Just a speculation, but I wonder how much underground parking increases Swedish multifamily construction costs. In my travels in Europe I am struck by the extent (almost universality) of underground parking, especially in colder climates. Obviously building underground parking is more expensive than just laying down some asphalt outside.
I would also lean into the 'Swedish housing is higher quality' argument. Not just the outside windows & doors, but solid-core interior doors, soundproofing, structural integrity - is it my imagination or does European modern construction just feel more solid, more durable, thicker, quieter, more substantial than American?
Also, it would be interesting to compare long-term (30+ years) energy, repair & maintenance costs. My hunch is that in Sweden you pay more up front but less over time.
I never was able to visit Scandinavia (bummer). But in NW Europe I have not seen underground parking in ordinary neighborhoods, or above ground parking structures. These are found adjacent to larger office buildings, shopping "malls", etc.
I can give you a very relevant, current project to chew on. I'm the project manager for a city in New Hampshire, USA, where the city wants to do a workforce housing demonstration project on city owned land. We are building six (6) 1,000 square foot, two-story cottages on about a half-acre, arranged around a shared central court, with parking in a nearby shared lot. The city wants to sell these to city employees at cost. We are using modular homes (not manufactured mobile homes), each consisting of two modules. We are struggling to get this project to less than $425,000 USD per home.
The city is its own contractor -- we bid out every sub trade and eliminated the profit factor that would have been in play had we gone with a general contractor.
We tried bidding out the modular units, but that's a problem in New England. There are three modular manufacturers in New England and one in upstate New York. There are several in Canada, but we found that logistics, shipping costs, and tariff concerns made those uncompetitive. Only one of the US manufacturers provided a bid. The others are way too busy, with most of their modules going to large multi-family projects.
I can state with confidence that a good modular manufacturer can set a less expensive structure, and at better quality, on a given foundation. They can control the cost inputs far better than an on-site builder can. But here's why the eventual home won't be any less expensive that a stick built one:
THE HOME WILL SELL FOR THE LOCAL MARKET PRICE, NO MATTER HOW IT WAS BUILT.
The builder is not going to pass on the savings the builder realized by using modular construction. Why give profit away? You might suggest that if you bid out the house, the one using the modules will be able to underbid stick builders. But here's why this does not work:
OWNERS RARELY, IF AT ALL, BID OUT THE CONSTRUCTON OF A NEW HOUSE.
No, owners will find a contractor with a good reputation, who can fit the owner's home into the contractor's schedule, and who seems to be a good fit for the owner. That's how homebuilders are predominantly chosen.
It's no wonder that the cost of construction is what it is. Aside from the materials costs, there's essentially little competition among builders. If there were more modular manufacturers, and more hungry builders, then maybe we'd see prices stabilize.
What I think the federal and state governments need to do is actively help new modular manufacturers get set up. That assistance can take many forms and will cost money, but I'd rather spend money this way than giving out housing assistance. Secondly, government should be spending a lot more money on growing the construction trades and educating small time builders on how to be better businesses. This will take time, so thirdly, congress needs to get their act together and immediately put in place some sort of work permit system that would enable immigrants to work in the trades here legally, perhaps giving them a path to citizenship after five years of steady work and good behavior.
People who are needed to do a job in the US should be issued a Green Card. The (cumbersome, too limited) temporary work permits a.k.a non-immigrant visas, are cruel. Basically the US is telling these workers they are not really welcome here.
However, for the last 30 years US Congress has been unable, or unwilling, to reform the immigration system. Currently the emphasis is Family Reunion-only, not the economic needs of the country. (A few exceptions exist.)
Some friends of mine recently bought a townhouse in Sweden in one of the smaller coastal cities. The big problem they encountered was the thin market. They had a bit of a wait before something suitable became available.
It was interesting to read this article about the Swedish housing industry in comparison with the market in the US. One advantage of factory produced housing is that it is easier to manage supplies. Contractors I've employed often find out they need a particular item or tool and have to stop work for a side quest. Only the most experienced and luckiest ones have everything they need on hand. A factory site can maintain an inventory and is less likely to be an hour long drive to the nearest hardware store.
I'm not proposing that this explains the gap between site-built and factory-built houses, but I do identify a factor not mentioned in this article: the cost of punch-list items and other followup fixes and maintenance.
