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The Future of Affordable Housing

In 2017, Rick Holliday, a longtime developer of affordable housing in the Bay Area, was about to retire when he got a request — Google wanted to work with him. “I was planning to just play with my grandson,” Holliday says. “But then the head of real estate at Google asked about a 135-apartment modular building I had created, saying I should start my own factory for low-cost housing. Around that time, the mayor called with the same idea. I said, ‘You’re out of your mind.’ But then Google said they would order the first 300 homes — so I jumped off the boat.

Holliday, 65, hasn’t looked back. Working with experts like David Baker, FAIA, LEED AP, a leading architect in affordable housing in the Bay Area; Larry Pace, a longtime contractor; and Carol Galante, the director of the Terner Center for Affordable Housing at UC Berkeley and a former Federal Housing Director under the Obama administration; he now runs Factory OS — a groundbreaking approach to modular design and construction. The process of creating sections (modules) of buildings off site and then stacking them like Legos into finished buildings on their intended sites, modular construction is cheaper and faster than traditional construction but has never caught on — an impasse Factory OS is trying to change. Housed 45 minutes north of San Francisco in a cavernous shipyard that once built submarines during World War II, Factory OS is creating prefabricated modular buildings on a scale never attempted in the US, pioneering new design solutions for affordable housing. “In construction, Baby Boomers are aging out, Millennials aren’t going in, and immigrants are being squeezed at the border,” Holliday says. “It’s driving up costs, which means modular’s time has finally arrived — we’re creating a robust system for architects to design great affordable housing.”

Across the US, as home prices rise, architects are trying innovative new approaches in modular design to combat an increasing issue — a lack of affordable housing. “Architects will always meet the challenges of our time,” says Robert Ivy, EVP and Chief Executive Officer of the American Institute of Architects. “From mitigating the detrimental impacts of climate change, to ensuring that everyone has access to safe and affordable housing, architects routinely meld technical expertise with compassion and creativity that ultimately drives positive change.”

According to a 2018 study by the US Department of Housing and Urban Development, policymakers are recognizing that insufficient affordable housing for those in need (often defined as families making less than 50% of the median income) can lead to rising rates of homelessness, poor health and greater community costs. According to a 2017 report from Harvard’s Joint Center for Housing Studies, about 11 million families (25% of all renters in the US) spend half their income on housing, straining budgets for essential needs like food and healthcare. With recent reductions in the federal low-income housing tax credit, the situation may soon become worse, leading to 250,000 fewer affordable units being built over the next 10 years.

Overall, affordable housing is facing a host of obstacles — and modular is providing a new way forward. Once popular in the US, modular homes were sold via mail-order catalogues from companies like Sears, Roebuck and Co., customers selecting housing styles and then receiving thousands of building materials (600 pounds of nails, 20 cans of paint, Bible-sized instruction manuals) to assemble their homes. In the wake of the Great Depression, however, the prefab home market took a downward dive, being relegated to trailers made from cheap materials with poor insulation.

Yet now, with the construction industry still reeling from the 2007 recession, modular firms like Factory OS, Kasita in Austin and Full Stack Modular in Brooklyn are betting they can finally bring modular to the masses with a simple premise — top design and materials can create a better, more affordable home than ever before. “We’re producing housing faster and at a cheaper cost than traditional construction, while also reinvesting a portion of profits into innovation and the workforce,” Galante says. “It’s an exciting time — we’re producing homes that are more affordable for a broader group of people.”

On an overcast morning in October in Vallejo, California, Holliday stands in the center of Factory OS. Around him, workers create move-in-ready housing units out of raw materials, the structures beginning as planks of wood, metal pipes and rolls of pink insulation near the entrance of the factory and gradually growing into fully-outfitted apartments as they move clockwise through a series of 33 stations, ultimately getting loaded onto trucks and shipped to sites where they will be joined together into finished buildings. Instead of single-family homes, Factory OS is creating condominiums and apartments, housing that best utilizes the factory’s replication process and scale. Overall, the soaring sunlit-filled space feels like a mix of an Industrial Era assembly line and a 21st century tech incubator, a clanging, hammering, analytics-backed attempt to fundamentally rethink the way we build. “The world is changing,” Holliday says, “and now construction is changing with it.”

