A question about prefab construction came up at a talk this year in Sydney with Lucy Turnbull (Former Sydney Mayor) and Alain Bertaud (planner and author order without design), Lucy mentioned someone tried this in Sydney and went under and they never heard from them again despite promising the world. Alain mentioned that tastes (think in terms of from finishes to floor plans) change often enough where prefabricating an entire house doesn't really make sense. Not to mention construction codes can change as well (I know in the US it can vary on a county level), they mentioned they saw more success with prefabricating components like windows or fireplaces or whatever.

Something like a factory requires an intensive upfront captial investment, if tastes change often enough the process would need to be amendable to adapt to changing tastes.

Combined with that, I think the fact there is no uniform standards for acceptable floor plans, compliant layouts and construction codes across the different jurisdictions really makes it hard for there to be economies of scale.

> note I don’t think construction codes are strictly a problem within the US, there’s apparently a manufactured housing code. However planning controls are a seperate thing and possibly still an issue.

An example from Sydney (which likely relates to other jurisdictions) Outsides construction code, in Sydney there is a quasi instrument called the apartment design guide which issues requirements on floor plans, floorspace, how far a bedroom wall can be from a window in a bedroom, ceiling heights a lot of things that act as constraints on the possible layouts of a home, and I have no doubt some form of this exists in other jurisdictions as well. I imagine when there is so much variation in different legislative constraints in different jurisdictions there isn't really economies of scales as there are actually several different non homogenous market segments with incompatible set of constraints, and where there's overlap it may not be a high demand end product.

I don't think this as much of a problem but I imagine there are cases where some unionised construction industries may refuse to use work on site using prefab components. I haven't really heard of such cases so I'm not convinced this is a real blocker.

Key statement: "The fact that the ratio between costs of constructing a home and the costs of the various materials is already so low is fundamentally what makes achieving substantial economies of scale difficult."

That's striking. Building houses looks labor-intensive, but, if that's correct, labor cost isn't that large a fraction of the final cost.

Building an Affordable House goes into some real, actionable things that could be done - and often aren't.

A big part of the problem is the same with cars; nobody makes used cars, and nobody builds used houses. The buyers are the ones with money and they drive the demand.

https://www.amazon.com/Building-Affordable-House-Fernando-Pa...

(Some of the obvious wins have taken over quite quickly; almost no builders frame roof trusses anymore and instead bring them in from a factory on trucks and crane them into position - three men can do in a day what would have taken an entire team a week.)

Lots of interest comments on the efficiency of building homes.

The bigger issue is the cost of land. The differential for land to build is often 10:1.

So even if the prefab shave 10-20% the price for a custom build, it's still not making much of a difference for the normal buyer.

unless a develop or government was opening up mutiple parcels of land well below the costs to build a house, prefab is not really going to be worth it.

Interesting essay.

There is this factory for lack of a better word near me that makes houses, packages them on a truck in pieces, and will ship them around the US to a foundation. All is said and done it's _maybe_ 100k cheaper to go with them than to buy the land and find your own contractors (and when the cost is between 300k-750k either way it doesn't really matter).

The essay touches on why this is the case, but fundamentally the issue with homebuilding isn't that we haven't optimized how to build houses. It's that only certain small segments of the population have seen anything but crushing decreases in wages on top of rampant inflation. So of course, when the average income of a region is 35k and the average house is 650k, there are issues that optimizing can't solve.

> You could vertically integrate backwards into the production of raw materials and components, in the hopes of driving down those costs

This is my takeaway: to reduce home-construction costs, we need to apply economies of scale further to the inputs.

What is the idiot index for lumber, drywall, et cetera?

I wonder how much it’s due to the fact that homes are such an incredibly expensive endeavor compared to other things. I could see significant economies of scale in most of the materials and parts, but perhaps there has been a steady increase in quantity in those materials?

One thing that can’t be scaled is “prime location”

There will be locations that are more desirable than others, and even if you keep building houses where there’s space, the need to congregate in particular areas (such as for work) will result in particular locations being more desirable.

And, it’s hard to increase the density of an area once the housing supply is already built out.

So instead, that supply stays fixed, demand increases, and the price increases in turn.

This actually made me think then that an accelerator for scalability could be: public transit into population centers that ensure areas with abundant space (and cheaper housing supply) can still easily access the areas that would otherwise be hugely expensive to live near

I believe this was done near DC where the public transit buildout helped foster further housing development in those emerging areas. Not sure if other HCOL areas, e.g. CA Bay Area, have similar things going on for East Bay mobility / other cross-county transport

I wonder, have vertical integration been tried yet? As in, do any builder companies own forestries, or maybe cement or steel mills?

