Tuesday, September 26, 2017

One Industry That Has Fought Automation - And Won (And We All Lost)

Why has the homebuilding industry remained largely unchanged in over a century, when so many other industries have adapted to new technologies?   Can you tell if this is a modular or stick-built home? (It is the former).

The media is rife with articles about how robots are going to take over the world or artificial intelligence is going to supplant human beings as the next stage of evolution.  We are told that blue collar workers are being laid off in droves because robots and machines have taken their place and nothing is ever going to change this.

And maybe this is true for industries making microprocessors and semiconductor chips, or automobiles or air conditioners and other manufactured products.  But one industry stubbornly remains in the 20th century, if not in the 19th century, in terms of technology, labor, and assembly costs. And that is the homebuilding industry.

A reader notes that home construction techniques have remained little changed in well over a century.  If you've ever worked on an older home, you will note that the basic construction techniques are pretty much the same as used today. Houses by and large are stick-built using two-by-fours and then covered on the inside with sheetrock or plaster, and then sided on the outside with clapboards or shingles, and then roofed with a shingle roof of one sort or another.

Certainly there have been some improvements over time.  Circuit breakers have replaced the old screw-in fuses, but most of the wiring of an electrical box or electrical outlets is pretty much the same as it was in 1920.

And houses today are built much as they were a hundred years ago, one stick at a time by individual laborers who assemble at the job site and build a house from the ground up one board and one nail after another.  One would think that this would be a industry ripe for automation.  But several factors have conspired to prevent automation and improved assembly techniques taking over the housing industry.

And it has not been for a lack of trying. The manufactured home industry has been building trailer homes, otherwise known as mobile homes, for decades. However these are viewed as depreciating commodities, which decrease in value over time, unlike a stick-built home which generally appreciates in value.  Manufactured homes had morphed into double-wide trailers and now into modular homes which are largely indistinguishable from stick-built homes, other than some telltale indications of the modular assembly techniques such as overly thick walls on the interior where the modules join.

And despite the fact that many modular homes are indistinguishable from stick-built houses, and in fact are often nicer and more elaborate than some stick-built homes, there is a stigma attached to manufactured housing. When we were in central New York, we looked at several houses which were modular and the real estate agent was quick to point out that this was a modular home.  They were required to disclose this if it was a defect in the property.  Moreover, Banks seemed less willing to loan on modular properties, and often required greater down payments, which discourages people from buying modular homes.

It would seem to the average individual that would make more sense to build houses in modular panels or blocks in a factory where the cost of labor is lower and overhead is less, and then assemble them on site. And in fact many companies have tried to do this with some limited success. They face a lot of headwinds not only from local regulators but also from unions and laborers. Let me give you two examples of what I mean.

My parents built a house near Saint Michaels, Maryland as a retirement home. They built a modest house as it was all they could afford, using stick-built techniques. Their neighbor bought a lot next to them and contracted to have assembled a very large and elaborate modular home from a company called Nanticoke.  It was a beautiful house - or it would have been, if the labor hired to assemble it hadn't sabotaged the entire project from the get-go. From the Carpenter's point of view, the modular home is taking food out of their mouths and taking jobs away from them and their fellow workers.  So they have little incentive to properly assemble a modular home and in fact may subly sabotage such a construction.

The house in question, which was built facing the Chesapeake Bay with a beautiful view, comprised over eight modules. The workers came and assembled the first six modules which comprised a two-story house. The last two modules were for the center part of the roof which covered the center of the house.  Rather than put these last two modules in place before the weekend, they decided to call it quits early on Friday, and put a blue tarp over the massive hole in the center of the house, and went off fishing for the weekend.  Priorities.

Well you can guess what happened, they had an amazing tsunami of a storm that weekend which dumped inches of rain which quickly overwhelmed the blue tarp which was hastily tacked over the hole in the center of the house. Water poured into the structure destroying the entire interior which was prefabricated down to the sheetrock, outlets, and even wallpaper. The hardwood floors, which were pre-installed is part of the modules, all warped up and twisted.  The entire house had to stripped down to the studs and rebuilt as a stick-built house, which is what the carpenters probably wanted in the first place.  While insurance covered most of the cost, it delayed construction quite a bit and with the deductibles and everything the homeowner came out way behind.

You could chalk this up to massive incompetence or you could chalk it up to subtle sabotage.  I believe it was the latter, not unlike the assembly line workers I saw at General Motors who sabotaged the cars as they went down assembly line to "get even" with their employer.  Of course, what they were doing was shooting themselves in the foot as the customers were the ones who had to deal with the defectively assembled cars, and these were people who willingly rushed into the arms of Toyota, Honda, and Nissan whose workers didn't feel the need to destroy their own product.

