The process for building affordable multifamily housing in the US is broken, and modular construction might just be the way to fix it, says Christian Lawrence, 29, a CEO of Rise Modular, a construction company in Minneapolis, Minnesota.
Modular construction refers to a process of building a residence at an off-site location and then assembling all of the pieces on-site, almost like LEGO pieces. At Rise, which specializes in multi-story and commercial real estate construction, this can mean building an entire floor of a home or apartment — including kitchens, bathrooms, and appliances — at its 150,000-square-foot warehouse and then transporting it to a job site for installation.
Building homes off-site can help speed up the time it takes to complete homes in areas of the country that face extreme weather, Lawrence said, as the initial construction process takes place inside and away from the elements. It's also more efficient in the sense that workers build the homes in an assembly line approach versus starting from scratch at each job site. Economies of scale not only reduce material costs, but they can also reduce waste generated during construction, Lawrence added.
In just two and a half years, Lawrence has grown Rise Modular into a business that has completed more than 760 housing units as of November 2022. Rise has also grown to 150 employees and has another 400 units currently under construction.
"We need to find a better way to build housing for everyone," Lawrence told Insider in November. "Everyone acknowledges the challenges we have as it concerns high construction costs, and I think modular construction is one of the most innovative and sustainable solutions we have."
Rise Modular primarily focuses on developments like student housing, hotels, and apartment buildings, Lawrence said. The company has also been called upon by other developers to help finish projects that wouldn't otherwise be possible in a more traditional construction setting, Lawrence added.
For example, Rise helped complete a seven-story, 192-unit apartment building called Alvera Apartments in St. Paul in December 2021, according to the company's website. Lawrence said other developers on the project approached Rise to help with the project because they couldn't make the numbers work with a conventional construction company. Rise was able to complete the building with 154 different modular pieces which saved at least five months of construction work, Lawrence added.
The impact of modular construction can also be seen outside of construction sites, Lawrence said, because it can make housing more affordable for renters at a time when wages are stagnant due to inflation. For instance, rents for studio and one-bedroom apartments at Alvera start at around $940 and $1,375 per month, respectively, according to the building's website.
The studio unit shaves off nearly $300 per month compared to the median rent for a studio apartment in Minneapolis while the one-bedroom apartment is about $200 less than the median, according to data from ApartmentList.com.
"Modular construction has the potential to provide housing at a lower cost and deliver buildings in a more cost-effective way than traditional sticks-and-bricks construction," Lawrence said. "It can also deliver a higher quality and more environmentally sustainable product."
These apartments are also hitting the market at a time when real wages in Minneapolis are decreasing because of inflation. According to data from the Federal Reserve Bank of Minneapolis, wages in construction and professional services have increased by 5% as of November 2022. However, consumer price data from the Bureau of Labor Statistics shows that inflation reached 5.3% in November, meaning that workers saw the spending power of their wages decrease by 0.3% over the last year.
In the next three to five years, Lawrence said he expects Rise to become a leader in the modular construction space. The process has been used successfully for decades in Europe, but Lawrence said there are very few companies in the US who are up to the challenge, especially in the Midwest where cold winters and snow can grind construction to a halt.
"We've proved that there are real cost and time savings associated with modular construction," Lawrence said
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