A case for site-built vs modular homes

Prefab homes seem to be showing up more and more in the media these days, especially with two large exhibits in Philadelphia showcasing their history this year. Like many, I hoped that prefab would be the answer to bringing modern architecture to the masses in the US and beyond. I thought that finally, modern home design would be attainable by those of us who aren't pulling in lofty six figure incomes. That was until I conducted extensive research into the possibility of starting a development company in Philadelphia using only prefab homes.

Don't get me wrong, I love prefab and many of the firms out there with cutting edge designs in the prefab realm. There are also a variety of building lessons that can be learned from the prefab methodology. I just don't believe it is the best way of delivering modern design to the average new home buyer.

Below we will look at this issue from two points of view. First, we will look at the prefab industry and try to dispel some of the myths that have arisen around it. Second, we will take a quick look at how the housing industry may be able to learn from both prefab and site-built homes to create a hybrid approach that will provide a better, more accessible solution to the home buyer and hopefully reduce the barrier of entry to modern, green, and unique residences.

Names and firms have intentionally been left out of this post in an effort to discuss only the facts, dispel some of the myths of prefab, and possibly look towards a better method for bringing modern homes to the average American.

Prefab's Claims to Greatness
There are a variety of claims made by prefab proponents to support the idea that this method of home delivery is the best way to provide modern architecture to the masses. Not every prefab supporter or manufacturer makes every one of these claims, but they are pervasive enough that we will address them as the claims of the industry as a whole.

They are:

Prefab is more Affordable

Prefab produces less Waste

Prefab takes less Time

Prefab is more "Green"

OK, let's look at each of these "myths of prefab" one by one.

More Affordable. We are starting here because it is the easiest to disprove, and is also the main reason that many start looking into prefab. Unfortunately, most find, after weeks of research, that they just cannot afford any modern prefab unit on the market today. This just doesn't seem fair.

The bottom line is that most modern prefabs today that someone interested in modern architecture would consider buying will cost at least $250 per square foot when all is said and done. This includes everything but the land cost which can vary greatly based on the buyers location. There are a few people out there that claim to get very close to $200 psf, but there are many more that will quickly go over $300 and even $400 psf. Stick built modern homes can be built to the same specs as these prefabs for less than these costs in all but the most expensive areas of the country. For example, in my hometown of Philly (6th largest city in the US) where labor and material prices are far from cheap, most of the prefab homes I've seen could be stick-built for anywhere from $125 - $150 psf.

Prefab manufacturers and resellers will tell you that prefab is cheaper because of the time and labor savings, but let's list the key factors that actually make prefab more expensive than site built:

Manufacturing Facility Overhead - Prefab manufacturers work in buildings with support staff above and beyond those actually building the houses. They also have facility costs such as equipment, utilities and maintenance ... Site built homes, built by most residential builders, don't have any of these.

Manufacturing Company Profit - These manufacturers are making at least as much profit as the average general contractor and often more. The majority of cost savings resulting from the prefab manufacturing process stays in the pockets of the manufacturer.

Delivery, Setting, and Crane Fees - These can easily run $10K per house (cranes aren't cheap) and can be significantly more if the distance from manufacturer to site is large. Most manufacturers also dictate who the labor crew will be, and often they won't be the best value available.

Architect or Reseller Fees - In some cases the fees charged by the architect providing the prefab can run as high as $30,000 or more. Even in cases where no additional site customization or design work is needed, a substantial fee will still be added by the architect or reseller.

Less Waste. Since prefab is built in a factory they claim to create much less waste by setting aside their scrap and reusing it in other projects. What they do not often advertise is that their structures use 20% - 30% more raw materials than stick-built homes in order to withstand transportation. That's no small figure in my book, especially considering that even if there is waste on-site with stick-built homes you can now easily hire a waste removal company that will recycle 90%+ of your construction waste.

There is something called "value engineering" which can be done effectively on site-built homes and the polar opposite called "over-engineering" that is often done with prefabs. Guess which produces more waste and costs the client more money.

One last point on the waste topic. Things like doors swing and cause damage during shipping so there is a lot of extra bracing in the house to prevent this damage. On top of that, there are extra structural supports inside stairwells and such that are left in the home after delivery. Loose materials to finish the homes are also left inside the boxes upon delivery. I recently walked through a delivered prefab with the owner and he offered me pallets of free OSB because he had so much extra and had no idea what he was going to do with it. I'm sure every prefab company is not this sloppy, but it is another indication of waste in an industry claiming extreme efficiency.

