- Multiple factors, including delayed homeownership and systemic pressures, contribute to the current housing shortage.
- Prefab homes, reminiscent of the early 20th century Sears Modern Home Project, emerge as potential solutions.
- Sears’ model democratizes the housing market by transforming local trades and introducing financing options.
- Despite challenges, innovative strategies like increasing housing density can potentially mitigate the housing crisis.
In this episode of the Poplar Propcast, Justin discusses the current shortage in the housing market and how it compares to the past. He puts prefab homes into the spotlight and compares it to the Sears Modern Home Project that ran in the early half of the 20th century as a potential solution to the housing shortage.
To explore this topic in greater detail, listeners can check out the full episode on Google Podcast or your preferred podcast platform. This blog post serves as a summary of the highlights covered in season 1, episode 12 of Poplar Propcast.
Drivers of the housing shortage
Justin points out in the podcast several pressures affecting today’s housing market. “We’re coming out of the pandemic with this housing supply crunch. There is more demand than there is supply,” he stated. He expounded on several reasons why:
- Aging population holding onto their homes – “The older generation is aging in place because they’re healthier and able to, so that longevity holds them into their home. They’re sticking around. They’re holding onto their houses.”
- Delayed homeownership – “All the people who have been delaying their household formation now want to start a household.”
- Remote work demands more space – “All these people who are working jobs that are then suddenly remote, that were packed into maybe two couples in a two-bedroom. When four people start working from home, that’s gonna push real hard on breaking those households up.”
- Systemic pressures – “Permitting land use has reduced the number of dense developments that have happened. They’ve reduced the amount of land that’s available to be used, and so that just kind of sits on the edge as a geographical pressure.
- Infrastructure hurdles – “Everything from rail lines to interstate freeways to power interchanges between two different states, all these things control where you can build property.”
The rise of prefab homes
Justin notices the shift in the way we construct our homes. “People are talking about 3D printing houses.” However, he is skeptical about the nearness of this reality. What piques his interest, however, are “prefab homes that are coming in as a bunch of panels.”
Justin ventures into “the potential to be as big as mobile home parks in the eighties and nineties.” He notes an increasing trend of people opting for a mobile home lifestyle where “people are living off grid in a motorhome and then going and building in the middle of nowhere. They’re kind of doing dry camping while they build out a house from parts so they don’t have to have a house to live out there.”
There are also basic houses you can purchase off of Amazon, like tough sheds. “Occasionally it’s barn style, so it has a second floor. There is no plumbing and electrical, but they have enough integrity that if you wanted to fully insulate and plumb it, you probably could figure out a way to make it,” Justin shared.
Justin points out that there lies an opportunity for companies to innovate in a similar way as the Sears Modern Home project: “a pack and ship home where you buy it, deliver, drop it off from a truck and you assemble it on site and it turns into a house.”
Revisiting the Modern Home Project
Justin delves deep into the Modern Home Project by highlighting the impressive influence of Sears during its prime. Quoting an article from curb.com he says “It’s important to understand the reach of the company’s famous catalog in 1908 when Sears began selling homes by mail. One-fifth of the country subscribed…That is phenomenal. That is Amazon-level reach with paper catalogs. It’s insane.”
The birth of The Modern Home Project
The iconic Sears Modern Home project started in 1908. This innovative project started by offering 44 house plans in their catalogs, along with some additional parts but not complete lumber kits. Over time, these offerings evolved. By 1911, framing lumber was included in the kits, and by 1914, Sears was pre-cutting parts to size before shipping.
This meant a customer could order a house from the Sears catalog and receive a “25-ton kit, transported by train, containing more than 30,000 pre-cut parts, including plumbing, electrical fixtures, and even 750 pounds of nails.” Justin mused, “That’s just an amazing reach for a stack of paper in the 1900s.”
High-quality homes at affordable prices
These Sears homes were not budget, low-quality options. Rather, they were surprisingly “high-quality houses made affordable by Sears’ bulk buying power, centralized manufacturing, and shipping efficiency.” The ability to buy in bulk and distribute materials efficiently allowed Sears to offer better quality and cheaper prices than could be found locally.
