Toyota's Prefab Homes

Plus: Smart home, construction equipment museums, and library costs

Nov 16, 2020

Welcome to Construction Physics, a newsletter about the forces shaping the construction industry.

Toyota’s Prefab Homes

It’s interesting to compare the Japanese homebuilding sector to the US one. Superficially, they’re somewhat similar: both countries build an enormous number of homes per year (~1.4M in the US, 0.95M per year in Japan), a large portion of which are single family homes (~67% in the US, ~44% in Japan)[1]. And despite noise that gets made about Japan’s highly advanced prefab home market, historically their percentage of prefab homes is similar to the US (13-18% in Japan vs 10-30% in the US)[2]. And like the US, Japan has a highly fragmented site-built construction market, and a highly concentrated prefab market.

One major difference is that in Japan, many of these homebuilding companies are divisions (or former divisions) of large conglomerates[3]. Of the five largest[4] prefab homebuilders in Japan, four of them were started as divisions of larger companies, and many large manufacturing companies in Japan have a homebuilding division. Panasonic has one, Mitsubishi has one, Honda has a token effort, and most interesting of all (to me at least), Toyota has one.

Like many other Japanese homebuilders, Toyota’s home division began selling homes as part of an effort to find new applications for it’s manufacturing technology and expertise developed from automobile production. Since starting in 1977, Toyota Home has gradually refined its product offerings and increased its sales volume, peaking at around 5000 homes built per year in 2006. They're currently sold in Japan and (apparently) Indonesia - the only ones ever built in the US were 50 built as an experiment near Toyota's San Antonio plant.

Toyota Home currently offers a sort of eclectic mix of housing options. Their Since line most closely resembles what you’d expect an automobile maker turned homebuilder to produce. The Since is Toyota’s prefabricated, factory produced line of homes, built on a volumetric modular, steel framed chassis.

Toyota also offers the Espacio line of homes, which are site-built using heavy gauge steel. And in the last few years they’ve introduced the Mokua, a line of panelized wood framed houses built using 2x4 balloon frame construction (a rarity in Japan, where something like 80% of homes are built using post and beam construction). Within each line are a variety of different individual models.

Of these product lines, the Since seems like the one that would most take advantage of Toyota’s manufacturing expertise. It uses prefab modules built from heavy gauge steel, roughly the size and shape of a shipping container, around 150 sqft (by comparison, a module for a doublewide manufactured home might be 900 sqft). Modules are fitted out in the factory with partition walls, floors, ceiling, appliances, and finishes - approximately 85% of the work will be done in the factory, with the rest done on site.

Modules are shipped to the site on flatbed trucks, craned into position[8], and bolted together. A 1000 square foot house seems to consist of around 6 or so modules, and larger homes will use 12 or more (compared to a manufactured home in the US, which will rarely exceed 2 modules). Installation takes just a few hours, after which final finish work will be done (painting, etc.). Total construction time including sitework, laying foundations etc. is approximately 45 days.

The marketing for the Since line is very reminiscent of the marketing done for cars. Safety and quality are given top billing. The homes are seismically tested using a shake table, and customers are invited to tour the testing facilities. They’re guaranteed for 60 years, twice as long as the lifespan of a typical Japanese house (and much better than what you’d get in the US from homebuilders such as Lennar), and achieved via techniques such as corrosion proofing of the steel structure (a technique applied from auto manufacturing).

It's easy to watch a video of a Since home being built and imagine you're looking at the future of construction, how all buildings will eventually be built[5]. It's fast, it's precise, it's high quality and low labor. Despite being prefab it seems to be somewhat flexible in the interior layout it allows, and the steel frame allows the system to scale to very large structures. And if you look inside it looks luxurious - lots of high end finishes and large, open spaces (though you can usually spot where the corner columns on the modules must go). US homebuilding looks laughably primitive by comparison.

But Toyota sells a relatively small number of Since homes. Per a shareholder’s report, Toyota Home sold just over 10,000 detached homes in 2019, a year in which over 40,000 prefab single family homes were built in Japan[7]. Considering that the 10,000 includes all its housing lines, Since homes at best make up a modest portion of Japan’s prefab home market, which is a minor portion of the Japanese housing market[6]. Unlike with cars, Toyota is a tiny player in the housing market.

If anything, the arc of the company seems to indicate a move away from the Since line, and towards panelized wood construction. In 1997, they acquired a panelized wood house manufacturer “USK Home” (later renamed Toyota Woodyou). And in 2016 they acquired a 51% stake in Misawa Homes, another prefabricated home builder that uses panelized wood construction. Per the shareholder’s report, Toyota Woodyou and Misawa homes combined make up the vast majority of the capital stock of Toyota Home[5]. And just recently they announced a partnership with Panasonic Homes, which seems to use steel frame and precast concrete, not volumetric modular.

Comparisons between construction and car manufacturing are made frequently, with the usual implication being that buildings should be built more like cars are. And the comparison isn’t unreasonable. Cars are fairly building-like (they consist of a load bearing support structure surrounding a climate controlled, waterproofed interior meant for human occupancy), and advances in manufacturing techniques have simultaneously lowered their cost, increased their production volume, raised their level of quality, and allowed the frequent introduction of new features and capabilities - all things missing from building construction.

I would have naively expected a line of prefab homes from Toyota to be far more competitive than it apparently is. Of all the car manufacturers, Toyota theoretically seems best poised to disrupt the housing market. Putting aside the manufacturing and logistics capabilities that come from being the second largest auto manufacturer in the world, Toyota’s manufacturing expertise is unrivaled - they wrote the book on modern manufacturing techniques, and they set the bar on product quality.

