Expert Insight: Multi-Family Developers Turn to Offsite Construction for Affordable Housing
December 8, 2020
The United States is planning to spend $640B over the coming years to address the affordable housing crisis. Real estate developers, owners, contractors and others are flocking towards this opportunity, and many are coming to the realization that Offsite Construction is the best method to solve this crisis.
The highly repetitive and efficient offsite process, where major building components, modules and panels are built in a factory setting and then shipped to job sites where minimal work is required, addresses both the cost and delivery requirements for affordable housing.
In this post we ask industry expert Francisco Zepeda, President at Tennex Development and Senior Vice President, Construction at SoLa Impact Fund, his opinions on why Offsite Construction is the key to delivering affordable housing. Francisco focuses on offsite construction and bringing innovation to multifamily developments, with a hyper-focus on the housing crisis and homelessness epidemic in Los Angeles.
Q: SoLa Impact Fund plans to raise $1B in capital to finance new affordable housing construction projects. As you look to deploy this capital, how will you be evaluating offsite/modular builders for these projects? What criteria are you looking for and what are your expectations on how these factories track production and quality?
A: In our next fund, the Black Impact Fund, we intend to raise $1B in capital to revitalize underserved communities across the country, similar to what we are doing now in South Los Angeles. Modular is going to play a key role in us doing that successfully. The organizations we partner with are going to have to have a proven track record, a high quality product at the lowest possible cost, and the technology to help us track progress remotely, in a manner that allows us to see delays well before they occur so we can come up with a solution to keep production on schedule.
Q: Given your current role at SoLa Impact Fund and focus on delivering multifamily affordable housing, why do you feel Offsite Construction is best suited to meet your needs? What are some of the immediate and long term advantages of going Offsite compared with traditional construction for your multifamily projects?
A: Offsite Construction really solves a lot of problems that traditional construction has not been able to solve. From the design, all the way through to completion of construction, you can see the value in Offsite Construction when it’s done right. Most developers are not just doing one development, we are doing hundreds of them. Offsite Construction really helps to reduce your design costs once you start using the same product over and over again. In fact, we are starting to do that now with our projects. We are using the same unit layouts, which do not have to be redesigned, and this has created significant cost savings for us. Additionally, combatting the housing crisis, and creating affordable housing requires us to get units built quickly, and faster than we are doing with traditional construction. Offsite Construction solves that problem. The time advantage is that you begin construction of the units, before digging even begins onsite. This gives you a headstart on your project that is just impossible to achieve with traditional construction. In fact, we are currently seeing a 20% reduction on our construction schedules, which ultimately means we are getting folks into an affordable place to live 20% faster. I mean, that social impact in itself is just incredible.
Q: As we’ve heard in the news, affordable housing over the coming years will become a massive focal point for new construction. How are developers and owners preparing to take advantage of this new opportunity?
A: In the Los Angeles area where I am based, affordable housing has already become a massive focal point for construction. Currently, there is a shortage of 3 million units in the greater Los Angeles area, and that number will continue to grow if something doesn’t change. I see that change being Modular/Offsite Construction. If we continue to build traditionally, we just can’t build fast enough to put a real dent in the affordable housing crisis, we need to go offsite.
We, as developers, need to look at this not only as an opportunity, but also as a mission. We are the ones building places for people to live, and right now there are millions of people that need a roof over their head, and many of them just can’t afford it. Modular/Offsite Construction can actually lower the cost of housing, by capturing the enormous economy of scale. The repetitive and manufacturing approach to Offsite Construction significantly lowers the cost to build, because factors like waste, weather and customization are nearly eliminated. This is the approach a lot of developers should be taking to capitalize on the opportunity, but also to have a significant impact on our current housing crisis.
I really think our approach to using Offsite Construction is unique to an already unique industry, and I think it creates an added layer of value. We started with partnership. That partnership includes a local, existing Offsite Construction facility, and a good friend of mine, Dr. Brent Musson (Musson Factory). We have designed a vertically integrated system that uses local businesses to help bring subassemblies to the factory where everything gets its final assembly before shipping. This not only helps us build faster and cheaper, but it also builds value for dozens of local businesses that are working in partnership with us.