual median household income.
But there is a solution that is garnering a lot of attention: modular homes.
These homes are constructed in controlled conditions and can take just a week or two to build.
So, is this the answer to the housing shortage around the world?
I’ve come to Top Hat to learn more about this industry.
Top Hat, located in the East Midlands of England, specializes in manufacturing and delivering modular homes.
The parts or ‘modules’ of these houses are built in a factory like this one.
How are these homes then taken to the sites?
They're lifted out of the factory, they're put on the back of a lorry, and they're then dropped into a foundation on site.
These are semidetached, side-to-side houses.
This will go into the foundation, and then that will be dropped on top.
All of it will be cladded by the time you leave the factory.
Cladding means materials such as wood, metal or brick are added as an extra layer to the
prefabricated home to provide resistance against harsh weather and add insulation.
It also connects the different modules together.
The less time you spend on site, the better. That is how we look at it.
We want to be able to drop the houses to site, get them zipped up and lived in as quickly as possible.
So modular houses like this one can take as little as 14 days to build,
much faster than a traditional home that can take six months.
Jordan says his team can construct homes faster and more accurately
than traditional builders because they build in controlled conditions.
This means they are uninterrupted by the weather and
can streamline and standardize production by controlling the process end to end.
Many parts are created using 3D printing.
So in order for MMC to really live up to the expectations we all have, you need to combine
the design process, production supply chain, so that you get a seamless flow around the factory.
Well, brick, especially clay brick is not great for the environment, and we wanted a solution.
And so, we created our own product.
It's also great, because it does all the things that brick is supposed to do, only better.
It's unbreakable.
It has the same fire-rating as brick.
And, it’s less porous than brick; so it keeps the water out.
So, it outperforms bricks, technically, but it also allows us to get this design variation that you could never get anymore on-site.
We can build 27 Top Hat homes for every one brick and mortar traditionally built house.
So, over the next week, we'll finish approximately 10 houses.
And that's again, one of the hallmarks of print manufacturing, the scalability.
The global modular housing industry was worth $106 billion in 2020 and is expected to reach nearly $154 billion by 2026.
The industry is gaining traction in places like the United States, China, India, Canada and Japan.
But factory-built homes aren’t new.
This form of construction dates back to the post-world war era, a time when many countries
were experiencing a severe shortage of houses, after many had been destroyed by bombs.
Several governments looked to prefabricated abodes to ramp up construction, aiming to
build as many homes as possible with the limited resources available at the time.
Between 1946 and 1949, more than 150,000 homes had been built in the United Kingdom alone,
with one aluminum version being manufactured every 12 minutes.
Many of these prefabricated houses were expected to last just 10 years.
and were widely considered to be ugly homes of low standard.
So there's been changes in the manufacturing process in general, with the advancements
in digital automation, and product automation.
You're building a different product today.
Just like cars today are very different than they were in the 1950s, and that advancement
gives us the opportunity to not only enhance quality in the homes, but also provide design
variations that you couldn't have done in the 1950s.
Hi, and welcome to our project
I’ve come to speak with one of the key voices in this industry.
Joseph Daniels is the CEO of Project Etopia, a company that aims to develop a more sustainable,
affordable and efficient approach to home building.
Anything new, you look at the electric vehicle market.
Electric vehicles, the reality is, they're better, they're smarter, they are faster.
People were unsure, we had huge infrastructure, right for gas cars.
It's exactly the same with housing.
We have got an infrastructure for traditional methods.
Traditional ways of doing things.
And because of that, it means that we're ingrained in this process, and it's very hard to change.
Modular housing, or what we call modern methods of construction,
which is like a modern way of building, allows us to get really sustainable results.
The environmental impact of the construction industry has come under intense scrutiny.
But Joseph sees prefabricated homes as a potential fix, citing less waste filling up landfills,
less energy spent transporting materials on and off site, and the use of more sustainable materials.
The construction material, it's an incredible, airtight material.
It's extremely unique, extremely strong.
Unlike anything else, we can do it fast, better and more advanced.
And so, this has all been inspired by enabling housing to step up to set the new baseline,
which means that if you get a home, it's not killing the planet.
It uses less energy, It’s better controlled, it’s better designed, it’s better engineered.
And as the homes are brand new, it makes it easier to include eco-friendly features, such as solar panels and more insulation.
One part of the housing crisis these homes immediately don’t solve, however, is the sky-high prices.
How much would a home like this cost?
(The building) would be the similar cost for a traditional building.
That’s because the land a home – modular or not – sits on forms a substantial portion of overall costs.
It’s a supply and demand problem, a space issue – and depending on the home’s design
and material requirements, a prefabricated home can get even pricier than a bricks and mortar build,
which leads to one of the biggest barriers for prospective modular home buyers and developers,
securing the funds to build them.
The mortgage industry classifies prefabricated homes as ‘non-standard construction,'
which makes it more difficult to get a loan.
There are fewer mortgages available, and the ones that do exist will likely require a larger
deposit and offer less competitive interest rates.
This partly stems back to the stigma associated with the prefabricated homes of yesteryear.
There are worries buyers may struggle to resell modular homes or that they may decrease in
value – though a few reports have pushed back at this notion.
But there are also still a lot of question marks that come along with most of the production happening off-site.
What happens if the developer runs out of money, or the factory closes down?
Who holds the rights for the property if it’s still off-site?
This can make modular homes a riskier investment for lenders.
The lack of customization and strict building codes in areas vulnerable to natural disasters
are other drawbacks, according to some relators.
Still, the demand for new homes isn’t going anywhere soon.
Billions of dollars have been invested into the modular housing space, with TopHat alone
securing £75 million from Goldman Sachs in 2019.
And with more developments coming online, Jordan tells me he’s optimistic about the future of the industry.
Like all great manufacturing companies, you have to learn from data.
And you have to go through that learning curve of continuous improvement.
The market, thankfully, is big enough that there is, at the end of it, a reason to do it.