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The Nexus Between Title 24 and the Modular Housing Market

Off-Site construction (OSC) is a global trend that addresses housing shortages, rising costs, and quality

By YING WANG and BRENT MUSSON

Housing demand and supply have become a major crisis in urban centers nationwide, especially in California, and particularly in the greater Los Angeles area where the vacancy rate has dropped to 2%. Growing the housing supply is increasingly more difficult as the skilled labor shortage deepens, and now only 3% of young adults choose careers in construction. While housing is becoming less and less affordable—in California, rents increased 24% while household incomes decreased by 7%. Given the COVID-19 pandemic, such housing-related disparities will only be exacerbated to a level unknown at this time.

Many long-term and short-term policies are through federal, state, and local funding to help overcome this crisis. In the meantime, the housing industry, developers, designers, and manufacturers are innovating with
new ideas to overcome high construction costs, better quality demand, and larger scopes responding to continuously changing restrictive energy code.

California enforces the Energy Code section Title 24 to establish an overall facilities’ energy allotment and baseline for energy efficiency opportunities.

Fortunately, a global trend toward Off-Site Construction (OSC) may address housing shortages, rising cost, and quality—three problems, one solution!

OSC is characterized by sections of a building, made in a factory, then transported to the project site for assembly. This method efficiently reduces waste and reduces
the carbon footprint as a byproduct of manufacturing efficiency.

These are the most compelling arguments, but nothing talks louder than cold, hard cash. Decisions about what and how to build are made by developers based on a cash flow analysis, that boils down to a handful of ratios that incorporate the present value formula to express a likely return on investment (ROI). OSC improves performance on all three critical measures: time, cost, and increased scope. Housing is built faster in the factory, and needs shorter on-site construction time; consequently, the labor cost is much less. On average, an OSC home is 10% to 20% less than regular stick-build. A private developer with more than $100 million in funding is exploring OSC for affordable housing in the South LA Opportunity Zone. They plan to build the factory in Downey to support the Los Angeles market.

The other particularly crucial point is the increased scope due to energy code requirements means that environmentally responsible features can be included in a build without breaking the budget.

Though many energy-saving choices pay for themselves over time, upfront costs can still be a hard sell to investors. So, the ability to incorporate energy-efficiency into a comprehensive manufacturing process, rather than as a line item, is an effective way to introduce sustainability broadly. For instance, employing an automated computer numerical control (CNC) router to cut drywall penetrations for service fixtures reduces human labor, which is excellent for business. Even more, it also makes tighter-fitting holes, which are easier to air-seal, and that’s great for energy efficiency.

The Off-Site Construction (OSC) homes in California are under T24 regulations, including Energy Efficiency Standards and CalGreen. Besides, the OSC also needs to pass the HCD inspection in the factory. California enforces the Energy Code section Title 24 to establish an overall facilities’ energy allotment and baseline for energy efficiency opportunities. The Residential Code regulates single-family and low-rise (up to three-story) multi-family, and the Commercial Energy Code regulates multi-family that are four-story and above.

Aside from erecting greener buildings, OSC is a much more ecological method. Just in time (JIT) roll-formed light gauge steel (LGS) framing sets a new standard for waste reduction because studs, joists, and other framing members are cut to length from a roll. Compare this with wood members which are sourced at standard lengths and cut to size for the project (visualize the trash pile at a typical job site).

Arguably the most critical category of environmental impact is our responsibility to our fellow humans. In addition to building more energy-efficient structures through a greener process, OSC reduces the cost of construction (making housing more affordable) and accelerates timelines (making it available faster), all while significantly increasing production capacity (to build enough for everyone). That means OSC could help to reduce housing shortages, provide some price relief, and provide greener housing at every price level.

Ms. Ying Wang, President of Okapi Architecture Inc., licensed architect, LEED FELLOW and AP, Well AP.

Dr. Brent Musson specializes in industrialized construction (off-site modular) primarily to drive multi-family housing development.