According to Holliday, the power of modular is simple — the streamlined construction process in a factory reduces the amount of time workers spend commuting to job sites (up to five hours roundtrip in San Francisco), resulting in buildings that are constructed 40% faster and 20% cheaper than traditional methods. Once the modules are stacked on their intended site, they are often then bolted together with metal straps, the final assembly usually completed within days, although final work on the site can take additional months.

Ultimately, Holliday says modular buildings are higher quality for a few reasons. One, the work is all done in a controlled factory setting, ensuring outside factors like rainwater don’t allow moisture into the framing, compromising the integrity of the structure. Second, workers can access every aspect of a building with ease and efficiency, installing, say, a 500-pound window that will ultimately go into a fourth-story unit with a machine on the ground floor of a factory as opposed to dangling 40 feet in the air on a construction site. Finally, perhaps most crucially, modular construction results in better homes because the factory process and set schedule allow workers to concentrate more on their work. “Factory OS is making more housing — housing that is better for both the cities and its citizens,” Autodesk President and CEO Andrew Anagnost said in November. “And they’re doing this with less waste and with less negative impact.”

Critics often point out three potential flaws in modular: it may only be cost-effective when real-estate prices are high, as they are now; construction workers can make more money working on job sites than in a factory; and the replication process results in boring, boxy buildings. In response, Holliday states that the modular process will always save costs due to its efficiency, the exact amount depending on market prices. As for pay rates, he states that Factory OS workers make up to $30 an hour, about half the amount of what workers can make on a site. However, as opposed to constantly hunting for work, Factory OS employees have a job with set hours, full health benefits, and paid vacation days. In addition, through a partnership with the Northern California Carpenters Regional Council, Factory OS trains its workers for free, and is also committed to hiring a diverse workforce, including former prisoners and people recovering from drug and alcohol issues. Finally, regarding design, modular is now attracting top architects to create striking buildings, pushing prefab and affordable housing into new markets. “The reality is that we have a completely broken housing system,” Holliday says. “Modular is a 360-degree different way of looking at things.”

According to a 2017 report by FMI, a leading research firm in the US construction industry, the amount of project work making use of prefab construction has tripled from 2010 to 2016, nearly 40% of US contractors saying modular is part of their future construction methods. Last December, Autodesk, the maker of design software like AutoCAD for architects, named Factory OS an Autodesk Entrepreneur Impact Partner, stating its design methods are helping to push forward the future of the industry. “Modular produces a better-quality unit than anything you see on-site in the Bay Area,” Holliday says, adding that Google commissioned Factory OS to create housing for its workers visiting from out of town, part of 40,000 orders for units it has received from across the Bay Area. “Google is our first customer — they’re not expecting their workers to live in substandard housing.”

From middle-class workers to the homeless, modular construction is lowering housing costs across the board — thanks in large part to architects. In modular, a type of housing that has historically been known for its poor design, architects are now using their skills to make landmark buildings that are also affordable, creating ripple effects across a host of industries. Ken Lowney, AIA, LEED AP, the founder and principal of Lowney Architecture in Oakland and a leading designer for modular in the Bay Area, is working with Factory OS on several projects, drawn, in part, by their social mission. “In addition to creating more affordable housing, Factory OS has a mission to bring more people into construction,” he says. “They’re encouraging women and people with criminal history to join the labor force, giving them a second chance. In modular, architects get to innovate to help solve major issues for people and the economy — it’s the most gratifying part of my practice, for sure.” Holliday agrees. “The workers here are building a sense of camaraderie that is special because they know they’re building housing when it is desperately needed,” he says, looking around the factory. “Just like when the US built ships here to win the war, now we need to win the battle on affordable housing — we’re building people’s lives.”

Marcus Johnson is standing in the western terminus of the Transcontinental Railroad, a magnificent structure of marble, arched windows and 40-foot-tall ceilings, smiling as an alarm goes off. “Glad to see it’s working,” he says, reaching for his cell phone to tell the police everything is alright. “We got people trying to break in here all the time.”

