(LRT THINK TANK) INSIGHTS ON ATTAINABILITY + PLACE: OFF-SITE MARGINS

5 minute read

In November 2019, we hosted 120 or so key stakeholders in the housing industry for a deep dive event focused on driving attainability for middle income households – those who make roughly $50K-$125K per year.

In table-based think tanks of six to eight people, we addressed 15 questions related to PLACE, PRODUCT and PRODUCTION (or process) – the three big buckets that need to be tackled to make homes more attainable without sacrificing the quality of our homes and our lives.

Here’s a question from the PRODUCTION segment of our agenda.

Outside of vertical integration, how can we reduce the cushion or margin stacking that occurs in off-site construction projects? Adding value and appropriate risk sharing for all contributors?

We asked 28 thought leaders, including housing developers, regional and national builders; experts in innovation, architecture, government relations, off-site construction, marketing, recruiting and media; researchers/analysts; manufacturers and an academic.

Here’s what they had to say.

1: Consider the ripple effect.

  • If component manufacturers are also providing the labor, this reduces the number of handoffs.
  • Strategic partnerships are important: for instance, you develop a relationship with your framer who realizes that with these off-site construction processes, he can build faster; his schedules are better, more reliable, and less dependent on weather.
  • Cleaner construction sites and less concern with theft. Homeowners on a walkthrough will be happy about a clean job site, which will lead to good reviews, which turns into more business for that developer and builder.

2: Bring trades into the process early so that they feel like they’re part of the solution.

If you move framing off-site, how do you get the onsite panelers to give reductions? If the plumbing holes are already drilled, how do you get the plumbers to give you a reduction? This is difficult to do in a tight labor market. Start with some sort of collaboration and profit sharing. Show the trades that we can all benefit from doing this together.

3: Coordination across trades.

It takes a lot of work to align the trade base around cycle times. It’s one thing to say off-site construction will take the plumber five hours less, but unless they have another house right next door ready to go, you haven’t actually realized any savings because that plumber still wants to earn the same amount per week. The coordination needed to make this work means that builders must have their house in order. Accuracy and adherence to the schedule, updates and job site readiness —that’s where a lot of the benefits can occur, and it takes work to get there.

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