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Achieving Modular Multifamily Affordable Housing

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As construction costs soar, funding for multifamily affordable housing remains relatively stagnant. The result is that multifamily affordable housing developers are increasingly pinched, forced to find creative ways to reduce already-tight construction budgets. Too often this causes delays and adversely affects the quality of the end-product. Meanwhile, the factory-built modular housing market is growing more sophisticated and efficient. It is estimated that the average modular multifamily project can save anywhere from 5% to 10% of overall construction cost relative to a traditionally framed building, not to mention the time savings of up to 40%. Yet, to-date, the modular industry has primarily served market-rate developers. The fact is that there are a number of financing, logistical, and permitting challenges that make modular affordable housing more difficult to achieve than modular market rate housing. Addressing these challenges has the opportunity to increase the affordable housing pipeline and address the affordability crisis.

Learning Objectives:
1. Learn about the cost and time saving opportunities for affordable housing associated with prefabricated construction.
2. Learn how to navigate the regulatory hurdles associated with prefabrication.
3. Learn about design constraints and opportunities associated with prefabrication.
4. Learn how construction documentation techniques may vary for prefabrication.

Speakers:
Brad Leibin, AIA Associate, David Baker Architects

Sharon Christen Senior Housing Developer, Mercy Housing California

Larry Pace Chief Operating Officer, Factory OS, Founder and President, Cannon Constructors North

This session was hosted by the AIA Housing and Community Development Knowledge Community in partnership with the Open Architecture Collaborative on May 6th, 2019.

Published in: Design
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Achieving Modular Multifamily Affordable Housing

