An evaluation of five wood frame construction systems and other related housing topics as partial solutions directed toward solving the national housing problem

The overwhelming majority of homebuilders in the United States use the following wood frame systems or combinations thereof: (1) traditional methods, (2) traditional methods employing purchased components, (3) traditional methods utilizing on-site constructed components, (4) two-dimensional panel systems, and (5) three dimensional modules. This study was designed to evaluate the effectiveness of the systems and make recommendations pertinent to their use by current firms or new firms entering the homebuilding field. Builder surveys and field observations were utilized to synthesize costs for each system if it were to be used to construct each of three hypothetical comparison standard units: a 1,298 SF (120.6 m2) ranch-style house with 2-car garage; a 1,992 SF (185.0 m2) two-story colonial house with 2-car garage and breezeway; and an eight-unit apartment building consisting of two levels of stack ed 912 SF (84.7 m2 ) apartment units. The systems were evaluated from the viewpoint of survival of the homebuilding firm during periods of reduced demand for housing. Design flexibility of the system, other factors (such as employee skill levels required, materials utilization effectiveness, etc.) and profit maximization were also evaluated. Heavy weighting was given to low break-even points and low levels of production at which pre-tax profits of $200,000 or less would be achieved. Secondary consideration was given to maximization of profits, because of predicted future instability of housing demand. Analysis of the systems was based on the assumption that builders using industrialized systems (panels and modules) would purchase major items, rather than manufacture them. Results of the study suggest that there are only minor differences between systems, although industrialized systems (4 and 5, above) were at a slight disadvantage compared to conventional systems (1-3, above). Proper selection of a system for a firm to use, therefore, might well be based on irreducible or non-cost factors. Factors favoring selection of industrialized systems include: remoteness of construction sites, short construction seasons, a low supply of adequately-skilled labor for conventional systems, low worker productivity, an outlook for sustained high levels of housing demand, the existence of satisfactory manufacturers and suppliers of units at reasonable prices, a lack of technical construction expertise within the firm, and a strong desire to avoid the scheduling and coordination problems incident to conventional construction. Factors favoring selection of conventional systems are basically the reverse of the above. Estimates of investments necessary for constructing facilities for manufacturing panels or modules were made to determine projected points at which it would become more economical for a builder to manufacture panels or modules rather than purchase them. These "cross-over" points appear to be insensitive to selling price (assuming the price does not reflect whether the items were manufactured or purchased). For panel systems, the cross-over points seem to range from 35-45 houses or 145-160 apartment units. The cross-over points for modules are 80-90 houses or 450-500 apartment units. In view of a projected instability of demand for housing, investment in manufacturing facilities by builders is not recommended; though if this were to be done, there would be less risk associated with the manufacture of panels. Other topics relating to residential construction or to the National Housing Problem include: (1) the importance of achieving stability of mortgage funds and interest rates; (2) the economics of industrialized versus conventional construction methods; (3) a rationale for relaxing the current buyer financing qualification which limits monthly expenditures for principal, interest taxes and insurance to no more than 25 percent of recognized gross family income; (4) a qualitative evaluation of the effects which increases and decreases in the construction duration have on financing costs and the average number of houses that it is necessary to have under construction at any one time in order to achieve given profit goals; ( 5) construction and socio-economic problems associated with urban rehabilitation; (6) limitations of new towns; (7) an examination of mobile homes as a housing alternative (8) an economic comparison between home ownership, mobile home ownership and apartment rentals which shows the long-term costs and receipts associated with home ownership result in substantially lower total monthly costs for this alternative; (9) the lack of federal support for housing research and development efforts; and (10 ) a discussion of self-help efforts as an integral part of national housing policy.