My intuition tells me that a factory that has built the same model house many times might deliver a product that has fewer flaws. By flaws I mean obvious things, such as a door that won't close due to a crooked jamb, and also things that only emerge months or years later, such as a drywall crack because of uneven settling or uncontrolled expansion/contraction during temperature changes. These flaws are often externalities to the price of a house - their costs are borne by homeowner at a later date. As such, according to this intuition, the more pricey Swedish home might have a lower total cost of ownership because it leaves behind fewer maintenance headaches for the owner.
The assessment of the cost or value of having a house with or without these types of flaws is complicated, both because of the technical nature of estimating repair costs and the uncertainty around when/if the flaws might emerge. As such, I would think that the average homeowner might be quite ill equipped at pricing this into the value of a home.
Yes, "higher quality" is often cited as a reason to favor prefab. It's hard to reason about this in a general case (its very easy to have low-quality prefab homes), but it wouldn't surprise me if there were fewer of these sorts of flaws in Swedish construction.
Many houses in the US are built in larger quantities, creating whole neighborhoods, by the same builder, using the same floor plans over and over. That must give economy of scale too.
EDIT: Now wait a moment! Isn't the US the country where DIY houses could be bought in catalogs? Sears, M. Ward, etc. shipped the complete kit to where the buyer was located. Do these not count as "prefab"?
Actually, the builder gets stuck with these costs. There are several reviews, and my house is to get its last one in a few months, so 4 years after we moved in. Builders like prefab for this.
What is included in your cost per square meter? Is it the same across countries? My family recently bought a prefab house in Sweden and the price included stuff like, bathroom, appliances, heat pump + floor heating, solar on the roof etc inte catolog price.
Also single family houses are somewhat smaller in Sweden re US - should push up square meter cost(?)
The US census home price is the sale price of a new single family home minus the value of the improved lot, so the home and everything in it. In the US this would include major appliances (HVAC, water heater, etc.) and probably some large kitchen appliances (my new build came with a dishwasher, oven, microwave, and a garbage disposal, but no refrigerator).
Ha! To me one of the more puzzling aspects of US home-building. Everything was there already, incl. the ugly ceiling fans with lamps as well as boob-lights (with nipple) in every room/hallway - but no refrigerator. When I asked about this phenomenon I was told "but you need to have freedom of choice!"
When we were home shopping, the place we ultimately bought was one where the seller's agent _hadn't_ invested so much money in replacing absolutely everything the previous homeowner had in the house with mediocre-but-new stuff. That left us more budget to invest in customizing it to our taste. But the old homeowner did have those awful boob lights, I know exactly what you're talking about. They're terrible for the lifespan of LED lighting, because they retain heat. If you want to invest in high-quality full-spectrum LEDs, or the even-fancier dimmable / color-controllable LEDs, you really want something open-sided so they'll stay cool.
Yes! My husband LEDed every light fixture in the houses we lived in for the past 15 years. We also had attic fans installed - those are real energy savers.
I keep meaning to do an attic fan at each end of our house (it’s kind of long and narrow), one facing in and one facing out, and then figure out temp sensors to control them.
Curious about the cost of labor- could the fact that the US construction labor force is (especially in single family) is mostly non union, and heavily immigrant play a role here?
Equally relevant are the human labor hours associated with factory vs site built construction, and interest accrued on a construction loan prior to closing/CoA., all things being approximately equal in floor plan and envelope design.
Also, annual maintenance costs over time (say 20 yrs?) should be factored in. My experience is that factory built is less maintenance costly/intensive.
Disclosure: I have a panel factory home, assembled on site in 10 worked days by a crew of 4, custom designed, which uses far less heating energy per sf than the regional mean and requires almost no exterior maintenance after 20+ years.
True, but even today most SF and MF are built to state or local energy code (which did not even exist 50 years ago), not maximizing energy efficiency even considering cost/benefit.
And it is not easy to find a builder who will change their ways and build with prefabbed factory built wall and roof assemblies, for example.
The U.S. construction industry employs an estimated 1.6 to 2.1 million undocumented workers. They make up approximately 15-23% of the total construction workforce, a much higher rate than their share of the overall U.S. labor force.
Workers may be misclassified as independent contractors, which means they are often denied access to health insurance, overtime pay, and workers' compensation coverage. They also earn significantly less than their U.S.-born counterparts for similar work.
In Finland, a major driver for the adoption of large panel system construction in the 1960s for multi-family housing construction was to minimise the need for bricklayers, who were notoriously prone to go on strike. The dynamic was probably very similar in Sweden.
