Modular vs. Stick-Built: Going Mod forum suggests now is the time to explore new construction options
BIA and When We Fix It Coalition Forum
With the fourth highest construction costs in any major city in the country and the third lowest sales prices, competitive home building in Philadelphia is impossible. The Going Mod forum looked at the impacts of that disparity and whether modular building technologies can reduce costs and increase investment in the city’s neighborhoods. The bottom line: modular construction can help, but Philadelphia’s tax abatement program for residential construction will still be needed. A detailed study shows that going mod can save up to 20 cents on the dollar and increase home building by 20 percent with current subsidies. It makes sense for builders to learn more about modular construction now, when building is slow, and expand their options for the future.
Released today at a breakfast forum hosted by the BIA of Philadelphia and the When We Fix It Coalition, Going Mod: Reducing Housing Costs in Philadelphia with Modular Construction is an objective price comparison between modular and stick-built construction in the city and suburbs. Four contracting firms were asked to submit bids for the construction of homes with identical specifications using each construction method. Bids were requested for a 16 x 40-foot rowhome (the size of standard workforce housing in the city) and a 20 x 40-foot townhouse (the smallest marketable product in the suburbs) at specified urban and suburban locations. Bids were also requested from manufacturers that build modular housing components, transport them, and set them on site.
Author Karen Black of May 8 Consulting presented the report’s key findings:
- Modular construction significantly lowers the cost of construction in the city.
- Constructing a house in Philadelphia costs substantially more than building an identical house in the suburbs.
- Modular only provides costs savings in the suburbs when a singular modular box is used per floor. (The maximum width of a modular building unit that can be transported on Pennsylvania state highways is 16 feet, so that a 20-foot wide home would require two modules fastened on site.)
- The four contractors’ bids differed significantly for both stick-built and modular construction.
- High finish costs charged by contractors lacking modular construction experience or by those who prefer stick-built construction can significantly reduce modular construction’s cost efficiencies.
In addition to cost, the study examines other important factors in comparing modular and stick-built construction. For example, while traditional building methods offer greater design flexibility, modular projects can be built faster and stronger. Both types of construction require a general contractor, but more local workers are employed for stick-built housing. And although stick-built and modular can both be environmentally sustainable, some green features favor modular building, which can minimize site disturbance and be completely deconstructed and recycled.
The conclusion is that modular building is a viable option for new housing construction in the city of Philadelphia and now is the time to educate developers, contractors, and potential owners. The report also recommends attracting a modular factory to the city or near region to further reduce costs.
Forum organizers invited Kevin Gillen, vice president of Econsult Corporation, to speak about housing prices and help make the case for addressing construction costs now. “All outcomes are bad for a high construction cost market,” he said. When it costs more to build a home than buyers are willing to pay, fewer homes are built, the flow of new housing is insufficient to replace aging stock, the total housing supply contracts, homes become less affordable, and tax revenue is reduced. Although housing prices doubled in the past 10 years in Philadelphia, property values are still way below construction costs, so that the model predictions above hold true. Housing starts in Philadelphia are well below those in the suburbs and overall housing stock increased nine percent in the suburbs and just two percent in Philadelphia between 2000 and 2010. The positive note is that if Philadelphia can bring its construction costs in line with those of the suburbs and state, much more of the city would be affordable to home building.
The forum ended with a panel of experts for a Q&A segment, including: Kevin Gray, Real Estate Development Director for the New Kensington CDC who worked with weeHouse design firm Alchemy Architects to address “gap tooth” sites and blight with affordable modular housing; Matt Koenig, AIA, of JKR Partners LLC who has worked on seven modular projects in the region; David Perlman, president of BIA Philadelphia and a developer with experience in both modular and stick-built construction; Paul Commito with AMC Delancey Group, hired to obtain accurate, objective cost estimates for the Going Mod report; Mark Durkalec, Business Agent, Carpenters Metropolitan Regional Council; and Charles Kasko of Signature Building Systems, a custom modular home builder with a factory in Moosic, Pennsylvania.
Questions and comments focused on the perception of consumers and the need to educate the public and industry professionals alike; opportunities for local carpenters and other workers related to finish work and an increase in building overall; bringing architects and manufacturers together to collaborate; and production flow and payment process. The discussion was generally positive, although Mark Durkalec expressed concern about the impact of modular construction on the local workforce. “Man hours for union carpenters on modular projects are reduced 70 percent from that of conventional construction,” Mr. Durkalec said. “Modular housing has come a long way and it seems to be where the market is moving in Philadelphia, but we don’t like to see modular. We’re not knocking it, but we want you to know that the union recently negotiated an agreement that saves builders 34 percent on construction costs on private market housing.”
Download a copy of the Going Mod Report and Going Mod Appendix. View PowerPoint.