Maybe we are solving the wrong problem? Should it be, where at the economies of scale in "building places for people to live in". I'd be interested to hear from others about relative costs for high rise, multi-family dwellings, double storey dwellings and so on relative to single-storey single-family dwellings.

I believe all these engineering/technology/economic discussions are missing the human element, humans do human kinda things.

The #1 feature of housing in US is to keep the undesirables out. The best way to implement it is costly housing via zoning, deed restrictions and HOAs. And with costly housing, emerge good schools. Which creates a vicious/virtuous cycle. People who want to live in safe places (and/or good schools) create more demand in these specific locations even though they may not have the original motive (of keeping the undesirables out). This is the power of defaults.

Now, add to this that most of the wealth in US is housing, it creates a perverse incentive to stop any more supply, which they can accomplish at the city/county level.

Note: The above is US specific. There are other things at play in other countries. I'm not sure what drives costly housing in Canada and Australia.

One problem in development is we keep trying to think big 'build a lot of homes at once'. That creates the suburbs which, long term, is very unhealthy for a city and its residents (and unfair to the core which ends up paying for their services). We need to push for smaller development, but more of it. It is a lr for cities. When you hear 'redevelopment' it generally means too big of a step is being attempted. It is too often a make or break, and too often that just means break so you get nothing bus held up development, and even when it does happen it is too much and you likely overshot in many ways and undershot in many more. Then, years down the line all those houses age out at the same time and their infra ages out at the same time leading to a sudden problem for the city. Smaller projects lead to a diverse and healthy city. You want to make homes cheaper? Publish, and maintain, pre-approved plans for homes and ADUs, but make sure the plans meet city density needs. Give incentives to clear out brownfill. Encourage development in ways that improve the health of a city and you will get healthier cities.

There's no good technical reason why you shouldn't be able to pick up flat pack housing at your local Ikea and fix something very serviceable with just an Allen key in an afternoon or so. But it would burst the bubble that housing is expensive and devalue the property of people that indebted themselves to own a house. That's why Ikea is not in the housing business.

Housing is not a technical problem. Our medieval ancestors build housing using just twigs and mud. It's not that complicated to build something vastly better with modern materials. Modern conveniences like heating, electricity, sewers, water, etc. add a bit of complexity of course. But there's no logical reason why you should spend north of half a million on that. If you have a few spare thousands, you can own a pretty nice recreational vehicle that come with most of what you'd need. But good luck finding a spot in most densely populated areas where you would be allowed to live in one.

We keep finding extremely petty reasons not to do pragmatic things to fix housing and the cost of living crisis. Simply stopping the process of policing this sector would in short order lead to most cities gaining uncontrolled slums, camp sites, and what not. The irony of policy failure is that this is in fact happening in lots of places.

> This means that the ratio of the costs of the output to the costs of the physical inputs (drywall, lumber, concrete, etc.) is around 2.

> You could find a way to use fewer and/or cheaper raw materials.

You can delete almost all of those components, almost all of that assembly work, much of the mass of the structure, much of the supply chain for the raw materials, almost all of the inventory costs, and you can make the financial carrying cost negative. You build it in a factory at room temperature mostly out of nearby rocks, and ship it flat-packed to the destination, where it mostly self-assembles over the course of a few minutes. The result is beautiful, requires little energy to heat or cool, and is impervious to insects, salt, caustics, weather, fire, and resistant to bombs.

Uh, the demonstration is forthcoming, bear with me.

We have effectively managed to demonize factory made houses by referring to the people that live in them as trailer trash. I honestly think 3-D printed concrete houses at some point will be how most things are built you’ll get tons of Americans talking about how do you can’t access the wires/plumbing and stuff and it basically just comes down to having enough windows or access points into the inner wall. Not to mention this is how everyone else in the world builds houses.

Homes last for 50+ years and are fixed objects that establish the visual look of our communities and outdoor space. They aren't disposable products. The way you get economies of scale is by repetitive builds and a highly optimized supply chain. You could get efficiencies if every home was built and looked the same but most people don't want to make that tradeoff

There are some things that could improve the situation. Post frame construction, Pre built trusses, macerating toilets that are more forgiving for sewer tie ins, localized instant hot so you don't have to run separate hot water lines, radiant heating so you don't have to run the duct work. It's all tradeoffs though and you aren't going to get a $500k house for $30k.

The other thing holding back progress are building codes and city laws. To be fair a lot of those codes exist for good reason but the inspection and permit system is suboptimal in most cases. You can buy a $30k small studio on Amazon right now that shows up on the back of a truck but good luck with your city allowing you to use it as a dwelling.

Take a look at Broad Sustainable Building.

