Vertically Integrated Modular Housing Project Opens in Auburn, Washington | HUD USER – HUD User

Vertically Integrated Modular Housing Project Opens in Auburn, Washington

Blokable at Phoenix Rising, a vertically integrated 12-unit affordable modular housing development in Auburn, Washington, opened in 2020. Modular homes are mass-produced, prefabricated residential structures that can be combined with other modules or permanent fixtures onsite to form single- or multifamily dwellings. Blokable, a Seattle-based manufacturer of modular homes, developed Phoenix Rising as its prototype multifamily building. Adopting a modular construction process generated considerable time, cost, and energy savings.

Creating a Prototype Modular Community

Unlike most modular manufacturers, who sell their products to developers, Blokable uses a vertical integration process that allows the company to control the entire development process, including site selection, assembly, and financing. After developing single-module accessory dwelling units (ADUs), the firm was ready to build a small multiunit development as the next step in the product development process. "This generation of prototype was basically the step between building ADUs and then building full five-story engineering," explained Aaron Holm, who along with co-CEO Nelson del Rio led the development of Blokable's fully integrated process.

Blokable drove the entire development process for Blokable at Phoenix Rising, handling the permitting, inspections, financing, assembly, logistics, and transportation. After working with the King County Assessor's Office to find available space, Blokable contracted with Valley Cities Behavioral Health Care to build a prototype multifamily residence. Valley Cities owns both the resulting apartments and the quarter-acre building site. Blokable initially intended to apply for funding from a state program supporting innovative development methods. However, because Blokable was a design-build developer, it could not respond to the state's request for proposals because only teams consisting of architects, developers, and general contractors were eligible to respond. To receive state funding, a state legislator had to add an earmark to Valley Cities in the state capital budget to fund this project. This unconventional production strategy created other complexities, such as determining the applicable rules and regulations as well as the builders' wages, because manufacturing and architecture are separate industries with very different pay scales. After a few years of financial and administrative delays, Blokable at Phoenix Rising opened in December 2020 at a cost of $1.5 million.

Twelve Prefabricated Apartments

Blokable assembled the all-steel modules in its manufacturing plant in Vancouver, Washington. Complete with floors, windows, and appliances, the modules were transported nearly 150 miles by truck to the site, where they were assembled into two buildings: one with five units and one with seven units. Only the roofing was constructed on site.

The modules, which have a useful life of 50 to 100 years, are all electric and net-zero ready. Their tight building envelope minimizes the energy expended for heating and cooling. Residents of Phoenix Rising pay about 60 percent less for air conditioning and heating their units and 30 percent less for utilities than do residents of standard new units. The units have an energy-recovery ventilation system that filters outdoor air and exhausts stale air outside. This system helps limit exposure to bacteria, mold, and other unhealthy air particles. The tight building envelope also minimizes outdoor sounds.

Five of the apartments are 280-square-foot studios and seven are one-bedroom apartments that are 340 square feet. The units include kitchens and living areas and have dimmable cove lighting. All the apartments are reserved for residents who earn between 30 and 50 percent of the area median income. Blokable at Phoenix Rising is near amenities, services, and job opportunities in Auburn and the greater Seattle-Tacoma metropolitan area. The development is also a few miles from a commuter rail station that offers direct links to downtown Seattle, downtown Tacoma, and other suburbs.

A Cost-Effective Strategy

At approximately $125,000 per unit, the project cost significantly less than a typical site-built residential development in King County would. One reason for the lower cost was the project's shortened development timeframe. Unlike traditional onsite construction, modular production is a standardized and repeatable process. In addition, factory production requires significantly less architecture and engineering services than does standard construction. The streamlined development process and reduced need for specialized services significantly lowered labor costs. The project's tight building envelope also reduced the amount of material waste, because the materials do not need to be sent to the site before being cut to fit.

Holm explained how Blokable will produce future modular developments more quickly and efficiently. "We took a lot longer building Phoenix Rising than we [will] on subsequent projects because we took a lot of time to specifically document the process so that we could make it more repeatable and drive costs down. This is a model that substantially reduces the per-door cost basis to bring new housing to the market." Blokable now has a standardized manufacturing, assembly, and attachment process, and many of the structural components are preengineered. In addition, developing a standardized, preapproved product simplifies the approval process because the structure already meets local regulatory requirements.

Although modular development is nearly always less expensive than site-built construction, Holm believes that the vertical integration model is by far the most cost-effective construction method. Currently, most manufacturers sell modules to developers when the "product" is at its lowest possible value, which adds a middleman and limits incentives for modular production. When the manufacturer also acts as the developer, however, these producers can increase profits while also reducing costs for residents. "The incentive for factory production in the real estate context is for vertical integration and [for] the developer to realize the upside in the form of appreciating real estate equity, not to sell it as a productized asset," Holm said. He explained that this model can yield 30 times the profit over a 10-year period compared with modular "products" that are sold as a construction "input" to the development process.

Prospects

Blokable is preparing to mass-produce multifamily apartments in several states. Blokable's product is designed to meet many of the strongest state codes in the country. The structures can be up to four stories tall in areas that experience heavy snow and up to five stories tall in earthquake-prone areas such as California, which has the strictest seismic requirements in the nation. These buildings are also designed to withstand winds of up to 160 miles per hour.

Modular homes are becoming increasingly popular in the United States because of their financial, environmental, and time-saving benefits. Although regulatory and financial barriers to modular and other prefabricated housing persist, some state and local governments have been easing restrictions. For example, shortly after Blokable at Phoenix Rising opened, the Washington State Department of Labor and Industries began allowing third-party engineers and architects to review modular development plans, simplifying the administrative approval process. Holm remains optimistic that modular development using a vertically integrated process will become increasingly common. However, financial and regulatory restructuring will be necessary for factory production to replace traditional construction in the residential market.

Interview with Aaron Holm, 10 October 2023.

Interview with Aaron Holm, 10 October 2023; email correspondence with Aaron Holm, 20 November 2023.

Interview with Aaron Holm, 10 October 2023.

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Vertically Integrated Modular Housing Project Opens in Auburn, Washington | HUD USER - HUD User