A second example illustrates why prefabricated homes face such a strong headwind.  Some friends of mine decided they want to build a house on the lot they had facing one of the Finger Lakes.  However, they didn't have a lot of money to spend and they were looking for alternative construction that would be less expensive than stick-built homes.  They contacted a company in Canada which made panelized homes.  These were flat panels which were shipped to the site and then assembled to build a home.  In other words, there would be four walls and then roof panels, and the whole thing would be bolted together and it would be indistinguishable from a stick-built home.

They put down a non-refundable deposit on the house, and then set out to find a contractor who would assemble the house on their site. In retrospect, they should have found a contractor first, but they assumed that somebody would be willing to assemble the home at a modest cost. What they found instead was every contractor they talked to quoted them a price that was equal to or exceeded the cost of stick building the same house.  There was an unwritten rule - a gentleman's agreement - among the various contractors and home builders in the area that they would not allow this sort of panelized or modular construction into their space.  As you can imagine, they felt that this type of construction would take away jobs and take food off their table.  My friends became discouraged, as the cost of stick building a house was something they couldn't afford and now they had put down a deposit on the panels and had no one to assemble them.  They end up building a pole-barn type structure which is an inexpensive way of building a home with a limited foundation.

But their experience illustrates the problem. The carpenters, union or non-union, are going to stand with solidarity with each other and prevent automation for taking away their jobs.  And so far they've been pretty successful in doing so.

Compounding the problem are local zoning laws and building codes.  We don't really have national zoning or building codes in this country, although most jurisdictions follow very similar building codes that are set to national standards. However many jurisdictions have unique features in their building codes which must be adhered to, often at considerable expense.

The problem is, the local inspectors are trained to understand stick-built houses of yesteryear, and they are uncertain how to inspect and certify a modular or panel-built home.  As a result, you are likely to face a lot of issues with the home inspection during construction as they will find problems where there are none.  As I noted in previous postings, often this is more of a political problem that a legal one, if you try to fight them on the legal basis you will lose.  I recounted before how an architectural review inspector insisted I put the slate roofing on the porch of my office building, even though the original asphalt shingles from 1933 were under three layers of curling shingles on the porch.  I had a similar experience with inspector with our swimming pool who failed inspection because I had 24 volt lawn lights, six and a half feet from the edge of the pool, when they should have at eight feet.  I quickly picked them up and move them to 8 feet, but the inspector insisted that the inspection be failed at a new inspection be called a week later. I called a new inspection in the new inspector came in and laughed at the idiocy of the previous inspector.  But this is the nature of building code inspectors - they are failed Architects, failed Builders and generally failures in life who take out their aggression on those who are actually trying to accomplish something.

Actually, most government works that way.  Those who cannot do, teach. Those who cannot teach, get jobs with the government.

Perhaps if Jeff Bezos or Elon Musk attacked the Housing Industry, they could institute some changes, but I am skeptical.  Because in addition to the unions and even a non-union workers and the building inspectors you have to deal with organized crime, and organized crime is rife in the building trades.  And this is particularly true in blue states.

In addition to the lack of automation in housing construction, the techniques used in building homes really have remained unchanged for so long, and are not really ready for change.  I realize this every time I rewire an outlet, and think of myself what a shitty engineering job the american electrical outlet is. Many of them are made of steel, with the electrical outlet screws mounted a mere fraction of an inch away from the sides of the box.  It doesn't take much to move the outlet from one side or the other and have it short out against the steel casing.  For this reason, I tend to use plastic boxes whenever I'm installing a new electrical service.  However, the basic technology hasn't changed in over a hundred years, with wires being run into the box and then stripped and then shoved into screws in a somewhat haphazard manner. Or else wires are twisted together with a big wire nut and jammed back the box where they barely fit.  As an electrical engineer, this strikes me as a pretty shitty arrangement on that could be improved upon.

And the way we run wiring and plumbing is also sort of scandalous.  Everything's hidden behind sheetrock walls and if you need to access it you basically have to smash the wall and then rebuild it from scratch - as I had to help a neighbor do, when their pipes broke.  A reader writes that maybe access panels in the form of wainscoting could be used at the bottom of a wall and be readily removed to access wiring and plumbing.  If a house floods such as in the recent hurricanes, the wainscoting to be removed the wall dried out and then the wainscoting replaced at a minimal cost.  It certainly sounds like an easy way to repair a hurricane damaged house.

Regardless of what sort of technology is used, it certainly could stand some improvement.  We are still using wooden framing for the majority of construction of homes in the United States.  One would have thought we would have moved to galvanized steel studs a long time ago as they are more dimensionally stable, Fireproof, and more resistant to rot and decay.  But even commercial buildings such as hotels and retail space are often made of two-by-fours and plywood, much to my amazement. We are building houses today in 2017 using technology that was developed in 1917.

I like I said, there's a lot of headwind here and it would be challenging even for someone like Elon Musk or Jeff Bezos to challenge this industry.  It would be easier to build rockets the moon than it is to redesign the American home.  We have a better shot at seeing hyperloop in our lifetime that we do seeing homes redesigned from the ground up.

The housing industry is stuck in another century.   And no "app" can readily fix this, either.