Variation in the cost of housing is primarily driven by the cost of the land underneath the house, not the cost of construction.
Cheap land leads to cheap housing, and expensive land leads to expensive housing, regardless of the construction technique used.
You can pitch a tent on empty land in San Francisco or NYC, and it would still be unaffordable. You can build nice and affordable 2500 square feet single-family residences where land is cheap.
Land is extremely cheap in some areas, and extremely expensive in others. Everywhere where housing is unaffordable has land that is far more than 20% of total costs. Where housing is affordable, it is less than 20% of cost.
In other words, it is the cost of land that matters, not the cost of construction.
You can see how much it varies in the United States here:
Agreed, but that's discounting the overhead necessary to entitle it and the cost to get out of the ground. Land costs are going up faster than vertical costs. And the true driver in land on costs is the scarcity, zoning and the entitlement process extending the lead time. Which is preventing affordable housing from penciling.
Another factor may be what the land characteristics are--in many places like Los Angeles the easy level terrain was built up years ago and new tracts now often involve massive amounts of grading adding quite a bit of cost. That and the framing is the easiest part of the building process (I remember talking to a couple framers on a Simi Valley, CA tract in the early nineties--they were getting paid $500 each to frame a tract house, said it took them a couple days).
I'm wary of using sale price to measure construction productivity because there are so many other factors that contribute. I'm also wary of comparing cost/sf because it seems like US houses are significantly larger.
That aside, assuming Sweden hasn't achieved any significant savings through pre-fabrication, I think the question is... why? And can it be fixed? It's hard to see construction ever becoming more efficient as long as every single piece is cut and joined by hand on site. Perhaps there are more burdensome regulations on Swedish houses, or maybe their strong unions are blocking automation in their factories.
I think there's pretty good evidence in the US that prefabricated construction of small units like ADUs is significantly cheaper than on-site, so it's worth thinking about what it would take to scale this. Maybe the issue is more about transporting volumetric assemblies instead of flat wall, floor, and roof assemblies?
Relative to European countries often timed higher efficiency in the US is due to market size/integration, Sweden has population of 10.5m and there several players at least in single family homes and basically no international market, I'd guess it plays a role.
Concerning transportation, floating homes should be able to do large homes but with transportation costs similar to AUDs/trailer homes.
Even if costs remain constant, one possible benefit for the Swedish model could be a shift in the labor requirements. At least in my local market, construction crews are almost entirely immigrants. These are highly skilled and experienced workers who, in the case of the undocumented, are being paid well below market rate for those skills. If current US immigration policy continues many of those will need to be replaced with workers that are more expensive and, more importantly, less experienced. Mixed manufacturing might allow us to concentrate the skilled workforce requirements on the factory floors and make use of more junior on-site crews.
You think factories will not hire illegal immigrants? What would make a bigger dent is a proper system of trade schools. Now there is a thing the US could look at some European countries for.
One factor I didn't see mentioned was the organisation of construction. Large-scale tract home development isn't really a thing in Sweden, so you don't get efficiencies of scale by moving crews to the next job down the street.
Prefab is easier for single lot development because a lot of the coordination work is pushed off-site and only the foundation work remains critically dependent on weather.
A good question to examine is how off Site/Modular construction is defined. Is it still 'stick-built' but under a roof, or is it actually different materials and assembly methods? Has the construction industry moved to prefabricate more than trusses? Are insulation methods the same in a factory as on site? Is electrical wiring and plumbing piping the same 'off/site' as on-site? Is concrete a Modular construction material (like Habitat '67) or is it still stick-built?
Is modular off-site construction more coordinated than on-site? Certainly, one of the reasons the construction industry productivity measures have remained flat is a lack of changing-up materials, processes and ways of building. This is generally true across the world.
Anything that expands the market would help. The lack of available skilled labor is a significant impediment today - so the question is, can you get them to show up to the factory more reliably than you can get them to the jobsite?
Right now there are municipal restrictions against pre-fab. These need to be loosened. Building codes can impede them - this should be looked at as well. But the biggest question is will be people buy them at scale. My encounters with homebuyers tells me no - until attitudes change with the buyer (and their realtors as well), pre-fab won’t move the meter.