What’s more, industrialized construction often seems constrained by low manufacturing volumes preventing true mass production, but Toyota’s production system was specifically designed to efficiently produce small numbers of a variety of different types of products - exactly what the construction industry requires. From “Construction as a Manufacturing Process”:

In 1950 Toyota’s President, Eiji Toyoda, spent three months at Ford’s Rouge plant in the USA. He was amazed at the total output of the plant, which in one year produced over 2.5 times the number of cars made by Toyota in the previous 13 years. But while total output was impressive, Toyoda thought the system to be wasteful (muda) in terms of effort, materials and time. Toyoda could not afford to produce cars with such narrowly skilled professionals and unskilled workers tending expensive, single-purpose machines with their buffers of extra stocks and re-work areas needed to ensure smooth production and final quality. Toyoda’s objectives were to simplify Toyota’s production system, combining some advantages of craft work with those of mass production, but avoiding high costs of craft and rigidities of factory systems. The result was the evolution of Toyota’s lean production system, which employed teams of multiskilled workers at all levels of the organization and highly flexible, automated machines to produce [smaller] volumes of products in enormous variety.
This system became known as lean production because it used less of everything compared with American mass-production: less labour was needed, smaller manufacturing floorspace, lower investment in tools, and fewer engineering hours to develop a new product. The system resulted in the need for less storage space for inventory on site. It also manufactured products with fewer defects and with greater and ever-growing variety to meet differentiated customer preferences.

Toyota is also selling in an environment where manufactured homes are a widely accepted construction method (as opposed to the US, where manufactured homes generally come with negative connotations), which means the cultural infrastructure (things like customers' expectations, building department requirements, labor force familiarity) for delivering them already exist. And the built environment of Japan, which is both highly urbanized and low density (i.e.: a lot of single family homes in a small radius), seems like it would minimize transportation costs, which should also favor prefabrication on the margin.

Despite all this, and the fact that the business line has existed at Toyota for over 40 years, they remain a minor player in the Japanese homebuilding market. I honestly find it confusing.

This isn’t exactly good news for those who think the construction industry needs to learn from automakers as the method for revolutionizing construction - if anything, it seems like the automakers are learning from US home construction. Toyota Home is in some ways a negative existence proof of the idea that adopting manufacturing best practices is a path forward to revolutionizing the construction industry. The fact that Toyota’s multi-decade effort in homebuilding has had little industry impact suggests that lessons from car manufacturing aren’t sufficient.

[1] - Japan actually builds substantially more homes per capita than the US, it just rebuilds them more frequently. This remains the case even though current Japanese homebuilding numbers are actually near historic lows.

[2] - The difference is that in Japan prefab homes are high-end and more expensive than site built, whereas in the US prefabricators pursue the low-end of the market.

[3] - But this isn’t as big a departure from the US as it seems. The Japanese homebuilding companies were generally started in the 60’s and 70’s as a way to find new markets for their products and manufacturing techniques (Daiwa for its steel tubes, Sekisui for its plastics, etc.). A similar thing occurred in the US at the same time - many of the Operation Breakthrough companies were similarly outsiders looking for new markets such as GE, Boise Cascade, and Alcoa. The difference seems to be that the US companies gave up, and the Japanese ones didn’t.

[4] - Circa 2003, at least.

[5] - This system isn’t unique to Toyota. Sekisui Heim house construction is extremely similar.

[6] - It’s hard to pin down the exact number of homes Toyota Home builds. The 2019 shareholder report indicates it built around 15,000 homes in 2019, of which a bit over 10,000 were single family homes. Misawa (a subsidiary of Toyota Home since 2017) indicates it built around around 7,000 single family homes in 2019 It’s unclear if that 10,000 includes the 7,000 Misawa Homes, which would leave just 3,000 for their volumetric, steel framed, panelized wood, AND Toyota Woodyou homes (most of which would have to be Woodyou’s) if capital stock ratios are anything to go by). So depending on what’s included in that 10,000, Toyota Home’s volumetric modular offerings are either a modest portion of the prefabricated home market, or have collapsed completely and are selling in tiny numbers.

[7] - Assuming I’m interpreting the statistics correctly. Japan seems to categorize housing starts slightly differently, and I’m having trouble finding “detached homes” broken out as a separate statistic.

[8] - Unlike manufactured homes in the US, which will avoid using a crane if at all possible.

Links

The Reasons I Ripped Out A £6K Lighting System - Chronicle of the problems trying to implement a smart home system. It seems like even high end smart home technology is grappling with fundamental reliability, ease of use, and burdensome maintenance issues that I read about 5 years ago in “Why Is My Smart Home So Fucking Dumb?”. I think that long term there’s a ton of potential in smart home for giving finer-grained environmental control, and for monitoring home state (a commentator points out the potential value in a sensor that could monitor water flow level as a way to detect leaks, something that could have saved me thousands of dollars and months of headache several years ago). But I suspect we’re in sort of a “videophone” situation, where the market for it will remain small until some quality threshold (which we seem to be a long way from) is reached.
Historical Construction Equipment Association - Museum and non-profit devoted to historical construction equipment. I had no idea a subculture devoted to construction equipment existed, but of course it does. Based on google satellite view, they seem to have a few hundred pieces of equipment in their collection, as well as an impressive archive of information. (see also the unrelated Museum of Construction Equipment, and the Tractor and Construction Plant wiki).
Two story library in New York will cost $2100/sqft to build. Apparently this is a chronic issue with New York library construction, and mostly seems to be the result of a large number of stakeholders and principal-agent problems. Ballooning costs seem to go hand in hand with ballooning timelines in construction - an active project will tend to accumulate billable hours just by virtue of being active, and it’s hard for even a well-managed project to stay under budget if the timeline gets drawn out. (see also Power at Ground Zero).
Lego’s largest model ever released will be the Roman Colosseum.