Here we are just a decade after the housing crunch that forced the closing of both prefab and modular factories across the entire country and it’s deja vu “all over again”.
Katerra, the Silicon Valley startup backed by SoftBank, has closed a large factory in Phoenix, weeks after one of its co-founders left the firm.
The Menlo Park, CA–based firm, which is valued at more than $4 billion, says it uses tech to deliver construction projects inexpensively. But it has a history of delaying or abandoning projects and in recent months has laid off hundreds of employees.
It’s been announced that the factory will close its doors and lay off 200 employees by the end of the month. They are opening a mass-timber plant in Spokane, WA and planning to replace the original AZ factory in Tracy, CA.
One of the biggest investors in Katerra is Softbank which has seen its share of problems when it overvalued another company they invested in, wework, the rental office space company.
Time will tell if Katerra will ever be the darling of the media it once was or will it simply just become another one of “those” upstart companies that saw a huge profit in supplying the affordable housing market in the West and fades from the scene.
The Phoenix, AZ factory, which was the company’s first, had been used to prefabricate building components for Katerra’s construction projects.
Meanwhile on the East Coast, one of the biggest modular home factories in the Mid-Atlantic region, Cardinal Homes, filed for Chapter 11 Bankruptcy on December 2nd.
Chapter 11 allows the owner to reorganize to stay in business and we wish them well in their endeavor.
This isn’t the only modular factory that has either closed their doors in 2019 or saw a drop in production. There are rumors of modular plants with assembly lines either shutdown for short periods of time or running a very low capacity in order to keep employees from jumping ship.
What’s causing this to happen when we hear so much about a shortage of affordable housing? As I see it, the three biggest factors were the move by East Coast modular factories to large projects such as hotels, dormitories and commercial which put hundreds of modules on the production line at the same time single family home builders were ordering new homes and the tightening of state and local regulations and code imposed almost exclusively on modular housing.
The third factor is the lack of “new modular homebuilders” coming on to replace the current group of builders that want to retire. Even if hundreds of new builders wanted to build with modular construction today, there is absolutely training or continuing education for them.
These fundamental problems will never be solved unless the modular housing industry decides to do something collectively about it. This is a problem that needs to be discussed openly and honestly before we see more factories close their doors.