Lastly, this really just plays with the edges of home production. The biggest issue is the land, and entitling and developing it. This is where Gavin and Ezra and their friends stand firmly in the way of solving this problem. We do not need government wasting tax dollars subsidizing the new shiny prefab factory (Solyndra) - which I’m guessing is the type of action they’d propose. If government wants to help, they need to focus its efforts around enabling/developing the infrastructure necessary to support more housing units. More power, more roads (and not bike trails), sanitary/sewer, and most of all stopping all the NIMBYs from blocking the next pre-fab development that might reduce the home resale value of their constituents.
Thank you. Anything Newsom spews is for the WEF agenda, and nothing more. He probably envisions the Pacific Palisades burning as an answer to his dream 15 minute city agenda moving forward.
Furthermore, fix the entitlement process to stop reviews from taking years to gain approval, with a plethora of rent-seekers blocking the path to development. And then within the home production cycle itself, we should move ourselves past the place where it takes almost as long to get a building permit for a home as it does to build it. There is no reason it should take more than 30 minutes to get a building permit for a single-family home, and a lot of reasons to employ A/I to make the process almost instantaneous. That’s something politicians could change instantly. But they won’t - I’m betting Ezra and Gavin didn’t even touch on those issues.
Brian, your charts reveal the exact "Industrial Paradox" I've been tracking in the Asian supply chain.
Look at the Price per Unit Area chart: Sweden is at $286/sq ft vs. the US at $166/sq ft. If "Prefab" was the primary variable for cost reduction, that delta should be inverted. The fact that it isn't proves that Methodology (Factory vs. On-site) is less important than Input Costs (Supply Chain).
The "Sweden Paradox" exists because they industrialized the Assembly but not the Component Chain. They are assembling expensive European timber, expensive European windows, and expensive European labor inside a shed. That is Protectionism, not Industrialization.
Contrast this with the System B (Pearl River Delta) model used for Hong Kong's MiC (Modular Integrated Construction). The factory is located within a 50km radius of the ceramic, steel, and glass mills.
Sweden: Moves high-cost labor indoors. (Result: Better working conditions, same cost).
China: Compresses the supply chain geographically. (Result: Component Deflation).
As a home inspector for the last 30 years or so I can vouch for the 'better quality control' aspect of prefab construction. The quality of home construction in the US is spotty at best and often just plain 'pi** poor'. The building code compliant home is the 'worst home you can legally construct' and yet 'it passed the code inspection' is the mantra of the scoundrel builder. And that's whether it's a local one knocking together a dozen houses a year or some of the national builders. There's an interesting video called; 'If They Build Cars Like They Build Houses'. It's worth a watch: https://www.youtube.com/watch?v=QXKcTAYusE8
Great comparison. One simple factor is that you lose all the benefits of a factory when you’re in the housing market. It favors flexibility. If every 10 years you have a massive downturn and have to let go of half your team, you’re going to have a very hard time keeping quality and efficiency up, as well as reach any form of efficiency of scale. America is a graveyard of prefab companies. I’m not sure if Sweden is a more stable market or they subsidize homebuilders or something, but the business model doesn’t make much sense here, which makes it very hard to make something work. Add in the red tape, regional requirements and politics of building and John with a pickup comes out ahead.
KLEMS data between 1970 and 1990 probably isn't very indicative of performance gains related to prefab, because prefab market penetration was already very high by 1970.
I don't have Swedish figures at hand, but Johanna Hankonen's 1994 dissertation Lähiöt ja tehokkuuden yhteiskunta (Suburbs and the Efficient Society) quotes Finnish statistics that show labour efficiency growth between 20% and 250% between 1955 and 1968 for various construction tasks.
The prevailing complaint is that we haven't had productivity gains since the 1970s.
Just a speculation, but I wonder how much underground parking increases Swedish multifamily construction costs. In my travels in Europe I am struck by the extent (almost universality) of underground parking, especially in colder climates. Obviously building underground parking is more expensive than just laying down some asphalt outside.
I would also lean into the 'Swedish housing is higher quality' argument. Not just the outside windows & doors, but solid-core interior doors, soundproofing, structural integrity - is it my imagination or does European modern construction just feel more solid, more durable, thicker, quieter, more substantial than American?
Also, it would be interesting to compare long-term (30+ years) energy, repair & maintenance costs. My hunch is that in Sweden you pay more up front but less over time.
I never was able to visit Scandinavia (bummer). But in NW Europe I have not seen underground parking in ordinary neighborhoods, or above ground parking structures. These are found adjacent to larger office buildings, shopping "malls", etc.