  1. 1. Achieving Modular Multifamily Affordable Housing AIA Webinar Brad Leibin, AIA #DavidBakerArchitects
  2. 2. 35+ years 13000+ homes 7000+ affordable 400+ awards
  3. 3. Design for Affordability ● California needs 1.4 million more affordable homes* ● Escalation at 5%-10% per year in the Bay Area ● Public funding sources relatively stagnant *California Housing Partnership, “California’s Housing Emergency Update,” March 2019
  4. 4. Design for Affordability ● Speed ● Density ● Cost ● Quality
  5. 5. Affordability by Design
  6. 6. Code Evolution
  7. 7. Modular
  8. 8. 1,400+ Modular Apartments
  9. 9. Modular: Union Flats 242 UNITS
  10. 10. Image: David Baker Architects Modular: Page Street Affordable 82 UNITS
  11. 11. Modular: Tipping Point Homeless 146 UNITS
  12. 12. First Modular Experience: 2006
  13. 13. Guerdon Wood Boise, ID Factory OS Wood Vallejo, ID US Modular Wood Southern CA Horizon North Wood Calgary, Canada Simplex Wood Scranton, PA Westchester Wood Wingdale, NY Palomar Steel DeSoto, TX Nashua Wood Boise, ID Stack Steel China/Canada RAD Urban Steel Lathrop, CA Champion Wood Troy, MI ATCO Wood Pocatello, ID Z-Modular Steel Birmingham, AL Plant Prefab Steel Rialto, CA Silver Creek Wood Perris, CA Blox Steel Bessemer, AL Modular Factories
  14. 14. There’s still a lot of room to improve!
  15. 15. Benefits of Modular ● Up to 40% Time Savings ● 5% - 10% Construction Cost Savings ● Better Quality Construction Product
  16. 16. Foundations and Groundwork Superstructure Work Foundations and Groundwork Superstructure Work Traditional Process Modular Process
  17. 17. General Modular Challenges ● Lack of GC and Subcontractor Familiarity ● Unique Permitting and Inspection Process ● Labor Unions
  18. 18. Challenges for Affordable Developers ● Early Capital Costs ● Affordable Developers have smaller production runs, more unit types (lower efficiency) ● High Modular Demand, Limited Modular Suppliers ● Bonding Capacity
  19. 19. 16’ 72-74’ 12’ Max Shipping Dimensions
  20. 20. Staging
  21. 21. 65’ tall Type 3 Type 1 Podium 9’ ceilings Site-built construction Zoning Code Variations Stick-framed Building Height
  22. 22. 65’ tall Type 3 mods Type 1 Podium 8’ ceilings Modular construction Zoning Code Variations Modular Building Height Low Ceilings
  23. 23. 71’ tall Type 3 mods Type 1 Podium 9’ ceilings Typical modular construction Zoning Code Variations Typical Modular Building Height
  24. 24. Building Permit Process ● Permitting process may vary state-to-state ● In California, prefabricated modular housing is permitted at the State level ● Willingness of local jurisdictions to abdicate modular inspection varies
  25. 25. Design Phase Build Phase Permitting Process in California
  26. 26. State Review Set: Modules Only 3rd Party Plan Check Final approved set is used in factory for shop drawings of mods. City Review Set: Site Built Only In house plan check Final approved set is used for site-built construction Document Production in California
  27. 27. Achieving 10% Savings ● Currently that is best-case in Bay Area market Site Factory 27-35%
  28. 28. Floor Plans
  29. 29. Modular Floor Plate
  30. 30. 11’ 15’ 74’
  31. 31. 11’ 15’ 74’
  32. 32. What is Different: DBA 15 SF = ~2.3% loss 30 SF = ~3.2% loss Modular Unit Layouts
  33. 33. Corridor Utility Walls
  34. 34. Site vs. Factory Scope Clarity
  35. 35. Factory Set Floor Plan
  36. 36. Site-Built Set Floor Plan
  37. 37. Structural Schedule Delineation
  38. 38. Prototype Unit
  39. 39. Case Study: Tipping Point Homeless 145 Studios for Formerly Homeless San Francisco Development Team Tipping Point, Mercy Housing, San Francisco Accelerator Fund
  40. 40. Tipping Point Homeless ● City negotiated with trade unions ● Private funding (No MOD or MOH review) ● Accelerator fund underwrote risk for lack of factory bonding capacity ● State Density Bonus allowed for additional height (beyond zoning envelope)
  41. 41. Design Excellence
  42. 42. Thank you
  43. 43. transforming the construction industry by vertically integrating 21st century off-site building technologies, software operating systems, lean manufacturing & progressive labor practices to deliver multifamily housing more than 40% faster and at 20% lower cost
  44. 44. While manufacturing and other industries have raised productivity steadily in the past few decades, in construction it has remained flat or gone down in many countries. In many places residential housing is still built in the same way it was 50 years ago. Project costs could be reduced by about 30 percent and completion schedules shortened by about 40 percent if developers make use of industrial approaches, such as assembling buildings from prefabricated components manufactured off-site. McKinsey Global Institute Tackling the world’s affordable housing challenge October 2014
  45. 45. Less Cost Less Time Less Waste Less Site Impact Greater Predictability Increased Safety Repeatability / Efficiency Why Off-Site Construction
  46. 46. Why Off-Site Construction Streamlining A Broken Construction Industry DEVELOPER Home Automation R&D Installation GC Partners Pipeline Partners Quality Assurance/ Quality Control Supply Chain Management Lean Manufacturing Arch & Engineering Window/Door Contractor Material Delivery Plumbing Subcontractor Site Planner Waterproofing Consultant Environmental Consultant Material Delivery Mechanical Subcontractor Concrete Subcontractor Roofing Subcontractor Material Delivery Flooring Subcontractor Electrical Subcontractor General Contractor Material Delivery Engineers Architects Factory_OS
  47. 47. STRATEGIC PARTNERSHIPS • Take part in thought- leadership programming in our education and event series • Through investment or sponsorship, support the research and work of the factory and innovation center • Active in finding solutions to challenges that arise when designing and building modular homes • Contribute to the evolution of the modular construction industry RESEARCH PARTNERSHIP MANUFACTURING PARTNERSHIP CONTENT PARTNERSHIP FINANCIAL PARTNERSHIP
