The promise of factory efficiency in prefab housing is often erased by new costs. Modules must be over-engineered to survive road transport—a primary design constraint—and then require complex, costly on-site work to connect, negating initial savings.
Contrary to most industries that see technological gains, housing construction has become less efficient. This stagnation is a key, often overlooked driver of housing affordability issues, as the fundamental cost to build has not decreased with technology.
Contrary to the popular myth of zero inventory, the Toyota Production System is nuanced. The company strategically stockpiles critical components with unreliable supply chains, like automotive semiconductors, demonstrating that true efficiency balances eliminating waste with building resilience.
Construction projects have limited upside (e.g., 10-15% under budget) but massive downside (100-300%+ over budget). This skewed risk profile rationally incentivizes builders to stick with predictable, traditional methods rather than adopt new technologies that could lead to catastrophic overruns.
Unlike lightweight goods, heavy housing modules are uneconomical to ship more than a day's drive. This physical constraint prevents the creation of massive, centralized factories, forcing a model of smaller, distributed plants that cannot achieve the same economies of scale.
The immense salaries in software and finance may create a 'talent Dutch disease,' pulling the brightest minds from crucial fields like structural engineering. This reallocation of human capital could explain why productivity has stagnated or declined in industries that build the physical world.
The U.S. prevalence for wood-framed housing is a matter of historical path dependency. Unlike Europe, which had largely deforested centuries ago, North America’s immense and cheap timber supply established wood as the default building material, shaping the industry's technology and labor skills.
The collapse of Katerra, which burned through $2-3 billion in VC funding, shows that simply applying factory models to construction is not enough. The startup's failure highlights that deep, systemic issues like logistics, regulation, and on-site complexity cannot be solved by capital alone.