I can give you a very relevant, current project to chew on. I'm the project manager for a city in New Hampshire, USA, where the city wants to do a workforce housing demonstration project on city owned land. We are building six (6) 1,000 square foot, two-story cottages on about a half-acre, arranged around a shared central court, with parking in a nearby shared lot. The city wants to sell these to city employees at cost. We are using modular homes (not manufactured mobile homes), each consisting of two modules. We are struggling to get this project to less than $425,000 USD per home.
The city is its own contractor -- we bid out every sub trade and eliminated the profit factor that would have been in play had we gone with a general contractor.
We tried bidding out the modular units, but that's a problem in New England. There are three modular manufacturers in New England and one in upstate New York. There are several in Canada, but we found that logistics, shipping costs, and tariff concerns made those uncompetitive. Only one of the US manufacturers provided a bid. The others are way too busy, with most of their modules going to large multi-family projects.
I can state with confidence that a good modular manufacturer can set a less expensive structure, and at better quality, on a given foundation. They can control the cost inputs far better than an on-site builder can. But here's why the eventual home won't be any less expensive that a stick built one:
THE HOME WILL SELL FOR THE LOCAL MARKET PRICE, NO MATTER HOW IT WAS BUILT.
The builder is not going to pass on the savings the builder realized by using modular construction. Why give profit away? You might suggest that if you bid out the house, the one using the modules will be able to underbid stick builders. But here's why this does not work:
OWNERS RARELY, IF AT ALL, BID OUT THE CONSTRUCTON OF A NEW HOUSE.
No, owners will find a contractor with a good reputation, who can fit the owner's home into the contractor's schedule, and who seems to be a good fit for the owner. That's how homebuilders are predominantly chosen.
It's no wonder that the cost of construction is what it is. Aside from the materials costs, there's essentially little competition among builders. If there were more modular manufacturers, and more hungry builders, then maybe we'd see prices stabilize.
What I think the federal and state governments need to do is actively help new modular manufacturers get set up. That assistance can take many forms and will cost money, but I'd rather spend money this way than giving out housing assistance. Secondly, government should be spending a lot more money on growing the construction trades and educating small time builders on how to be better businesses. This will take time, so thirdly, congress needs to get their act together and immediately put in place some sort of work permit system that would enable immigrants to work in the trades here legally, perhaps giving them a path to citizenship after five years of steady work and good behavior.
Tim in New Hampshire
People who are needed to do a job in the US should be issued a Green Card. The (cumbersome, too limited) temporary work permits a.k.a non-immigrant visas, are cruel. Basically the US is telling these workers they are not really welcome here.
However, for the last 30 years US Congress has been unable, or unwilling, to reform the immigration system. Currently the emphasis is Family Reunion-only, not the economic needs of the country. (A few exceptions exist.)
Some friends of mine recently bought a townhouse in Sweden in one of the smaller coastal cities. The big problem they encountered was the thin market. They had a bit of a wait before something suitable became available.
It was interesting to read this article about the Swedish housing industry in comparison with the market in the US. One advantage of factory produced housing is that it is easier to manage supplies. Contractors I've employed often find out they need a particular item or tool and have to stop work for a side quest. Only the most experienced and luckiest ones have everything they need on hand. A factory site can maintain an inventory and is less likely to be an hour long drive to the nearest hardware store.
I'm not proposing that this explains the gap between site-built and factory-built houses, but I do identify a factor not mentioned in this article: the cost of punch-list items and other followup fixes and maintenance.
My intuition tells me that a factory that has built the same model house many times might deliver a product that has fewer flaws. By flaws I mean obvious things, such as a door that won't close due to a crooked jamb, and also things that only emerge months or years later, such as a drywall crack because of uneven settling or uncontrolled expansion/contraction during temperature changes. These flaws are often externalities to the price of a house - their costs are borne by homeowner at a later date. As such, according to this intuition, the more pricey Swedish home might have a lower total cost of ownership because it leaves behind fewer maintenance headaches for the owner.
The assessment of the cost or value of having a house with or without these types of flaws is complicated, both because of the technical nature of estimating repair costs and the uncertainty around when/if the flaws might emerge. As such, I would think that the average homeowner might be quite ill equipped at pricing this into the value of a home.
Yes, "higher quality" is often cited as a reason to favor prefab. It's hard to reason about this in a general case (its very easy to have low-quality prefab homes), but it wouldn't surprise me if there were fewer of these sorts of flaws in Swedish construction.
