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Building Blocks

Truckee is poised for modular building
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As soon as December of this year, an initial wave of 12-by-60-foot flatbed trucks carrying Truckee housing will roll into town. The homes, stacked like 20-ton Lego blocks, will be bound for the community’s newest housing development, Coburn Crossing, bringing 137 much needed rentals to the market. Closely following will be a second round of homes on wheels headed for the 90-unit affordable housing Artist Lofts project at the Truckee Railyard.

As construction costs climb sharply — 10 percent each year — and housing need rapidly outpaces the ability to build, a pragmatic response by local developers has led to entire developments planned to be built as far away as South Dakota and then shipped as whole units to Truckee. It’s not simply thinking outside of the box — it’s moving the box across state lines and redesigning it entirely. The modular building technology coming online today has taken the idea of manufactured housing into the 21st century. It’s booming across the West, and Truckee is in the vanguard.

Set to pop

“The industry has been so devoid of innovation for so long — we’re really trying to accelerate that,” says Rick Holliday, developer of the Truckee Railyard, as he walks purposefully across the roof of a massive shipyard warehouse in Vallejo, leading a tour of his latest project: A 250,000-square-foot factory devoted to cranking out modular units in rapid, futuristic fashion. I followed the group through the warehouse, taking notes and watching each unit being built from a laminated timber foundation up — framing, siding, plumbing, electricity, and furnishings all installed piece by piece as the units move from station to station in the warehouse — until we reach the roof. Here, Holliday wraps up the tour with a look at the space he will be leasing to University of California, Berkeley, his alma mater, for students to use in brainstorming future innovations for the building industry. Factory OS is Holliday’s solution to the need for quick, affordable building solutions on a large scale, and on that factory roof, with a view stretching across the industrial port of Mare Island, you get the feel of catalytic potential.

The warehouse outside of Vallejo is a converted submarine manufacturing site from the middle of the last century, and after hiring its first worker on April 1 of this year, the company is now building at a rate of a unit a day. It’s the 21st-century Model T, courtesy of the factory’s cofounder and engineering lead Larry Pace. The factory completed its first order last month, Holliday says, which was a 110-unit apartment complex for Oakland — the project wrapped up under budget and ahead of schedule. The ironic drawback to this feat is that although all of the units are built, they are sitting in storage because the city planning commission hasn’t yet had time to approve the project.

Factory OS buzzes like a well-oiled machine. Workers transport full-sized housing units across the factory floor using winches and pneumatic airbags that lift the boxes just above the ground as if they are hovering on an air hockey table. Engineers craft plans in a modern office at the front of the warehouse, steps away from where their plans are being brought to life. The whole operation seems years in the making, but Holliday says the thought of founding a modular factory would have sounded outlandish to him even three years ago. When plans for his Truckee-based affordable housing project, the Artist Lofts, were first submitted in 2015, the project was originally designed to be erected traditionally, “stick built.” But, when Holliday finally secured funding and took the project to bid this year, it came in almost $7 million over budget due to construction costs rising roughly 30 percent during that time. His team drafted a modified plan incorporating modular units — Factory OS was just getting off the ground at this point — and the transition to modular building was approved by the town planning commission in August.

Holliday says he’s hollowed out a time slot in late spring of next year to build the units for the Lofts, and they’ll start stacking units on site by August.

Turning the model on its head

Modular building is growing sharply in demand, and Holliday is unique in his vertical integration. For many developers, financing projects and negotiating with factories is essentially still the Wild West. Mike Foster, architect for Coburn Crossing at Triumph Development, said they had to get creative in their search. Contrary to the Artist Lofts project, the deed-restricted, market-rate rentals at Coburn were drafted to be built off-site from the get-go. According to Foster, Marriott Hotels & Resorts had brought the property to Vail-based developer Triumph with the suggestion that it be built modular, and Foster said the more he looked into it, the more sense it made.

“As we started to talk to contractors and pricing, and just the local labor pool that’s there in Truckee and the limitations of winter and so forth, that really pushed us and solidified that we use the modular for both the hotel and the apartments,” Foster said. There were only a couple of drawbacks. The first is that the developer must make hefty deposits in advance before the factory will begin construction, an imbalance of investments that Foster says is putting the cart in front of the horse for most traditional lenders. Case in point: If you look out at the project perched above town between I-80 and the Truckee Cemetery now, you’ll see only foundations — but Triumph has already invested millions for the structures themselves.

Another hurdle was supply. Foster said Triumph had to cobble together their project from factories across the West to fulfill the 138-unit order (made up of 167 separate boxes, as some boxes combine to build two and three-bedroom units) and meet the building timelines. Three different factories from Boise and Pocatello, Idaho, and Waterton, South Dakota are working on the apartments, and a fourth factory will be used for the hotel. The Marriott will be built by a different developer, but Triumph’s first round of boxes arriving in December are slated to be rent-ready apartments by June 2019.

“It’s not ideal to have three factories, but with the popularity of modular construction and how busy these factories are, no one factory had the production slot to do all 167 of our boxes,” Foster said. He said when Triumph first reached out to modular builders in the West two years ago, not one they approached would have had trouble delivering the order. Now, he said, the Boise facility they contracted with is booked solid through July of next year.