There's also the other path of making homes more durable, less maitainance intensive. This would also increase the housing stock and probably reduce total costs over the utilization time by a household.

More durable materials and construction techniques would also reduce the insurance costs which are basically overhead in the economy.

I think standardized codes would help a lot. Another major issue is labor mobility: Here in California, there's a big labor shortage for all blue collar trades, and even if they do live in the area, they have to spend a lot of time going to/from the job site.

I think this can be largely solved by technology, but with a change of regulations, code, and division of labor in the trades.

1) Put all the power conduit, plumbing and HVAC into standardized modules that can be cut to length with a circular saw, and attached with tools that cost a total of $500 with no skilled labor. It doesn't matter if this increases material costs by 50% for those components because they are cheap vs. labor. I'd rather waste a $50 piece of conduit than pay three different tradespeople $100+/hour to hand-build junctions where the wasted piece would end up being.

2) The next big cost is probably drywall finishing + doors. I don't have a great solution. I can imagine just 3d printing the whole interior once the conduits are placed.

3) Roofs can be cheap if rooflines are simple, since that allows stuff like metal roof trim to be fabbed at a factory. I don't think asphalt shingles are going to make much sense in many places 30 years from now, so probably just bite the bullet, and pick something wind and fireproof, then make it cheap.

4) Put solar panels somewhere other than the roof, or replace the roof material with them entirely.

5) Framing and insulation are already embarrassingly cheap vs the rest of the house. Probably not worth optimizing unless it saves finishing labor in the next step (e.g., 3d print a beautiful interior wall so you don't have to pay for someone to apply joint compound + paint).

That leaves the foundation + architecture / engineering work as the hard part. Most of the design work for that stuff could be automated. Let the homeowner and builder boss an LLM around, and then run the LLM output through code compliance + simulation gates. The latter is really important because most local code is hazard or climate dependent, and having good deterministic vetting of designs would let the construction process apply to multiple climates.

Prefab could make sense, but, in practice, those people don't pick up the phone. One major issue is delivering the house to things like hills, or at the end of windy / suburban roads. (The prefab sections want to be 30-50ft long, but your residential road doesn't want to support trailers over 20-30' or so).

Why does a carpenter cut the end off a 10-foot board to get a required 9ft-2in, thereby wasting 8% of the input and incurring dumpster charges? Suppose the architect's design specified the cutlist, to be transmitted to the board "factory", which would cut boards to the required lengths, tagging them with RFID serial numbers indexed to the design, stacking them so the first ones to be used are on the top, and truck to the site without passing through Home Depot?

It's a strange way to analyze the situation. By that logic, building from premium materials makes economies of scale more difficult, and building from cheap materials makes it easy.

Also, labor inefficiencies clearly exist, as protectionism by definition creates artificial inefficiencies, and it is rampant in all aspects of construction. It's easy to buy an off-the-shelf and cheap window air conditioner that uses a far more efficient variable-speed heat pump than the fixed-speed heat pump most central HVAC's use, but that same technology is rare in installed central HVACs, because the licensing and certification requirements impede the adaptation of newer more-efficient technology, despite the requirements ostensibly existing to increase its use, but in practice providing protectionism at the expense of modern efficient technology. There's similar effects with protectionism slowing the adaptation of longer lasting, safer, or less error prone infrastructure in other fields of construction like plumbing, electrical, framing, etc.…

Licensing and certification is also easily hijacked by NIMBYists, and because it's not based on actual safety requirements it can vary significantly from region to region, as is demonstrated by nationwide home builders having an efficiency disadvantage over those operating in only one region.

Granted, repealing NIMBYism and protectionism is nearly impossible, so it's not an effective means to reduce the costs of building housing, but it does demonstrate that there is a lot of inefficiency in the process. It also means that the field is ripe for disruption, because a concerted enough effort to sidestep NIMBYism and protectionism could break through and create a significant and immediate impact on the field, as for example, Trader Joe's did with wine importation, Southwest did with scheduled airlines, and Uber and Lyft did with town car services.

It suggests we need to find cheaper materials from which to build homes.

Public transit is one thing that could help. Another is a land value tax, which would incentivize density in places with rising demand.

I've been thinking about this a lot. It feels to me like we* are not good at making new places that people want to be, so we spend a lot of energy working out how to maximally utilise the existing good places.

There will of course be some places that are uniquely popular e.g. due to their geography or natural beauty. Humans tend to congregate around centres of economic activity, which means some places become popular. But creating sprawls of dormitory suburbs and efficiently piping everybody into the few places that are actually nice sounds terrible.

* my perspective from Australia

> One thing that can’t be scaled is “prime location”

Literally density.

It can though.