These houses were delivered to the chosen location in a monumental feat of logistics that would typically involve local contractors, trucks, and farm vehicles. Once the home was delivered, it was then assembled on-site, often becoming an anchor house in a neighborhood. This often inspired others in the neighborhood to purchase their own Sears homes.
Its impact on local trades and neighborhoods
Justin acknowledges its impact on local trades and the neighborhood. “As these homes increased in complexity, local tradesmen would often be hired for specialized tasks like electrical and plumbing work, or even to oversee the entire build. This led to an industry of builders and tradesmen learning new techniques and skills.”
He said the influence of the Sears Modern Home project extended far beyond the customers who bought the homes. It had a significant effect on the character of neighborhoods, allowing potential buyers to see and participate in the construction process and even customize or design their own homes.
Making homeownership even more accessible
Sears continued to evolve its influence in the housing market, and as Justin explains, “Sears noticed this and did something really smart.” Recognizing a barrier to entry for potential homeowners, Sears introduced a financing option for their homes in 1911, making homeownership even more accessible.
This smart move by Sears coincided with a significant change in US demographics. Justin points out, “At this point in time, there’s a huge immigrant community that’s been coming in that’s gonna continue after World War I and that’s gonna continue through the end of this program.” However, these new immigrants found it difficult to work with the “pretty conservative banking community for capital loans,” and many were unbanked.
“Sears started lending them money,” Justin explained, describing Sears’ solution to this financial gap. With terms requiring 25% upfront and a five-year loan at six to ten percent interest on the balance, Sears was providing a new path to homeownership. There was also a 15-year loan option with higher rates.
With this move, Sears not only enhanced its own business but also helped democratize homeownership by making it an achievable dream for many more people.
Is replicating the Sears model the solution to today’s housing crunch?
Justin then circles back to the ongoing housing crunch and asks, “So how do we do something like that now? Is it even possible?” He notes several challenges to replicating the Sears approach in today’s world.
Firstly, he points out that, “we don’t have the same infrastructure we did.” The rail system, which was critical to Sears’ distribution method, is not as extensive as it was in the first half of the 20th century.
Next, Justin recognizes the complexities of today’s financial landscape. He states that “financing is much different now”, and that to engage in Sears’ direct finance model, “you’d have to be a pretty big company to take on that risk.” He also questions the readiness of banks to offer loans for prefab homes, especially when land isn’t part of the deal. “I don’t know enough about mortgages to know how that would work for them,” says Justin.
He further notes that the diversity in tastes and preferences today could present a significant challenge. “Everybody’s got their own flavor and style now,” Justin says, suggesting that individual customization could “add to the drag on Amazon, Wayfair, and other suppliers.”
The creative future of housing
In addressing the housing crunch, Justin suggests the need for innovative thinking. “I think right now we start being creative in how we build these new units, replace existing inventory, and kind of upgrade the housing landscape across the board,” he says.
One such strategy could involve homeowners and renters collaborating to increase housing density. Justin proposes a scenario where a homeowner asks a tenant, “Do you mind if I split it into two? You’ll get more space and I’ll have an additional dwelling unit that I can rent.”
Despite acknowledging potential challenges, including adjusting to new neighbors, Justin stresses the urgent need for more housing, citing the needs of an aging population, the formation of new households, and support for immigration. He states, “We need more places to live.”
Highlighting the vastness of the United States, he notes that there’s ample unused land that could be developed, even while recognizing the infrastructural obstacles like water supply, flood prevention, and food accessibility.
But Justin sees these challenges as opportunities for innovative, holistic solutions that could deliver homes that are “massively energy efficient”, with minimal heating or cooling loss. He envisions houses “that come with solar panels already integrated into the south-facing roof side,” or houses that are “ready to plug into the water and sewer system, but everything else is fully contained.”
Despite the complexities, Justin remains optimistic, concluding, “There are ways to do this and we can get there. We can definitely, definitely do it.”