Overview:
Modular housing is an old development technique that sees homes built off-site before being shipped off for completion. This development technique is seing a resurgence given its cheaper and faster building process. Could the City of Fresno also see a rise in this type of housing?
Fresno expects to open a first-of-its-kind housing project by the end of this month.
In the short term, the project will introduce nearly 100 apartments to homeless youth in the city.
Fresno leaders hope the success of the project’s development process encourages private developers to look toward an unconventional method of development to help address the city’s desperate housing crisis — with an estimated shortage of over 35,000 affordable homes.
The Welcome Home project on Sierra and Polk Avenues in northwest Fresno is a modular development. The homes are essentially built off-site and then shipped off on trucks to Fresno where it’s assembled and finished, like Legos or a car assembly line.
Though the build method differs from traditional, or “stick” method building, modular development provides opportunities for shorter construction times and cheaper development costs.
Fresno leaders like assistant planning and development director Phil Skei hope those incentives can lead to this old building method finding a resurgence in the city.
“We certainly hope so!” Skei said, adding that it hopefully won’t just be affordable apartments, but market-rate projects, too.
“However,” he added, “construction decisions are the choice of housing developers.”
The Welcome Home project
The City of Fresno and Valley Teen Ranch partnered to develop the $27 million “Welcome Home” housing project, with $2.4 million coming from the City and $21.9 million coming from Project Homekey — a pandemic-era state program that funneled millions of dollars to local governments to buy and convert old hotels into apartments for formerly homeless people.
Homekey projects have an aggressive turnaround deadline of 12 months, meaning grant winners usually have to hit the ground running once the money is in place. Skei said that for this project in particular, taking the modular route instead of the traditional, or “stick” method, was the only way the City felt it could meet the funding’s tight deadline.
“We were excited to demonstrate how quickly construction can occur when utilizing non-traditional housing products,” Skei said of the decision.
Skei added that a similarly sized project using the “stick” method would have cost “well above” $500,000 per home, and take about 16 to 20 months to complete. This project will cost about $280,000 per home and takes about nine months to build, according to Skei.
Fresno Mayor Jerry Dyer and City Council President Mike Karbassi have also championed the assembly-line method.
“It’s rapidly housing people at an affordable price for taxpayers, and I want this model in northwest Fresno to go throughout the entire city,” Karbassi said in an interview last year with ABC30.
Fresno Housing Authority CEO Tyrone Roderick Williams said they’ve also been looking at “all possibilities” for alternative development, including modular. But while he’s supportive of the specific northwest development, he stopped short of calling modular housing the wave of the future.
“I, like the mayor, am very supportive of anything that can expedite (development) time,” Williams said.
The project, which currently has a tentative opening date of May 27, according to Skei, has a chance to not only be a boon for Fresno’s homeless youth, but a catalyst for change in a city in desperate need of more housing.
A ‘new way of thinking’ about modular homes
Modular housing accounts for only about 4% of current housing construction in the United States, according to Optimum Modular Solutions – the developer of the Welcome Home project.
In large part, that’s due to the reputation these developments have attached to them for years. Though the building method itself is not new, modular development saw a decline in use following public perception that the practice led to unsafe households, and ultimately, more appropriate for run-down homes.
Dave Clevenger is the CEO of PreFab Innovations, a modular housing company based in downtown Fresno. Clevenger’s company focuses on accessory dwelling units, which today are the more commonly accepted modular housing products. He said he’s seen people parrot those same misconceptions before.
Clevenger, however, still decided to jump into the world of modular housing after growing frustrated with the lethargic pace of traditional home-building.
“Nothing is built outside of a factory anymore,” Clevenger said. “Cars, watches, iPhones, everything is built inside of a factory environment. Why do we still do houses that way? It’s just because nobody’s taking it on.”
Clevenger and Williams said the low market share is mostly attributed to the novelty of the development practice. They said the increase in modular housing development will take time.
“That market has been established for a long time, and it’s sort of just the way we do things, and so it’s hard to get capital and interest to pivot to a new idea,” Clevenger said.
“When we moved from horse and buggy to cars, that was a change in technology and transportation delivery systems” Williams said. “We’re in the middle of a transition from ‘stick-built,’ traditional, the way you’ve been doing it for the last 200 years, to a new way of thinking. It takes a while for that to become widely accepted, to become widely understood.”
Other jurisdictions have also seen pushback from trade unions who fear increased modular construction can lead to reduced hours and staff. Speaking for his own company, Clevenger said he has no issue with trade work.
“There is plenty of work to go around,” Clevenger said. “I don’t have any issue with them. I think if people are willing to show up and work, regardless whether they’re affiliated with the union or not, there’s plenty of work to do.”
As housing costs continue to rise, modular building has begun to look like a more enticing option for nervous developers seeking safer investments.
However, even supporters of the more novel process acknowledge it’s not a silver bullet.
Skei said that the way modular gets built makes it difficult — if not impossible — to make any changes in the middle of construction — a flexibility that is afforded to traditional building.
And modular’s reputation has also been harder to shake for lenders, who may be more apprehensive to loan money to first-time home owners and private developers looking to make the pivot.
Williams also said that, in his experience exploring modular, the cost savings haven’t always been as great as they’d hoped. It’s a reason they haven’t gone all in just yet.
“We know that it’s a shorter time frame,” Williams said, “but what we’re seeing is that in some cases, the costs (of a modular development) are not that much lower in other cases, depending on the structure of the buildings…so we’re having to weigh that.”
Skepticism from lenders and builders was at least part of the reason Fresno leaders were eager to frame the project as a possible housing solution for a desperate city.
“Because the private sector had not begun utilizing modular buildings in Fresno yet,” Skei said, “this project was an opportunity for the public sector to demonstrate the many advantages of this building product, with the hope we will see more in our city.”
He added that there are no restrictions that prevent modular homes from getting built anywhere in the city. Fresno could also see two other city-sponsored, modular projects, though Skei added that since those projects still need tax credit financing to come through, there is no timetable for either of them.
Can we expect to see more modular projects in the future?
A common misconception about Fresno’s role in addressing the housing shortage is that the city is a developer — but it’s not, Skei said. The city’s role involves allocating funding and land to developers, but it’s ultimately up to the builders to spur new construction.
Clevenger said he believes the city could see more home-building through increased incentives for developers. Developers are building modular homes in bigger cities like Los Angeles and San Francisco, he said, because the profit margins are bigger and more reliable. He said he believes incentives can drive more development locally.
“You can do that through grants. You can do that through streamlining the permit process. You can do that through tax incentives,” Clevenger said. “The city needs to look at all avenues to create desire and developers to do business in the city.”
Williams said, modular or not, solving the housing crisis is “a marathon and not a sprint.” While he welcomes the introduction of a new, innovative way to develop, he hopes people’s expectations are properly set.
“We’re going to be dealing with this matter for the next 15 to 20 years. That’s the harsh reality.”
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