Can You Really Build a Building Like an iPhone?

A terrible title introduces Chris Mims' look at prefabricated housing.

Prefabrication has been the answer to the problem of building housing at least since this pamphlet was printed in 1941. It is a history that, in North America, is a litany of failure. But this time it’s different; Silicon Valley is taking on the problem.

Christopher Mims writes about it in the Wall Street Journal with the title, "Why You’d Want to Build a Skyscraper Like an iPhone," and the subhead, “With tech-enabled modular design and building, the construction industry, like consumer electronics, can benefit from economies of scale.”

© Katerra/ delivering panels

Chris looks at Katerra, a prefab constructions startup that came out of stealth mode this spring with a big factory in Phoenix and bigger plans across America. Chris writes:

Katerra ships the walls to construction sites, where they’re snapped together like Lego bricks. The company’s goal is to build seven more factories within two years, each intended to serve a different geographic area. “That will cover the whole U.S.,” says Katerra’s chairman and founder, Michael Marks, who was previously chief executive of consumer electronics manufacturing giant Flextronics.

On the basis of the $221 million raised to date, Katerra has a valuation of over a billion dollars. Chris says it is “in some ways, the standard-bearer of this new, tech-focused wave of interest in building.”

© Katerra/ Phoenix, not Sweden.

Katerra’s factory will look familiar to TreeHugger readers who have followed trends in Europe, where much of the housing is built this way. Lindbäcks of Sweden has been doing this for years. But Katerra is going to be different from traditional American builders:

Katerra is responsible for its buildings from design to final construction, which it says allows it to further cut costs. In consumer electronics, “design for manufacturability”—the reconfiguring of a device’s shape and function to make it cheaper to build—is standard. Another thing Katerra borrows from that industry: buying goods in bulk, direct from suppliers.

But this is what every big builder does. Have a look at any house or building from Toll Brothers or KB Homes and you can see that they have engineered the dimensions and the materials down to the fraction of an inch, and obviously they buy it in bulk. But most builders do not build in a factory or get any benefit out of building in North America the way Lindbäcks does in Sweden. That’s because conditions are very different.

• Labor in Sweden and much of Europe is very expensive, because workers have unions, legislated rights to vacations, health care and other benefits that American trades don’t have.
• Environmental regulations are tougher in Europe; it is much easier to get the kind of control you need for air tightness and insulation when it is done in the factory than when you are paying subcontractors by the square yard for insulation and drywall.
• Most housing in Europe is multifamily and often rented, so it is not subject to the swings in demand that come from an economic slump or an interest rate change.

This is what has killed many prefabricated housing companies before; they have serious overhead and cannot compete with a guy in a pickup truck with a magnetic sign and a nail gun and a bunch of subcontractors getting paid by the square foot.

© Katerra does CLT in Portland

Can Katerra make it work? Its timing is good, given that the supply of undocumented workers might dry up under a Trump administration. They appear to be learning from the experts in Europe and buying their tools instead of reinventing the wheel. They are going after multiple family units where they are less subject to the whims of the rich one-off buyer like Blu Homes is.

But unlike Europe where government-supported social housing keeps the factories running, Americans have Ben Carson running HUD. Unlike Europe where they have high standards of energy efficiency, the U.S. is killing Energy Star and promoting cheap gas. Unlike Europe where multiple family housing is almost universal, in the hot markets like Seattle and San Francisco, it takes years to get approval for anything, thanks to NIMBY protests. Conditions are very different, but we can always hope.

A building is not an iPhone

Chris uses modular and prefabricated interchangeably, which is problematic. He calls Forest City Ratner’s 461 Dean building a success when in fact it was a spectacular flop. But for me the biggest problem in the article is the title, because a building is not like an iPhone.

© Katerra/ assembling house in field. Note insulation and wiring or lack thereof.

• iPhones are made by the millions and they are all the same. Every building and every site is different depending on bylaws, climate, physical constraints, seismic conditions and more. Almost every building is a one-off, which really messes up the economies of scale.
• iPhones are teensy and can be shipped all over the world. Buildings are big and shipping is expensive, particularly if designed as modular instead of flatpack. Distance really matters.
• iPhones come full assembled. Buildings made in factories have to be assembled on site, even if they did go together like Legos, which they do not; Legos do not have plumbing and wiring and fire separations and waterproofing and foundations, all of which have to be done by people on site. This means you need either reputable local trades to put it together or you have to ship crews with the building, which gets really expensive.

Chris acknowledges this in his conclusion, noting that “homes, after all, aren’t like cellphones. We can’t just stick the old ones in a drawer when the latest model comes out.” Perhaps they shouldn’t have started the article with such a dumb title.