Going Mod

Reducing Housing Costs in Philadelphia with Modular Construction

Since 2004, May 8 has worked actively with a coalition of Philadelphia non-profit and for-profit organizations to bring down the cost of construction in Philadelphia in order to encourage investment. In the report, Going Mod, May 8 and partners attempt to conclusively determine whether modular construction can significantly lower the cost to build a rowhome in Philadelphia. The need is clear. Philadelphia’s construction costs are the fourth highest of any major city in the nation and 18 percent above the national average. The city’s house values—the price for which homes can be sold—are the third lowest of any major city in the nation and are 40 percent below the national average. As a result, construction costs often exceed the prices of new homes. This makes government subsidy a prerequisite for home building in most Philadelphia neighborhoods to fill the gap between building costs and the sales price of a home. High labor costs, 39 percent above the national average, drive the construction industry’s out-of-scale cost structure.

A detailed cost comparison found that modular single-family-home construction significantly lowers the cost to build a new home in Philadelphia. On average, an owner or developer saved 20 percent of total project costs by building a 16-foot-wide x 40-footlong row home in the city using modular versus stick-built construction. Average savings for the modular construction of a 20-foot-wide x 40-foot-long home in the city were 9 percent. In addition, modular home construction offers speed, durability and environmental-sustainability benefits. Stick-built construction, however, offers the advantages of more design flexibility and a greater use of local labor. A full picture of the pros and cons of each method is included within the report in order to help for-profit and nonprofit developers choose the best construction method for individual projects.