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.

1. Achieving Modular Multifamily Affordable Housing
AIA Webinar
Brad Leibin, AIA
#DavidBakerArchitects

2. 35+ years
13000+ homes
7000+ affordable
400+ awards

9. 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

10. Design for Affordability
● Speed
● Density
● Cost
● Quality

11. Affordability by Design

12. Code Evolution

13. Modular

14. 1,400+ Modular Apartments

15. Modular: Union Flats
242 UNITS

16. Image: David Baker Architects
Modular: Page Street Affordable
82 UNITS

17. Modular: Tipping Point Homeless
146 UNITS

18. First Modular Experience: 2006

19. 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

20. There’s still a lot of room to improve!

21. Benefits of Modular
● Up to 40% Time Savings
● 5% - 10% Construction Cost Savings
● Better Quality Construction Product

22. Foundations and Groundwork Superstructure Work
Foundations and Groundwork
Superstructure Work
Traditional Process
Modular Process

23. General Modular Challenges
● Lack of GC and Subcontractor Familiarity
● Unique Permitting and Inspection Process
● Labor Unions

24. 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

25. 16’
72-74’
12’
Max Shipping Dimensions

28. Staging

31. 65’ tall
Type 3
Type 1
Podium
9’ ceilings
Site-built
construction
Zoning Code Variations
Stick-framed Building Height

32. 65’ tall
Type 3
mods
Type 1
Podium
8’ ceilings
Modular
construction
Zoning Code Variations
Modular Building Height Low Ceilings

33. 71’ tall
Type 3
mods
Type 1
Podium
9’ ceilings
Typical modular
construction
Zoning Code Variations
Typical Modular Building Height

34. 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

35. Design Phase Build Phase
Permitting Process in California

36. 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

37. Achieving 10% Savings
● Currently that is best-case in Bay Area market
Site
Factory
27-35%

38. Floor Plans

39. Modular Floor Plate

40. 11’ 15’
74’

41. 11’ 15’
74’

42. What is Different: DBA
15 SF = ~2.3% loss 30 SF = ~3.2% loss
Modular Unit Layouts

44. Corridor Utility Walls

45. Site vs. Factory Scope Clarity

46. Factory Set Floor Plan

47. Site-Built Set Floor Plan

48. Structural Schedule Delineation

49. Prototype Unit

50. Case Study: Tipping Point Homeless
145 Studios for Formerly Homeless
San Francisco
Development Team
Tipping Point, Mercy Housing,
San Francisco Accelerator Fund

51. 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)

53. Design Excellence

55. Thank you

56. 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

57. 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

58. Less Cost
Less Time
Less Waste
Less Site Impact
Greater Predictability
Increased Safety
Repeatability / Efficiency
Why Off-Site Construction

59. 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

60. 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

61. 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

62. Why Off-Site Construction
Increased Labor Productivity

63. Over 1,000 Modules Successfully Set by Factory_OS team within the past 18 months
Why Factory_OS
Proven Success in Off-Site Construction

64. 40% Faster, 20% Less Expensive
Proven, Not Projected
5880 Third Street

65. 40% Faster, 20% Less Expensive
Proven, Not Projected
Marea Alta

66. 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

70. 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.

71. 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

72. 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

73. 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.

74. Modular Complexities
It is an
evolving
industry

75. 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

76. 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.

77. 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.

78. 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..

79. 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.

80. www.mercyhousing.org/file/modularconstruction.pdf