Factory-built housing hasn't taken off in California
latimes.com
latimes.com
Condo defect law is far far more onerous than defect law for single family homes, to the point that it doesn't make sense to offer units for sale. There are those working on reform but it's a slow process.
I have see it happen with older friends: they could move to a smaller place that's more appropriate but they'd had to pay a ton more.
The Prop 13 distortion on the market is very extreme. Perhaps even more so than the super low pandemic interest rates compared to today's interest rates.
Just the sewer (the capacity only, no work done) was $11k. Then add on the park and school fees which both were over $10k. No wonder it a builder has to build something over 2000 SQFT to make it pencil out.
Buying property should have the same transparency (into costs and fees) as breakfast cereal with nutritional labels.
I'm with you up until that. Maybe there are places where you have to build over 2000 sf due to regulations. For the most part, this is an industry talking point to justify building expensive houses on the limited land that gets zoned for residential. It gets repeated a lot.
You can build smaller houses but you can't charge as much for them. I'm not faulting the builders for maximizing profits, but it's still a talking point. (And in the grand scheme of things, it's not the reason housing is unaffordable.)
I kind of feel it is the inverse.
If you can build a house for X$/sqft, you have a linear relationship. If it costs 100k _plus_ X$/sqft (for sewer, permits, etc) now you have a floor. You can sell a bigger house for 600k, or a 35% smaller house for 425k, odds are you’ll sell the bigger house quicker. I bet the 325k homes would sell like beanie babies in the 90s in places like sf.
The actual problem, the elephant in the room, is that California is expensive, both by popularity and regulation. This makes for an embarrassing conundrum where California is simultaneously pushing poor people out while trying to subsidize their life via social programs.
I don’t think it’s working.
>> The actual problem, the elephant in the room, is that California is expensive, both by popularity and regulation. This makes for an embarrassing conundrum where California is simultaneously pushing poor people out while trying to subsidize their life via social programs.
> I think your comment works by making a bold assumption that construction in California is wildly expensive than elsewhere and that it’s the major driver of cost.
I didn’t make any bold claims.
Yes, and that's the point I was making in my comment. What's driving the price gap is that you're selling to a group with a much higher capacity to pay when you're building the 2000 sf homes.
But that has nothing to do with it being unprofitable to sell lower-priced homes, it's just less profitable. The talking point makes it sound like the home builders are trying to do good things, but they're victims of the government. No, it's nothing more than a desire to maximize profit, because the folks that are looking for 2000 sf homes are high income households with kids, and they're willing and able to pay a steep premium for that house.
You believe that builders are this nefarious cabal. I don’t think this is true. Hanlons razor and all that.
> You believe that builders are this nefarious cabal.
No, calling them profit maximizers has nothing to do with them being a "nefarious cabal".
When folks come along and ask "Why can't I afford a house?" the builders don't give the honest answer "Because we're maximizing profit, and that means we don't build houses for you." Instead they say "We're trying but the government won't let us build houses for you."
IMO the North America economic-societal "model" is High cost + More regulation. Everything is legal and proved by some experts, and regulated to the maximum, but in reality they also build moats after moats for existing interest groups (landlords, insurance companies, big contractors, etc.).
And everyone thinks this is the right model for "democracy" and "ruled by law". People may blame for part of the model (e.g. landlords) but never realize that the whole model is built to support this.
This is my observation so definitely biased.
Overall the price you see on the website is the price for the unit. You need to factor in delivery, upgrades, installation and site design).
As mentioned, it wasn't a cheaper option, but rather a better investment with the quick build and quality control. Our total for the build (with land) was still a savings compare to what is available in our local market.
We figured out that overhead power lines would prevent it from being lifted in by a crane, so we decided to have it assembled onsite. Then the county decided -- after full approvals -- it needed a concrete foundation. We asked how to do that when the backyard already had a concrete foundation. Building department said pour it on top of the existing foundation.
I've mentally blocked my memory of the other ways the county came up with to make it hard to place this cuboid shape in my yard, but each time added another $10K. And the end result, other than being a foot off the ground because of the duplicate foundation, was nothing more than the $30K structure I originally bought. I can't point to where the extra $50K went and say at least I got value from it.
Like all home construction or remodeling, each misstep was outrageous, but tolerable because it was surely the last hiccup before completion. Only later do you realize it's Zeno's Paradox and you're always halfway from the finish line.
Whoever your contracter was doing paperwork screwed you.
