The Rush to Take Modular Homes Mainstream in Disaster-Ravaged Areas

Wall Street Journal

3 days ago

After Jerry Camarillo's childhood home in Altadena, Calif., burned down, he was determined to rebuild the one-story, midcentury ranch house exactly as it was before the Los Angeles wildfires.
That all changed with one look at the home's insurance policy, which would cover only a fraction of the $700,000 estimated cost to rebuild.
Then he stumbled across Hapi Homes, a company that builds prefabricated homes as pieces in factories and then assembles them on-site. The company said it could build a home for $200,000 less than the cost of traditional construction, and do it in less than half the time.
The new home would look and feel the same as it did before the fire, Hapi Homes pledged. Camarillo was sold. 'This makes rebuilding possible,' he said.
Companies that use modular construction, 3-D printing or other nontraditional methods have existed for decades on the fringe of home building, often tainted by an association with lower-quality construction and previous missteps.
Now, these companies are trying to break into the mainstream by offering a faster and less costly alternative for rebuilding in cities ravaged by natural disasters.
Many of the thousands of displaced homeowners in Los Angeles, Hawaii and the Southeast are giving these businesses a look. Victims of hurricanes, wildfires or other disasters can be desperate to rebuild, but their insurance payouts are often well short of what is needed to cover traditional construction costs.
'Homeowners in a moment of crisis want to try something different,' said Jason Ballard, chief executive of ICON, a company that makes 3D-printed homes.
ICON uses giant 3-D printers to squeeze layers of concrete into the framing for a house. The company received hundreds of calls about building projects in disaster-prone areas, including from Los Angeles homeowners and developers after this year's fires, Ballard said. Now, the Texas-based company is rearranging its expansion strategy to target disaster-prone markets such as California and Florida.
Modular builder Samara is working with billionaire developer Rick Caruso's rebuilding nonprofit, Steadfast LA, to offer dozens of free modular homes to low-income residents who lost their homes in the Los Angeles fires. And the Los Angeles Mayor's office is having conversations with more than a dozen alternative builders to explore nontraditional construction options.
'Disasters are actually going to be the turning point' for the wider adoption of factory-built housing, said Vikas Enti, chief executive of Reframe Systems. 'That's what we're betting on.'
Enti's Massachusetts company builds homes in robotic, artificial-intelligence-powered microfactories. It is planning to build a California microfactory 18 months earlier than initially scheduled, he said, and to hire local Los Angeles employees to meet the postwildfire demand.
Offsite-factory construction can accelerate the building process because fewer workers are required and materials are often purchased in bulk. The shorter timeline can sharply reduce carrying costs for a project.
And in disaster areas, where many builders are competing for construction labor and materials, factory-home manufacturers have an edge because they can access less crowded supply chains in other cities and states.
After the 2023 wildfires in Maui, Hawaii, more than 100 modular companies flooded the Hawaiian market. State officials alongside the housing nonprofit HomeAid Hawaii commissioned five modular vendors to help build 450 temporary housing units for displaced residents.
None of these modular companies had worked in Hawaii previously. But their emergency entrance into the market has made Hawaii's public officials more open to alternative competitors.
'As a public official, I'm now saying, 'Hey, we do have alternatives to typical construction,' ' said Joseph Campos II, deputy director at Hawaii's Department of Human Services. 'There can be a partnership with traditional construction trades.'
That is a stark pivot from the decadeslong reputational problems plaguing the alternative-building industry.
Off-site factory home construction has historically been used for lower-budget homes, leaving many people with the preconception that it tends to be of lesser quality. That stigma has been compounded by high-profile failures.
'Large companies have come out with really big promises,' said Michelle Boyd, the chief strategy officer at Terner Labs, a housing research nonprofit affiliated with the University of California, Berkeley. 'And then they go belly-up.'
In 2021, the tech construction startup Katerra filed for bankruptcy after raising nearly $3 billion from a host of notable backers such as SoftBank Group. Katerra vowed that it could use manufactured construction to turn home-building into a 30-day, assembly-line process. But the company had yet to figure out the nuts and bolts of that mass production before committing to projects.
Some alternative builders are going to great lengths to rehabilitate their image. Hapi Homes, for example, invited Camarillo to tour the company's Utah factory that helped close the sale.
'I had to go see if this was real or just a scam,' he said.
Still, the problems of alternative building stretch beyond a bad rap. Expanding these businesses to a national scale is difficult because of the expensive transportation costs that come with shipping entire homes from one place to another.
Home builder Williams Rebuild, which intends to build between 120 and 150 homes a year for Los Angeles wildfire victims, is exploring whether building wall panels in a factory could help reduce the materials that need to be stored on-site, said Dan Faina, the company's president.
'If not at major scale, it definitely won't be cheaper' than building homes in bulk on-site, he said. 'I think the adoption rate is going to be substantially less than the excitement that's going behind it.'
SoLa Impact, an affordable-housing developer based in Los Angeles, is supporting state legislation to expedite approvals for modular housing.
SoLa CEO Martin Muoto said the acute housing shortage exacerbated by the wildfires could boost support.
'Never let a crisis go to waste,' he said.
Write to Rebecca Picciotto at [e-mail] and Nicole Friedman at [e-mail]