Less Time. Most prefab companies will claim that there are significant savings because the construction process is much faster than a traditionally built home. The site work can be done while the home is being built in the factory and the actual physical build time on the manufacturing floor is only a few short weeks. However, in practice there may be months before that process, and months after, that greatly lengthen the time before the home is ready to be lived in. If you scour a prefab company's FAQ's, call them or ask others that have gone through the process you will find that 6-12 months or more is not uncommon from start to finish. With site-built homes often going up in 4-5 months where is the time savings in prefab?

More Green. We'll throw this in here because "green" is hot now, so the prefab companies are jumping in and claiming superiority again in the green realm. Much of the green claims in prefab come from the lower waste myth that was dispelled earlier. The new one that we've been hearing more of lately is that the insulation is installed to better standards than site-built homes because of the superior labor and inspections put in place by the factories.

This seems like a weak claim for a number of reasons. Most prefab companies are still using loose, batt insulation that is often falling out of the framing by the time the modules reach the site. Batt insulation alone is not what is making the better green homes out there more energy efficient. Also, in many cases, all of that house wrap that is supposed to be sealing up the home from the outside is tearing apart and falling off of the exterior by the time the modules reach their final resting spot. Lastly, the extra framing we spoke about earlier is causing more thermal bridges in the building envelope. In other words, the more structural framing that connects to both the drywall inside and the exterior sheathing outside, the poorer the total insulation of the home. Wood is a very poor insulator.

A Possible Hybrid Prefab and Site-Built Approach
What if you were to take the best of both prefab and site-built methods of home building and combine them into a hybrid approach to construction and home delivery?

First, let's start by roughly defining what this hybrid method might include:

Quality, stock plans from qualified architects that meet local codes and can quickly receive zoning and building permit approvals.

Educated clients that understand they are not buying a fully custom home.

Prefab building envelope - SIPs, ICF's & Precast Walls.

Internal prefab components made in local shops -- interior framing, framing with electrical & plumbing, prefab kitchen/bath/utility pods.

Better scheduling and local subcontractor cooperation

Quality Stock Plans
The first place to start when trying to streamline and cut costs from any building project is with high-quality building plans from qualified architects. If every detail down to the last sheet of drywall and bucket of paint is nailed down and proven out in each set of plans, it becomes much easier for a GC to provide the best price from his crew and any subcontractors that are hired for the job. This can not be undervalued, since any uncertainty on the part of those bidding on the project will instantly up the quotes. This is where prefab gets most of the efficiency gains in their process, by building exactly the same home over and over. They know exactly how much material and how much labor goes into each home plan in their library of options.

Another point to make here is the need for plans to be developed or easily modified for any location in order to ensure a fast permitting process. Zoning and building permit acquisition can add months to a building project, so having a way to expedite this phase of construction can be a significant cost saver that should not be overlooked.

An Understanding of Semi-Custom by the Client
One of the big reasons that fully custom homes designed by architects are expensive is not necessarily related to the architectural firm's fee. It has more to do with the fact that the client is choosing exactly what they want in terms of appliances, layout, and finishes. There is nothing standard about this process. The GCs that bid on these homes will be forced to deal with any number of materials or construction processes, some of which they might be seeing for the first time. They may not be able to get their normal discounts on preferred brands and the uncertainty in labor costs will add a healthy premium to their bids. An experienced GC knows that there will be many changes during construction on these custom homes due to the owner changing their mind or inadequate documentation on the building plans, and they will pad for these changes in their budget.

What clients must understand in any prefab or hybrid method is that the more custom changes they try to make, the higher their costs will be. There is not an abundance of quality prefab or stock plan options out there, which is one of the reasons everyone ends up wanting to customize so much. If the stock plan industry grew, then there would be much more variety to choose from and less desire to customize. In the end though, clients will still need to understand the cost to value ratio of customization. Most customizations will probably add $0.50 (if any) in value to the home for every $2.00 in extra cost that is incurred to make that customization.

Prefab Building Envelope
Now that we've covered the planning phases of a lower cost hybrid home, we can get into the nuts and bolts of the structure itself. The basis of the hybrid system proposed here is that prefab is good in the right places and in the right doses.

The best example of this concept is SIPs or Structurally Insulated Panels. SIPs are wall and roof panels that are prefabricated in a factory and then delivered on a flat bed truck to be assembled like legos on the construction site. The SIPs combine the framing, insulation, and exterior sheething all into one product. The windows and door openings of a home can also be cut exactly to size with framing lumber attached so that they are 100% ready for the windows and doors to be installed on site once they are in place. The product is superior to traditional insulation methods in that it offers higher R-values per inch and an overall tighter home envelope. There is far less thermal bridging with SIPs and dramatically less air leaking out of the finished house.