The USG kinda used to do this by changing the headquarters for an agency/organization to be in the western (less populated) states.

That's not exactly true. Its possible to bootstrap entire cities successfully. Look at China. In the US, redeveloping Gary Indiana would be a good option for this sort of thing.

And I guess some billionaires are trying to do something more greenfield in Solano County, California.

"Prime location" is not some static thing.

> 'build a lot of homes at once'. That creates the suburbs which

What a silly American way of thinking. Build a lot of homes at once creates high rise neighborhoods. We've had these in Europe since the 60's, they are great. Asia has taken it to the extreme in recent decades.

A couple high rises give you a few hundred residential units in a completely walkable neighborhood.

Here's an example from Ljubljana, built between 1977 and 1987. Houses 18,000+ people on 150 acres. https://sl.wikipedia.org/wiki/Nove_Fu%C5%BEine

Here's a more sciency source. Over 3000 residential high rises were been built in Europe in the 2010's

https://www.alexandrinepress.co.uk/built-environment/high-ri...

Another fun example: The tallest skyscraper in Europe will have 260 apartments and 107,000+ sqft of communal space https://www.domusweb.it/en/news/gallery/2025/09/26/benidorm-...

The US is not completely centrally planned by a politburo, and suburban sprawl is not a conspiracy of diabolical powers that be. Given the choice, many people with the means will pay a premium and spend hours every day commuting to not have to live in The city they work. Why? There are uncomfortable answers. You can’t make maximizing harm to a segment of the population a policy goal and expect them to stay.

1) I don't think this is really a problem? When the walls are open, running stuff is fast. But when the walls are done, the trades come back to make the connections, which is slow amd expensive. Or if you messed up and have to fix it when the walls are up.

2) prehung doors help. Drywall is already the cheaper, faster option... but yeah, finish takes a lot of time. Innovations such as giant oversized outlet trims help a little bit.

3) simple rooflines help even when not using prefab, but people seem to prefer complex roofs. Again, asphalt shingles are the cheap option. If you have a single or two surface roof, a roof goes very fast. Where planes intersect is where all the time is. Material costs on a metal roof are still way more than asphalt.

4) most people don't have a somewhere else for the solar to go. Solar tiles are too expensive (materials and labor)... Panels as roof sounds good until you want to have roof penetrations as is normal for plumbing vents, combustion flues, and bathroom ventilation. Gotta make that all mostly waterproof too.

5) framing seems to be getting some labor saving. Prefab sections can save on-site labor. Things like roof trusses fit on a truck nicely. I think I've seen wall segments too, maybe? Stair sections?

The problem is that most of the country wants housing to get more expensive...

You're going to have a hard time getting anything passed when a lot of people will do anything and everything to make sure housing can never get cheaper and only more expensive...

Have you ever been on a building site, let alone been involved with building?

The vast majority of the boards and carpenters gets come pre-cut to 92 and 5'8". That is exactly the size you need for an 8' wall. It is only a tiny minority of borders that the carpenter is actually cutting on site. The majority are already pre-cut to the exact size needed.

It would be possible to cut boards to the exact site in a factory. However, you would lose more in the logistics cost of managing all the different possible sizes that you need. Thus two by fours come size multiple of two feet except for the 92 and 5/8's and 104 and 5/8's. Those later too are the extremely common sizes that are used in most commonly.

The truck has to pass through something like Home Depot anyway because all those boards come not on a truck they come on a railroad car and then they'd have to be transferred to trucks to get them to wherever. That Home Depot-like place is also a good place to stage things if you actually are building you'll discover that the dedicated lumber yards are very good at breaking apart all the different pallets of lumber and they figure out exactly what you need and they put those all into one group and bring it to you. Yes, you do sometimes have to cut a 10 foot 2 by 4 and 9 foot 2 inches. However, you are never in the situation where you have a 12 foot 2 by 4, you have to cut to that size because Lumberyard has already figured that out and gotten you the closest to the right size for you. Having been in construction, I can inform you that there are very few boards that actually return to the lumber yard at the end of the build. They are generally right on and getting you the exact amount of lumber you need from the blueprint

You can buy kit houses that basically do what you're describing, up to and including entire log cabins that go together like Lincoln logs of yore (which end up being MORE expensive because they literally build the house at the "factory" and then disassemble it, put it on a truck and reassemble it onsite).

The big problem with kit homes ends up being what happens when (not if) you @#$@ something up.

And the big builders are already bypassing Home Depot, they buy from suppliers that you've never even heard of (the smaller ones buy from suppliers you've heard of, but when you went in everything was 5x the price of Home Depot, because they don't want you as a customer - they want the builders who buy on account and get 80-90% discounts on "list price").