This delay is a problem for developers looking to capitalize on the rapid pace of modular, yet it’s the only sustainable business model for the factories producing the units as they can’t afford to have any length time period without a contract. Companies face temporarily laying off hundreds of workers simultaneously the instant the last box rolls off the production line. Because of this, factories really can’t afford to have open slots on their production line less than a few months out, Foster said.

If off-site construction is an evolution of traditional building, it’s also revolutionizing the traditional workforce. “It’s been an embryonic experience building our factory,” Holliday said. “We’re building a completely different labor force.”

Holliday has over 90 workers at Factory OS, and contrary to a usual building site, where plumbers, electricians, and carpenters all play a specific role and are all represented by different unions, the workers at Factory OS are hired on to do just about any job at the factory, and they are all represented by a single union, the Northern California Carpenters Regional Council. The union and Holliday agree this departure from tradition is necessary for a trade that has seen little innovation over the last 75-plus years.

“At the carpenters [union] we’ve always taken the approach that you can’t stop progress and evolution in new technology, so what we try to do is be a part of it,” said Jay Bradshaw, director of organizing for the regional council, in a statement regarding Factory OS. “By doing that we stay viable, as a craft, and we actually create more work opportunities for more members of our union.”

A good fit for Truckee/Tahoe

Here in Truckee/Tahoe the benefits of modular have the potential to count double. According to Pat Davison, governmental affairs director at the Contractors Association of Truckee Tahoe, the local building industry is strong, but the workforce never fully bounced back from the last recession. She said an influx of modular building, as long as providers savvy to our regional codes and practices, would be “welcomed with open arms.” She also echoed Bradshaw’s sentiments about the changing industry.

“It’s about … being open-minded, being able to evolve, and grow as an industry and that means embracing some of these new ideas and new ways of doing things,” said Davison, adding that she is planning a tour of the Vallejo factory with a group of CATT members to see the manufacturing process firsthand.

“Our workforce is in such high demand with Reno booming and with what’s left of our developed areas still getting built out, we don’t have the labor,” Tahoe Truckee Community Foundation Executive Director Stacy Caldwell added. “It kind of takes it out of our market and dynamics and it looks to companies that can source the labor around this specific type of product and make it more predictable.”

Beyond the workforce element, there are a number of other issues that modular almost seems pre-manufactured to address. Off-site construction continues in the dead of winter, adding nearly half a year of building time compared to traditional methods.

Regulatory processes that often slow down development in the Truckee/Tahoe region are often expedited. Factory OS, for example, has certified inspectors on site that can approve every unit for both state and local codes, significantly speeding up the building process compared to traditional builds that can wait days or weeks to be inspected, meanwhile holding up the next phase of construction.

A fundamental benefit for every rung on the ladder — the builders, the residents, the community — is cost savings. This reason alone drove Holliday to restructure his plans for the Artist Lofts. A Mountain Housing Council report of local fee structures compiled by Hansford Accounting this year found that building multi-family homes is not financially feasible in the Truckee/Tahoe region. Construction costs were found to be the highest by far in such developments, compared to the cost of land and impact fees. The price savings inherent in modular building means it’s one of the only ways to build smaller housing units in the area.

“It’s not new, it’s just our willingness to see it as an attractive product as a community,” Caldwell said. “The potential is, we’ve got another tool in our tool kit; the reality is that developers are looking to it to solve some pretty significant problems around the financing around not only affordable, but also market housing that isn’t kind of targeted to that luxury second homeowner market — to be able to build smaller houses and make it pencil.”

Caldwell adds that there is other modular building potential yet to be explored. Picture, for example, pre-approved Additional Dwelling Unit (ADU) design plans — a topic that has come on the Housing Council’s radar recently and is currently being utilized in Sedona, Arizona. The local building jurisdiction has a set of ADU options with pre-approved designs; the homeowner walks into the local planning office, picks one of the designs, pays a fee, and the approval process is complete.

The canon of homes

Modular building isn’t isolated to multifamily or potentially ADU units — single-family homes are also leveraging the concept. Local contractor Mark Tanner recently completed a series of small homes in nearby Clio, at Nakoma Resorts. “Off-site construction can run in parallel to onsite construction to produce a quality finished home much faster than conventional means,” Tanner said. “I think there’s definitely great opportunities for modular/hybrid housing in Truckee, not only in a large scale but then on one-offs or customs as well.”

Rick Holliday said his operation is likely too large to supply this kind of single-family market, but one standout feature of Factory OS might cross over to that industry segment — a canon of how to get it done. The methods Holliday and his team are using in its Vallejo factory are intended to be open source. This means the technology that is currently outputting one unit a day of multi-family housing — and on track to produce about 5,000 units a year, according to Holliday — can be utilized by any entrepreneur looking to address the region’s many housing needs through off-site construction.

“We’re in the heart of it,” Caldwell said. “I feel like our region is just poised for solving some of our most difficult challenges.”

 
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November 8, 2018