We're talking about Swedes keep in mind.
Houses will always shows signs of settling. They are almost human in that regard.
Many houses in the US are built in larger quantities, creating whole neighborhoods, by the same builder, using the same floor plans over and over. That must give economy of scale too.
EDIT: Now wait a moment! Isn't the US the country where DIY houses could be bought in catalogs? Sears, M. Ward, etc. shipped the complete kit to where the buyer was located. Do these not count as "prefab"?
Actually, the builder gets stuck with these costs. There are several reviews, and my house is to get its last one in a few months, so 4 years after we moved in. Builders like prefab for this.
What is included in your cost per square meter? Is it the same across countries? My family recently bought a prefab house in Sweden and the price included stuff like, bathroom, appliances, heat pump + floor heating, solar on the roof etc inte catolog price.
Also single family houses are somewhat smaller in Sweden re US - should push up square meter cost(?)
The US census home price is the sale price of a new single family home minus the value of the improved lot, so the home and everything in it. In the US this would include major appliances (HVAC, water heater, etc.) and probably some large kitchen appliances (my new build came with a dishwasher, oven, microwave, and a garbage disposal, but no refrigerator).
Ha! To me one of the more puzzling aspects of US home-building. Everything was there already, incl. the ugly ceiling fans with lamps as well as boob-lights (with nipple) in every room/hallway - but no refrigerator. When I asked about this phenomenon I was told "but you need to have freedom of choice!"
When we were home shopping, the place we ultimately bought was one where the seller's agent _hadn't_ invested so much money in replacing absolutely everything the previous homeowner had in the house with mediocre-but-new stuff. That left us more budget to invest in customizing it to our taste. But the old homeowner did have those awful boob lights, I know exactly what you're talking about. They're terrible for the lifespan of LED lighting, because they retain heat. If you want to invest in high-quality full-spectrum LEDs, or the even-fancier dimmable / color-controllable LEDs, you really want something open-sided so they'll stay cool.
Yes! My husband LEDed every light fixture in the houses we lived in for the past 15 years. We also had attic fans installed - those are real energy savers.
I keep meaning to do an attic fan at each end of our house (it’s kind of long and narrow), one facing in and one facing out, and then figure out temp sensors to control them.
Curious about the cost of labor- could the fact that the US construction labor force is (especially in single family) is mostly non union, and heavily immigrant play a role here?
Not sure. This website gives an average salary for a Swedish carpenter as the equivalent of $48,000 per year https://www.erieri.com/salary/job/carpenter/sweden#:~:text=The%20average%20pay%20for%20a,SEK%20321%2C788%20and%20SEK%20528%2C651.
The BLS lists the median salary for a US carpenter as $56,000 per year (https://www.bls.gov/oes/2023/may/oes472031.htm)
Though in Sweden there might be greater benefits that drive up the effective compensation, idk.
Equally relevant are the human labor hours associated with factory vs site built construction, and interest accrued on a construction loan prior to closing/CoA., all things being approximately equal in floor plan and envelope design.
Also, annual maintenance costs over time (say 20 yrs?) should be factored in. My experience is that factory built is less maintenance costly/intensive.
Disclosure: I have a panel factory home, assembled on site in 10 worked days by a crew of 4, custom designed, which uses far less heating energy per sf than the regional mean and requires almost no exterior maintenance after 20+ years.
Given that most homes in America are about 50 years old, I would certainly expect a new build to be more energy efficient than average.
True, but even today most SF and MF are built to state or local energy code (which did not even exist 50 years ago), not maximizing energy efficiency even considering cost/benefit.
And it is not easy to find a builder who will change their ways and build with prefabbed factory built wall and roof assemblies, for example.
Where do you live? Custom designed tells me you do not live in a row-built town home?
The U.S. construction industry employs an estimated 1.6 to 2.1 million undocumented workers. They make up approximately 15-23% of the total construction workforce, a much higher rate than their share of the overall U.S. labor force.
Workers may be misclassified as independent contractors, which means they are often denied access to health insurance, overtime pay, and workers' compensation coverage. They also earn significantly less than their U.S.-born counterparts for similar work.
In Finland, a major driver for the adoption of large panel system construction in the 1960s for multi-family housing construction was to minimise the need for bricklayers, who were notoriously prone to go on strike. The dynamic was probably very similar in Sweden.
Variation in the cost of housing is primarily driven by the cost of the land underneath the house, not the cost of construction.