$33K list price 4K delivery 3K sales tax 8.5K onsite assembly 1K building application and permit
So that's $49.5K for what in my mind was a $30K prefab office.
Then a basic wood frame foundation for a couple grand, torn down when the county changed its mind about the foundation type (but I did end up using most of the wood for other projects), a $4,500 site plan demanded by the county now that their concrete foundation made the project look more like a permanent fixture on the property, additional permits for the foundation, changes to the site plan when we discovered the existing foundation under the backyard pavers, and then building the foundation and the framing atop it, which all in totaled $70,485 -- not the $80K I remembered.
So I started with "Ooh, an extra room for about $30K?! Let's do it!" to "Ugh, it's actually going to be $49K with all the tax and delivery and permits," to "Aaargh, $20K more because of errors or crazy shit that they could have told me from the start." Yeah, maybe the contractor used the foundation change orders to sneak in an extra $2K-$3K, but I'm not a GC and by that point I wasn't going to bid it out.
But, as I said, I love the office and use it daily, so I can't say I regret it.
It was a complete disaster. The developer hired contractors who didn't know what they were doing and ignored stop work orders when the city learned of the problems, which included setting the modular units on their foundations without the proper permits and in violation of state building code. A separate fire department inspection deemed the structure "unsafe for interior firefighting or for interior response by first responders." The site has been abandoned for about 5 years, and the development company filed for bankruptcy.
> contractors who didn't know what they were doing and ignored stop work orders
I mean... if you can't even stop when told...
It cost me less than half the median CA home price, with 7 acres, most of which I made walkable. I just had a nice morning walk through my "arboretum" of mostly manzanita plants. Real pretty ones, and I took some nice photos.
I could't move the home, nor place a new one in most locations, including the vicinity of my local downtown area. I checked, just for jollies.
Land costs drive CA housing. Look at charts or ask ... you know who.
Example, In April 2024, the Dallas-Fort Worth (DFW) metro area permitted 7,851 new homes, surpassing the 7,612 permitted in the entire state of California.
There are so many other examples
https://www.sfchronicle.com/sf/article/mission-district-affo...
https://www.sfchronicle.com/sf/article/housing-supervisors-n...
The market is not free. It is heavily regulated by what can be built where when. There is a distinct lack of planning and regulation to protect consumers in this market.
The moral difference between BlackStone and the random NIMBY homeowner is that the homeowner exerts control over the planning process while Private Equity just piggybacks on the homeowner efforts.
[1]: https://missionlocal.org/2018/06/the-strange-and-terrible-sa...
[2]: https://sfyimby.com/2022/05/san-franciscos-historic-laundrom...
Of course, the tone of thse first article makes the problem even more obvious, in a black comedy kind of way, with the writer complaining about "luxury prices" of the resulting apartments without considering even for a second why the prices might be so high.
It's surprising to me that even the most optimistic estimate here is so modest.
Prefabrication doesn't save all that much money: you still need several guys, now with a crane, and you need to ship and deliver an oversize load. A lot of the cost is finish (including cabinets, countertops, appliances), and in California, land and compliance.
With that said, the advantage disappears compared to national builders- the guys who buy up big farm fields and build entire subdivisions all in one go before they even have buyers. They can keep crews rotated between jobs in a fairly predictable schedule, so the only thing holding anyone back compared to the factory is bad weather preventing digging out room for foundations.
you as a one off can't because the plumber isn't going to give you the priority needed.
Labor and materials isn't the problem with housing costs. It's onerous permitting and zoning and code requirements.
For them, blocking factory built housing meant they had a monopoly on the local housing development projects and easy commutes from their homes (which are protected from property tax increases by Prop 13) to the local job sites.
As these original local trades people have aged out of the workforce they are replaced by younger trades people who can't actually afford housing in the area face 1-2 hour commutes, I think there will be less resistance..
The thought of living in a huge home in Riverside or Fresno with a 10-20 minute commute and building in houses in a climate controlled, OSHA inspected building will start looking more attractive.
China treats housing primarily as providing a place for people to live, not a speculative asset. In the West, housing is largely a speculative asset where everyone from investor companies to individual homeowners become incentivized to make housing scarcer and more expensive at every level. China, on the other hand, makes it more expensive and more difficult to own second and third homes.
Now you might be tempted to object and point to things like the Evergrande bubble. And that's actually evidence of success not failure. Xi Jinping quietly changed China's policy, starting around 2014 to focus on living not investment, and Evergrande was essentially allowed to default because housing access is a priority over investors.
You really see this plays out with trains.