The SIPs will often save slightly on material costs when all components are added together, especially compared to a full prefab house that requires up to 30% more lumber to withstand shipping. The SIPs are also flat-packed, usually on one truck, which reduces transportation costs compared to prefab which will require multiple truckloads of modules to the site. SIPs can be handled by a fork lift or lull on site as well as by hand, which eliminates the very costly expense of a full-sized crane and operator at the site (always needed in prefab). The panels will go up in 3-5 days on a typical home which beats stick building by a long shot considering that the SIPs include insulation and sheething.

Similar products to SIPs are precast concrete wall systems like Superior Walls that include insulation. These walls can significantly reduce time in the foundation and basement portions of the build. ICF's or Insulating Concrete Forms is another alternative to SIPs or precast walls. These are basically hollow blocks of Styrofoam insulation that can be linked together quickly and have concrete poured in the centers to form the finished structure.

Internal Prefabed Systems
The next suggested use of prefab in the hybrid model is not used very often in the US, but has been used extensively for years in other parts of the world. Many good framers are able to prefab most interior walls, stairs, and even some floor decking off-site to speed up the installation process on-site. This off-site framing can be done in a local workshop while the foundation is being set on a home and while the SIPs are being made in a nearby factory.

The next step in this concept would be to include electrical, plumbing, and gas line runs in these prefabbed walls to further reduce construction time on-site. The building codes in the US make this very tricky, but the Swedes have been doing this for years with great success.

Lastly, the furthest development of this prefab interior component idea is to actually prefab entire kitchen, bath, laundry, closet, and utility assemblies at a local off-site location. These small modules would not be subject to the strict structural requirements of larger prefab modules due to their size and the fact that they would not need to travel on highways. They could be dropped right into the homes as the SIPs were going in place that could result in the vast majority of the home being assembled on site in only two weeks. A good example of this type of system is the Copod designed and built by a company in the UK.

Advanced Scheduling and Building Team
Advanced scheduling and building is something that goes hand in hand with a good stock plan and a client that keeps customization to a minimum. The successful tract home builders in the country that are building 80% of the new housing stock can teach us something about process (but certainly not architecture) in this step also. They have their build schedules down to the day.

The way to reduce construction costs on site is to eliminate as many unnecessary delays in the schedule both with each subcontractor and in between each sub's work on the site. This can be done by implementing the following:

A fully developed stock plan with no uncertainty for the GC

A qualified GC or Project Manager that can make and keep a good budget and schedule

A qualified GC or Project Manager that can reduce delays with local code officials and utility companies to a minimum

A team of quality subs with 1-2 backup subs in each field

This may sound like common sense to many, but in many custom and semi-custom homes, all of these factors rarely fall into place. Many construction sites sit idle for weeks and even months as delays are experience with specific subs, in between subs or while waiting for local officials to inspect work that is completed. These delays must be eliminated to reduce the on site build schedule from months to weeks on a hybrid house.

Advantages of a Hybrid Building Method
What are the potential advantages of this type of Hybrid method of building?

Faster - A hybrid approach could easily reduce the total build time of a home from start to finish to eight weeks or less if properly executed.

Less Waste - The use of SIPs to eliminate most framing waste, less transportation, no crane requirement and the use of a construction waste recycling company will result in less overall waste than than prefab or traditional stick built houses.

LOCAL Labor - This is a big difference from prefab which uses remote labor to perform over 50% of the work. There are SIPs manufacturers all over the country that make the same products and can enable 100% of the construction of a hybrid home to use local labor and contribute to the local economy. In my book, this is a big advantage over prefab.

More Energy Efficient - Better insulation, a tighter envelope and fewer thermal bridges from excessive framing equals a much more energy efficient home than any prefab on the market.

Unlimited Designs from Unlimited Firms - Architects no longer need to develop a costly and time consuming relationship with prefab manufacturers or worry about marketing and selling their designs with the hybrid approach. Many different plans from many different architects can be used in the hybrid system anywhere in the country.

Cheaper, much Cheaper - Somehow I almost forgot this key point. Bringing high quality residential architecture to "the masses" will be done by some type of hybrid building system like the one proposed here long before prefab will due to the significant savings in cost that will actually be passed on to the home buyer.

To Conclude . . . Finally

There are many amazing things being done in prefab, and if it weren't for my self-imposed ban on mentioning specific companies and architects, I could name a bunch that I personally admire. However, there are also a large number of misconceptions about the benefits of prefab that need to be discussed, and this post is simply trying to get that discussion started. Are there points of dispute here? Certainly. Am I perfectly correct in everything I have said? Probably not. So, go to the comments and tell me what you think.

Chad Ludeman is President of Philadelphia-based postgreen, a real estate development firm specializing in modern, green and affordable buildings in Philadelphia’s urban neighborhoods, and developer of the much talked about 100k House.