Cheap land leads to cheap housing, and expensive land leads to expensive housing, regardless of the construction technique used.
You can pitch a tent on empty land in San Francisco or NYC, and it would still be unaffordable. You can build nice and affordable 2500 square feet single-family residences where land is cheap.
This isn't true for single family home construction in the US, land is typically on the order of 20% of the cost of a new home.
There is no "typical" when it comes to land cost.
Land is extremely cheap in some areas, and extremely expensive in others. Everywhere where housing is unaffordable has land that is far more than 20% of total costs. Where housing is affordable, it is less than 20% of cost.
In other words, it is the cost of land that matters, not the cost of construction.
You can see how much it varies in the United States here:
https://www.aei.org/housing/land-price-indicators/
This is for existing homes, not new construction. For new construction of single family homes builders generally shoot for around 20% lot cost.
Yes, that is another way of saying that the cost of new single family homes is driven by land cost, which is my main point.
Agreed, but that's discounting the overhead necessary to entitle it and the cost to get out of the ground. Land costs are going up faster than vertical costs. And the true driver in land on costs is the scarcity, zoning and the entitlement process extending the lead time. Which is preventing affordable housing from penciling.
I don't understand what you just said.
If you meaning that zoning and other government regulations drives up the cost of land, then I agree.
Yes, that is what I mean. Sorry if unclear. My reply was to Brian's comment on 20%.
Another factor may be what the land characteristics are--in many places like Los Angeles the easy level terrain was built up years ago and new tracts now often involve massive amounts of grading adding quite a bit of cost. That and the framing is the easiest part of the building process (I remember talking to a couple framers on a Simi Valley, CA tract in the early nineties--they were getting paid $500 each to frame a tract house, said it took them a couple days).
I'm wary of using sale price to measure construction productivity because there are so many other factors that contribute. I'm also wary of comparing cost/sf because it seems like US houses are significantly larger.
That aside, assuming Sweden hasn't achieved any significant savings through pre-fabrication, I think the question is... why? And can it be fixed? It's hard to see construction ever becoming more efficient as long as every single piece is cut and joined by hand on site. Perhaps there are more burdensome regulations on Swedish houses, or maybe their strong unions are blocking automation in their factories.
I think there's pretty good evidence in the US that prefabricated construction of small units like ADUs is significantly cheaper than on-site, so it's worth thinking about what it would take to scale this. Maybe the issue is more about transporting volumetric assemblies instead of flat wall, floor, and roof assemblies?
Relative to European countries often timed higher efficiency in the US is due to market size/integration, Sweden has population of 10.5m and there several players at least in single family homes and basically no international market, I'd guess it plays a role.
Concerning transportation, floating homes should be able to do large homes but with transportation costs similar to AUDs/trailer homes.
Even if costs remain constant, one possible benefit for the Swedish model could be a shift in the labor requirements. At least in my local market, construction crews are almost entirely immigrants. These are highly skilled and experienced workers who, in the case of the undocumented, are being paid well below market rate for those skills. If current US immigration policy continues many of those will need to be replaced with workers that are more expensive and, more importantly, less experienced. Mixed manufacturing might allow us to concentrate the skilled workforce requirements on the factory floors and make use of more junior on-site crews.
You think factories will not hire illegal immigrants? What would make a bigger dent is a proper system of trade schools. Now there is a thing the US could look at some European countries for.
I am really surprised this was ignored here.
If we want ‘good factory jobs’ here in the US, perhaps this is the perfect source??
One factor I didn't see mentioned was the organisation of construction. Large-scale tract home development isn't really a thing in Sweden, so you don't get efficiencies of scale by moving crews to the next job down the street.
Prefab is easier for single lot development because a lot of the coordination work is pushed off-site and only the foundation work remains critically dependent on weather.
A good question to examine is how off Site/Modular construction is defined. Is it still 'stick-built' but under a roof, or is it actually different materials and assembly methods? Has the construction industry moved to prefabricate more than trusses? Are insulation methods the same in a factory as on site? Is electrical wiring and plumbing piping the same 'off/site' as on-site? Is concrete a Modular construction material (like Habitat '67) or is it still stick-built?
Is modular off-site construction more coordinated than on-site? Certainly, one of the reasons the construction industry productivity measures have remained flat is a lack of changing-up materials, processes and ways of building. This is generally true across the world.
Bingo.
