A Brief History of Off-Site Construction in North America
The concept of achieving lower costs, better designs and higher quality in housing has deep roots in North America. Some historians point…to the packaged building materials imported by European colonists in the seventeenth and eighteenth centuries. Others point to the kit homes sold by Sears, Roebuck & Co. at the end of the nineteenth century. Spurred by housing shortages after World War II, firms sprung up to pre-fabricate wood, aluminum and steel wall sections, floor trusses and roof trusses, some offering a relatively complete package of components to builders. A few of those “prefab” companies still exist, while the mass-manufacture of components is now carried on by lumber yards and specialty truss manufacturers. In the late twentieth and twenty-first centuries we have seen the development of products focused on energy-efficiency such as structural insulated panels (“SIPs”).
The inception of mass-producing a relatively complete home in a factory is generally traced to the formation of the Sportsmen’s Trailer Company, later re-named Schult Homes in Elkhart, Indiana in 1934. Their first products were relatively small structures on wheels aimed at fishermen, hunters, and campers. It quickly became clear that there was also a market for trailers that would function as permanent housing. This got a boost during World War II when Schult got a contract to quickly build a large number of homes for the atomic bomb manufacturing facility in Oak Ridge, TN. While a few competing manufacturing firms were founded before WWII, the real growth erupted afterwards, often in northern Indiana by alumni of Schult. By the 1950’s, this industry had divided into specialists in permanent housing and recreational vehicles. Voluntary building codes were developed under the American National Standards Institute (“ANSI”) for both parts of this industry. Conflicting state regulations and serious national concerns about occupant safety led to federal legislation effective in 1975, the Manufactured Housing and Safety Code for permanent housing. The recreational vehicle industry continues to use various ANSI codes. The federal code is administered by the US Department of Housing and Urban Development (“HUD”), so homes built to that code are generally referred to as “HUD-cod homes.” From a marketing stand-point, homes in this part of the industry have evolved from being called “trailers” to “mobile homes” and, since the enactment of the 1975 code, “manufactured homes”. A similar regulatory path arose in Canada, with the Canadian Standards Association (“CSA”) providing a model code for such structures.
The focus of the manufactured housing aspect of off-site construction tended to focus on high affordability, with many homes placed on leased ground in mobile home or manufactured housing communities or in rural areas which lacked affordable site-built homes. However, by the 1960’s a number of entrepreneurs and some traditional homebuilders saw an opportunity to build homes in a factory which met the same model code requirements as site-built homes, albeit this meant meeting code requirements which differed significantly from state-to-state and province-to-province. Efforts also began to use relatively complete factory-built structures for multi-family housing and commercial structures such as office-trailers. This part of the industry got a big boost in the US in 1969 under the “Operation Breakthrough” initiative under George Romney’s tenure as Secretary of HUD. Nearly all states enacted regulations covering factory-built structures intended to meet the state’s version of a model building code. While the state regulations were generally called industrialized building codes, the homes tended to be called “pre-fabricated,” “prefab” or “modular” homes, terms which have persisted. Importantly, these regulations provided for the inspection of key components within the factory by independent inspection firms authorized by the state.
In Canada, the evolution of factory-built structures conforming to the National Building Code of Canada led to the development of factory-oriented procedures by the Canadian Standards Association and the enactment of industrialized housing regulations by the provinces. A product niche unique to the Canadian Prairie Provinces is the Ready-to-Move (“RTM”) home. In Manitoba, Saskatchewan and Alberta the broad open highways enable the inexpensive transport of very large loads, and some building firms construct complete homes rather than in smaller modules, then move them to the home-site.
Some of the most spectacular advances in off-site construction are happening in Europe and, especially, in Asia, where Chinese construction firms are building huge office and hotel towers in record time.
Change, sometimes gradual and sometimes rapid, has also been a constant characteristic of the distribution of factory-built structures. Most HUD-code home in the US and re-locatable homes in Canada are distributed through firms which were formed specifically to market such homes or by the developers of leased-land communities designed for such homes. Such firms may purchase exclusively from a single manufacturer, but more often purchase homes from several manufacturers in order to satisfy the full range of demand in the markets they serve. Some firms sell from multiple locations, while others from only one. Most states and provinces license and regulate such firms and the often independent firms which install the homes on a foundation. Since the “Great Recession” of 2007-08, most of these retailers have found it necessary to hold fewer homes in inventory and purchase more from manufacturers as needed. In the US some manufacturers began to establish their own captive retail locations and some multi-location retailers established their own manufacturing capacity. Most of these integrated firms, which often included a finance company, were victims of the “Great Recession,” the notable exception being Clayton Homes, which is now part of Berkshire-Hathaway and which ironically now owns the assets of industry-founder Schult Homes.
The distribution of prefab and modular homes has evolved along a somewhat different path. While some firms were founded specifically to market prefab and modular homes, many are sold through firms that began as conventional on-site homebuilders, and may have continued to build some number of homes entirely on-site. Beginning in the 1990’s some manufactured home retailers also began to sell prefab and modular homes. This tendency accelerated after a severe contraction of the specialized financing for manufactured homes erupted in 1999. In general, the firms that had their genesis as manufactured home retailers have tended to focus on more standardized and simple modular homes, whereas those with a traditional building or strictly modular focus have tended to build a much broader range of homes. Because prefab and modular homes share most of the business characteristics of site-built structures, there has been relatively little movement to regulate them any differently than a traditional on-site builder.