Chengdu has the 5th largest (by rail length) metro system in the world. It didn't exist before 2010. China standardized rolling stock so there's no time-consuming and expensive procurement process and there are economies of scale.
China has spent less than $1 trillion building ~50,000km of high speed rail. They initially bought high speed trains from Germany and Japan (IIRC) but now they make their own. To compare, the California HSR, if it ever happens, is estimated to cost in excess of $130B.
The point I'm getting to is that in the West every aspect and level of this is treated as a profit opportunity, which ultimately is a wealth transfer from the government to some company. Procurement, maintenance, track building, land acquisition, track maintenance, station building and so on. These are all state enterprises.
Back to housing, IMHO nothing will solve this problem so long as housing remains a speculative asset. There'll simply bee too much resistance to change.
https://en.wikipedia.org/wiki/Chinese_property_sector_crisis...
https://en.wikipedia.org/wiki/Public_housing_in_Singapore
https://en.wikipedia.org/wiki/Housing_in_Vienna
Of course none of this matters to the US or to this thread. Half this country won’t even wear a simple mask to save their neighbors lives. Forget about coordinating public housing.
Where and who did you get this idea from? Speculation in China makes speculation in the USA look like child’s play. Speculation is such a huge part of China’s housing economy that the government has to constantly fight against it, or for it when they fight too hard and the economy starts to teeter, and then fight hard against it again when normal people can’t compete in a market full if Wenzhou housewives. I mean, that even Wenzhou housewife is still a meme for property speculator should give you a clue. The government only ever tolerated speculation in the first place because it used housing as a jobs program for a huge under employed rural population.
Whatever the USA does to fix its problem, copying China’s problems isn’t going to help, and will actually make things worse.
HSR isn’t used for commuting in China like the Shinkansen is used for commuting in Japan. It just isn’t very viable to transit from an HSR station to your job, HSR stations aren’t very central even in tier one cities. Example: you work in Beijing chaoyang and want to live in cheaper hebei, let’s say right on the HSR line so let’s not count commute times on your home end. But just getting from Beijing South to…anywhere let alone chaoyang (and chaoyang is huge, let’s say the CBD just for kicks), is going to take an hour or two even with the subway in place.
What we need to copy from China is there ability to get projects done on time and on budget. But everything else…china has its own problems that it’s still working on.
This information is so out of date it borders on misinformation. China's real estate market "crashed" at least 5 years ago at this point. And it didn't just crash in the same way that, say, the Toronto condo market has crashed. It crashed because the government burst the bubble, deliberately, to make housing a priority not an investment. Put another way, like I said above, housing people was made a priority over investor returns.
> HSR isn’t used for commuting in China
China's HSR now has over 4 billion passenger movements a year [1]. It's largely an alternative to short=to-medium distance air travel eg Beijing to Shanghai is ~1200km, roughly equivalent to Chicago to NYC. What's commuting got to do with it? Are you comparing to Japan where people might live 2 hours commute away from work for various reasons?
https://www.atlanticcouncil.org/blogs/econographics/chinas-p...
Second, this is a good thing. It is a success not a failure. I mean it's bad for the investors but China has decided people having affordable housing is more important than the investors. The investors aren't being bailed out.
Why is this a good thing? Because the only way we can correct Western housing markets at this point is by doing what China has already done. That is, crashing the housing market. And that is political suicide so we are where we are and it's not going to get better anytime soon.
Here is my crazy theory: After only one year of the second Trump admin, the US now seems to have damaged one of its greatest assets: namely attracting the cream of the crop. One second order effect of this is now we are entering population decline. If it becomes terminal, who is going to take out a 30 years mortgage on the overpriced houses? As boomers die off, we might see a collapse. There might be a scenario where a future Trump like character fumbles the bailout(or refuses to do it) and the housing market finally is allowed to burst.
Ten years of stagnating house prices would bring them back into the affordability range.
And they've gotten it. Build quality and durability is the poorest it's been in decades. Do you really think I want to live in a 200 unit timber framed apartment building with the thinnest walls legally allowed by code?
> Henry Ford, but for housing
Do these people not live in houses? Or do they just assume that the lack of luxury is something people /want/?
> Will the state step in?
Haven't they done enough damage already?
1. Baby boomers biggest demographic group holding on to homes, that means a huge decrease in housing supply
Read it twice as that is the major obstacle, nothing more nothing less; and notice you cannot solve it by asking retirees to sell that home and downsize as over time they lost purchasing power to do exactly that move!