Will homebuilding finally evolve? Lessons from the American experience with factory-built housing

MEREDA’s Spring Conference in May included a keynote presentation by Dr. Lynn Fisher of the American Enterprise Institute in Washington, D.C. Dr. Fisher provided both national and state economic data, painting a bigger picture of the housing situation. We thought this article that she contributed to might be of interest to our members.

by Lynn Fisher and Scott Ganz, American Enterprise Institute

Abstract

In this report, we examine the history of attempts to disrupt site-built single-family housing in the US to learn about the potential for the homebuilding industry to increase housing affordability through innovation. We argue that greater reliance on mass production is unlikely to be a source of significant cost savings for the kinds of homes that most Americans live in today. We highlight the potential for factory-built housing to provide more significant cost savings if smaller-size and reasonable but lower-quality construction is permitted, as is the case with manufactured housing. While the entire home is rarely prefabricated in the US, we do find an increased reliance on prefabricated components in site-built housing over time, resulting in some cost savings and increases in construction quality. Finally, we argue that the history of homebuilding demonstrates that rapid adoption of prefabrication or more efficient production processes by homebuilders are more likely to be driven by market competition than by economies of scale within consolidated firms or by government intervention.