Anything that expands the market would help. The lack of available skilled labor is a significant impediment today - so the question is, can you get them to show up to the factory more reliably than you can get them to the jobsite?
Right now there are municipal restrictions against pre-fab. These need to be loosened. Building codes can impede them - this should be looked at as well. But the biggest question is will be people buy them at scale. My encounters with homebuyers tells me no - until attitudes change with the buyer (and their realtors as well), pre-fab won’t move the meter.
Lastly, this really just plays with the edges of home production. The biggest issue is the land, and entitling and developing it. This is where Gavin and Ezra and their friends stand firmly in the way of solving this problem. We do not need government wasting tax dollars subsidizing the new shiny prefab factory (Solyndra) - which I’m guessing is the type of action they’d propose. If government wants to help, they need to focus its efforts around enabling/developing the infrastructure necessary to support more housing units. More power, more roads (and not bike trails), sanitary/sewer, and most of all stopping all the NIMBYs from blocking the next pre-fab development that might reduce the home resale value of their constituents.
Thank you. Anything Newsom spews is for the WEF agenda, and nothing more. He probably envisions the Pacific Palisades burning as an answer to his dream 15 minute city agenda moving forward.
Furthermore, fix the entitlement process to stop reviews from taking years to gain approval, with a plethora of rent-seekers blocking the path to development. And then within the home production cycle itself, we should move ourselves past the place where it takes almost as long to get a building permit for a home as it does to build it. There is no reason it should take more than 30 minutes to get a building permit for a single-family home, and a lot of reasons to employ A/I to make the process almost instantaneous. That’s something politicians could change instantly. But they won’t - I’m betting Ezra and Gavin didn’t even touch on those issues.
Brian, your charts reveal the exact "Industrial Paradox" I've been tracking in the Asian supply chain.
Look at the Price per Unit Area chart: Sweden is at $286/sq ft vs. the US at $166/sq ft. If "Prefab" was the primary variable for cost reduction, that delta should be inverted. The fact that it isn't proves that Methodology (Factory vs. On-site) is less important than Input Costs (Supply Chain).
The "Sweden Paradox" exists because they industrialized the Assembly but not the Component Chain. They are assembling expensive European timber, expensive European windows, and expensive European labor inside a shed. That is Protectionism, not Industrialization.
Contrast this with the System B (Pearl River Delta) model used for Hong Kong's MiC (Modular Integrated Construction). The factory is located within a 50km radius of the ceramic, steel, and glass mills.
Sweden: Moves high-cost labor indoors. (Result: Better working conditions, same cost).
China: Compresses the supply chain geographically. (Result: Component Deflation).
Ref https://chinarbitrageur.substack.com/p/the-underlying-operating-system-of?r=71ctq6
You can't get "Ford T" prices if you are buying parts at "Volvo" prices. Prefab without the supply chain cluster is just LEGOs for the wealthy.
As a home inspector for the last 30 years or so I can vouch for the 'better quality control' aspect of prefab construction. The quality of home construction in the US is spotty at best and often just plain 'pi** poor'. The building code compliant home is the 'worst home you can legally construct' and yet 'it passed the code inspection' is the mantra of the scoundrel builder. And that's whether it's a local one knocking together a dozen houses a year or some of the national builders. There's an interesting video called; 'If They Build Cars Like They Build Houses'. It's worth a watch: https://www.youtube.com/watch?v=QXKcTAYusE8
Great comparison. One simple factor is that you lose all the benefits of a factory when you’re in the housing market. It favors flexibility. If every 10 years you have a massive downturn and have to let go of half your team, you’re going to have a very hard time keeping quality and efficiency up, as well as reach any form of efficiency of scale. America is a graveyard of prefab companies. I’m not sure if Sweden is a more stable market or they subsidize homebuilders or something, but the business model doesn’t make much sense here, which makes it very hard to make something work. Add in the red tape, regional requirements and politics of building and John with a pickup comes out ahead.
KLEMS data between 1970 and 1990 probably isn't very indicative of performance gains related to prefab, because prefab market penetration was already very high by 1970.
I don't have Swedish figures at hand, but Johanna Hankonen's 1994 dissertation Lähiöt ja tehokkuuden yhteiskunta (Suburbs and the Efficient Society) quotes Finnish statistics that show labour efficiency growth between 20% and 250% between 1955 and 1968 for various construction tasks.
The prevailing complaint is that we haven't had productivity gains since the 1970s.