Remember the pre-pandemic days, when even your average retail startup was trying to brand itself as a “tech company” or “tech startup”? This branding had little to do with the consumer and everything to do with the investment funds generated. That’s nothing except that if the fundamentals of a new “tech startup” are flawed or built on the wrong assumptions, that business is likely to fail, technology or not. It’s not a bad thing. Interest in building modular homes has suffered this natural fate by trying to ignore the fundamental principle that the problem with high housing prices is simply that there is not enough housing, and the reason is overregulation.
A Business Insider headline tells part of the story. Factory-built homes were supposed to save us from the housing crisis, but the companies that manufacture them are failing.. why? Here is a passage from that story.
“However, multiple layers of restrictive government regulations, such as zoning laws and building codes, often stand in the way of factory-built housing. . . . There is a complex web of local and state regulations. This may make it impossible for unit housing companies to build the economies of scale needed to reduce costs and increase profits.”
I’m clearing my throat. I told you so.
Sometime in 2017, I started receiving emails and phone calls about the latest big technology to solve the “housing crisis.” In a radio interview, I called the speaker of the Washington state House of Representatives the “Grand Poobah” of subsidized housing. Although this irritated him, it had the beneficial effect that on weekends he would see me for an hour or so. Among other things, the Chairman asked me to reach out to up-and-coming companies that are slated to become the new Amazon AMZN of the housing industry. So I did. The conversation went nowhere. This is his email to me from May 2017, recording a phone call I had with this person. After the conversation, I emailed someone something like this:
“Last weekend, I met the following person [the Speaker] He really values the concept of modular housing.he said to talk to me [the CEO of one of these companies].
When I spoke to him Monday morning, he struck me as a clearly smart guy, but he didn’t seem interested in the realities of Seattle’s regulatory and political environment. It turns out that it’s not unusual for people in the technology industry to think that they can introduce products into the housing market just like they can in other markets.
He explained that housing is not like a service or software product, it is highly unstable and sensitive not only to the immediate needs of consumers but also to popular opinions.
Anyway, if the Chairman would like to talk more about how this goes, please let me know. ”
A lot of people think I’m mean, and maybe I am too, but I’m not going to name names here. I also have a contract with one of the sexy companies that recently filed for bankruptcy, and I said this in an email in December 2018:
“It comes down to policy. The land use and housing policies being pursued by local governments on the West Coast are extremely clumsy and based on the flawed principle that commercial market housing is an impact that should be mitigated or ameliorated. Yes. No. Increasing the supply of housing on the market, especially a greater variety of typologies and smaller unit sizes, can alleviate the price pressures that hit the poor hardest.”
Generally speaking, emerging “tech” companies that are trying to make modular a reality are not interested in hearing about the dangers ahead, producing products for less money, and ending up with regulations that add cost. You ignored my suggestion to invest in untying the knots. It will be more expensive. At the time, I also posted about the benefits of modular (Modular housing saves time and money and can lower prices) and the danger of regulations that take away price benefits (If left alone, modular can contribute to increasing housing supply.). All of this was ignored as the media and investors pursued the shiny goal of a “technological” solution to the housing crisis. Yes, mass production can reduce costs and reduce prices and rents for end users. But regulatory confusion at the state and local level makes that impossible.
I rediscovered songs that were everywhere at the time. what do fools believe – Artist: The Doobie Brothers, The story of a man who happens to meet a woman who seems to be interested in him for some reason. she didn’t. “She had a place in his life/He didn’t make her think twice.” And the song’s key refrain is a gimmicky, quick-fix response to the housing “crisis.” It symbolizes a solution.
But a fool sees what he believes
Smart people don’t have the power to reason
What do you think?
always better than nothing
better than nothing
I’m not a smart guy, but the solution is simple: fewer rules, regulations, taxes, and enforcement, more housing, and efficient cash subsidies for those who can’t afford housing.
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