Johnson, 64, is a lifelong resident and community leader in the Prescott neighborhood of Oakland, a two-square-mile wedge in the western portion of the city across the bay from San Francisco. A former mechanical engineer for a network data security company, Johnson now helps oversee the development of his neighborhood, a community grappling with rising levels of homelessness. According to a 2017 report by the Oakland City Council, 2,700 people are estimated to be living on the streets in Oakland, a badlands of shopping carts, broken-down cars and makeshift communities of tents and Tuff Sheds, 8-10’ structures intended to house garden tools that are now serving as temporary dwellings. Amid the homeless, middle-class workers escaping the tech-inflated prices of San Francisco are arriving every day to remodel $1 million 19th century Victorians, the city grappling with both gentrification and a visible health epidemic. “This is a crisis situation,” says Lowney, who lives nearby. “We have people starving on the streets. Right now, everything from our technology to our economy is becoming more efficient, except for construction. As an architect, I have a total commitment to modular — it’s one of the solutions that can get us out of this problem.”

Increasingly, architects are working to create affordable housing using three innovative approaches in modular: greater community engagement, top design and higher-quality building materials. This approach could help change the face of affordable housing in San Francisco, a city grappling with some of the highest real estate prices in the country (median home prices are over $1.5 million), as well as a rising homeless population that has been called a “crisis” by city officials — shining a way forward for other cities across the US. “As architects, we have to use these tools to design better and more affordable units,” says R. Denise Everson, Assoc. AIA, LEED AP, a partner at Cure Architects in Largo, Maryland, and a former chair of the National Housing and Community Development Network for the American Institute of Architects. “Cities are vibrant when we have a diversity of income, race and gender, and architects are instrumental in helping to create this beautiful fabric of America.”

On this afternoon, Lowney and Johnson are standing in the 16th Street Station, a key pillar in what they see as a new way forward for the neighborhood. Once a grand railroad station, the building stopped serving trains in 1994 and fell into disrepair, later getting purchased by Holliday and then given to the non-profit BRIDGE Housing as part of a local redevelopment project. Surrounded by community gardens and chain-link fencing — Johnson monitors the area to keep out squatters and ravers — the 16th Street Station, once renovated, will be a new community hub along with another nearby construction project, the Phoenix building: a 103-unit modular housing development for the homeless designed by Lowney and being built by Factory OS. “Modular construction is helping to provide balance to these new million-dollar houses,” Johnson says, leaving the station to walk to the site for the Phoenix building with Lowney. “At first, people here weren’t supporters of affordable housing for the homeless. But they’ve been converted by Factory OS.”

For architects, modular projects like the Phoenix represent a new opportunity — a chance to create innovative designs for an assembly-line process. In modular, the same techniques that allow for faster, cheaper construction — repetitive processes that run around the clock — also produce creative constraints. Instead of designing buildings however they want, architects must avoid unusual shapes, creating units that can be easily replicated and stacked atop each other (for this reason, modular design largely use squares and rectangles). Yet, in order for affordable housing to also help jumpstart local economies, the buildings must be beautiful. To achieve this, architects like Lowney vary the patterns that will be stacked next to each other, putting rows of identical 2-bedroom units next to, say, 1-bedroom units, the variations ultimately forming unique exteriors that, in the right hands, can look like landmarks — becoming hubs to revitalize neighborhoods. “Modular is such an innovative forward approach,” says Melanie Mintz, the Community Development Director for the city of El Cerrito. “Finding financing for affordable housing is a huge barrier and, in the past, modular wasn’t always great in terms of design. But now, good architecture is changing the face of modular. This stuff from Factory OS is really efficient but it’s also really beautiful. It ends up being an amenity for the whole community — it’s a game changer.”

When designing the Phoenix building, Lowney and Holliday first did community engagement, holding meetings with local leaders like Johnson. After listening to their input and incorporating it when possible, Lowney then crafted an innovative design of one and two-bedroom units that also included a key component — offices for social services. In addition to offering a new home, the Phoenix is designed to offer a new way forward with offices providing assistance on everything from health to training to job resources, all means of fostering a stronger sense of community for residents transitioning to a new life. “Rick and Ken did community meetings, bringing folks together and it made a huge difference,” Johnson says, standing with Lowney while looking at the future site of the Phoenix. “It’s my mantra now. Modular is going mainstream — it just makes sense.”

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