  48. 48. BUILDING ENVELOPE SOLUTIONS COMBINED WITH INNOVATION FOR INDUSTRIALIZED CONSTRUCTION TILE, FLOORING, AND COUNTERTOP SOLUTIONS FOR ALL OUR MODELS LOCAL COMPANY WITH INNOVATIVE WINDOW SOLUTIONS AND A FOCUS ON MULTI-FAMILY HOUSING IAQ AND SMART HOME SOLUTIONS WITH ADDITIONAL OPTIONS FOR FULL AUTOMATION MANUFACTURING EXPERIENCE CURRENT MANUFACTURING PARTNERSHIPS
  49. 49. Why Off-Site Construction Increased Labor Productivity
  50. 50. Over 1,000 Modules Successfully Set by Factory_OS team within the past 18 months Why Factory_OS Proven Success in Off-Site Construction
  51. 51. 40% Faster, 20% Less Expensive Proven, Not Projected 5880 Third Street
  52. 52. 40% Faster, 20% Less Expensive Proven, Not Projected Marea Alta
  53. 53. 24" x 24" clos. 24" x 24" clos. M O D U L A R D E S I G N B Y ANDREW MEAGHER ENLARGED "TYPE B" STUDIO PLAN The Phoenix: Supportive Housing Model
  54. 54. Discussion Points • Many challenges facing affordable housing developers, particularly in the Bay Area – 5-10% cost escalation per year. Due to: • Reduced sub pool after the last recession • Complicated public Green, Stormwater, local Code requirements – public financing lenders and regulating agencies less tolerant of high costs • High cost limits limit the number of housing units that can be produced exacerbating homelessness crisis – Many homeless are homeless due to not being able to afford rent • The cost/time savings with modular could result in more affordable housing • However: – Developers need capital sooner for modular deposits for material procurement and to – Most modular providers cannot bond.. Typically public lenders and affordable housing construction lenders require major subcontractors (modular is typically 20-25% of the total construction contract) to have Subcontractor Default Insurance or provide a performance and payment bond.
  55. 55. San Francisco Modular Development Perspectives 1064 Mission Street – Permanent Supportive Housing Why Factory Built? Time savings • 256 studios; 2 1 BR staff units • The majority of the Type IIIA floors 2/3 – 6 are Type IIIA Factory Built Housing • Factory Built Scope includes: units, residential corridors, exit stair shafts, elevator shafts • Over 1-2 story Type I concrete podium • Type I/site built – will include most the building’s common areas. • Exterior will be installed on site • Team: • Developer: Mercy Housing CA and Episcopal Community Services of San Francisco • Architects: • Herman Coliver Locus Architects (40 + years experience with affordable housing in San Francisco/South of Market) • Lowney Architecture (will document the Factory Built scope) • Contractor: Cahill Contractors LLC
  56. 56. San Francisco Modular Development 1064 Mission Street – Permanent Supportive Housing Maximized Factory Built Scope Minimized – box types Site built = Floors 1, 2 and partial 3
  57. 57. 833 Bryant Street • Why Factory Built Housing – Tipping Point (gap funder and foundation focused on ending chronic homelessness) requires factory build housing construction be used to innovate affordable housing and produce project quicker and at a more efficient cost per unit. – 145 studios; 1 1 BR staff unit • Type I ground floor, Type IIIA floors 2-6 • Essentially all units exactly alike, and stack – Team: • David Baker Architects (experienced with modular) • Cahill Contractors LLC (experienced with modular) • Factory_OS, start up modular provider.
  58. 58. Modular Complexities It is an evolving industry
  59. 59. Labor • In a union town (such as San Francisco), modular had to be “approved” by the unions before it was allowed to be used for affordable, non profit sponsored housing
  60. 60. LBE Contracting Requirements • Need to be modified to allow for “modular” housing. – For 1064 Mission, we met early with the Contract Monitoring Division to get them to understand the scope of work between site built and factory built. – We did a typical bid process for the factory built provider selection. – We have LBE goals that are based only on the site built cost of work.. – For communities that have LBE goals, this negotiation needs to be done early.
  61. 61. Permitting • San Francisco has MANY local code amendments and essentially a “San Francisco Code”. – We agreed to meet SF Code in the modular built scope. This is not required but was politically required. – The locals will do a “courtesy” review of the modular built scope. This was also needed to build confidence and trust with the plan check and inspectors because of their previous (very poor) experience or perception of factory built housing. – Some inspection issues still need to be figured out. – An MOU between our local, City funders (OCII and MOHCD) and DBI/MOD/SFFD will be executed to document roles and responsibilities.
  62. 62. Bonding • Many modular providers cannot provide a performance and payment bond or be admitted under the general contractors Subcontractor Default Insurance (SDI). • A construction lender (and Mercy ☺) will require that you have a P&P bond or SDI prior to construction loan closing. Some lenders will accept a supply bond but that does not have the same protection as a P&P bond. • The provider selected for 1064 Mission and 833 Bryant has committed to be bondable by the time we close on the construction financing. – In the mean time, we’re working on back stops in case they don’t perform.. • These may be: – A large amount (likely 33-40% of the modular contract) as a Letter of Credit. The LOC would be posted by a foundation wanting to participate in accelerating, innovating, etc. affordable housing..
  63. 63. Risk Allocation • The General Contractor will not accept the risk of the modular provider not performing on time or going out of business. – Modular providers will not agree to liquidated damages – We’ve been negotiating with the General Contractor re how to “allocate risk” • Likely will need to monitor the schedules carefully to assess who causes delays. • The “backstop” and contingencies will need to cover for modular provider delay of failure. • We’d likely add some time to the lease up timeframe to mitigate against tax credit delivery adjusters.
  64. 64. www.mercyhousing.org/file/modularconstruction.pdf

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