Aaron Norris is joined this week by Steven Glenn. He is the founder and CEO of Plant Prefab, and their mission is to make it easy, fast, and cost-effective for people to build custom, high-quality single and multi-family homes that are healthy, sustainable, and durable. The company operates out of a 62,000 square foot facility out here in the Inland Empire in Rialto, California. Previously, Glenn has worked with the Clinton HIV/AIDS initiative, was former CEO of PeopleLink, a founding partner of Idealab, and for Disney Imagineering as co-director of virtual reality studio.
Aaron began by asking Steve how he got into the real estate space. Steve said his first love is architecture, and growing up he wanted to be an architect. I had Legos and books on Frank Lloyd Wright. When he got to college, he became involved in technology. He still thought he might go into design. One summer, he did a design program, and he learned there that he really had neither the talent or temperament to be an architect. He learned about developers; and he realized that if you really care about the quality of the builder environment, developers are much more important than architects because they set the agenda. They control land and budget, and they hire architects and let them do great things, or not.
Steve resolved then that someday he would get into development. At that point he was already involved in technology. After a career doing tech stuff, mostly startups but also to some big company things too, he took some time off and was going to get into real estate. Finally, he was asked by a guy he worked for in college to do some nonprofit work with the Clinton Foundation. After doing this, he realized he had the time and certainly the motivation to finally get into real estate. Aaron said it’s a perfect blend. When he looks at his non-profit space technology, he found it interesting the comment he made about developer versus architect. There is a heavy dose of politics, especially when it comes into development in California in particular. He has probably cut a lot of very important teeth that most people don’t even realize how important it is to have.
Living Homes started back in 2004, so Steve really started on the design side of things. They officially got started in 2006, but were certainly already seriously thinking about it in 2004. When he started thinking about real estate and what he wanted to do his thesis on, he quickly concluded that there was a large and growing number of people who really valued design, health, and sustainability. Back then, people were driving Priuses, shopping at Whole Foods, and buying some furniture from places like Ikea and using Apple products. There were companies back then that built products that reflected the value we placed on great form and functionality that were built in a healthy and sustainable way.
The production home builders weren’t building homes for them. At this point, Steve resolved to build a company that created products for them. The idea was to get great world class architects and not mess up the great design work they do. They wanted to integrate a lead platinum level environmental program under a green building certification program, platinum being their highest level of certification. Finally, they wanted to use factory production to more efficiently build what they needed to build. That was really the whole idea.
On the last radio show, they talked about how the difference between prefab manufactured homes and modular housing. Aaron asked about Prefab Plant and if they work with modular homes and if they stack them and bring them on site. Steve said prefab is an industry term that covers four major building systems and markets. Steve described them as moving from things that mostly happenin the factory to things that mostly happen on site. What most people are most familiar with when it comes to mobile homes is they are built completely in a factory. They have to follow what’s called HUD code, and legally they can’t be attached permanently to a foundation and are discriminated against in a way by cities and banks to places that allow for mobile homes.
The next category is modular homes. This is what they work with at Plant Prefab. These are homes that have to conform to local building codes. They’re not HUD code legally, they’re considered the same as a site-built home. You can’t discriminate against them for purposes of zoning. Those homes are built off-site, but they’re permanently attached to a foundation.
Next category is a penalized home. That’s where you’re building a wall section out of panels that are created in a factory. These fall under more of a site domain where more work is happening on site. With the panels, you have to do much more work once you’ve delivered the panels, the electrical, plumbing, and cladding with modules. That is often integrated in the modules. The last category are pre-cut homes, like a log cabin. That’s where you pre-cut all the materials. Now you have much more work to do on site. So that’s the four major systems that comprise the category of prefab. Aaron had never heard it described in that way.
In the next session, Steve and Aaron will talk about a lot more of the future of housing and get a lot more into lead design and some of the cool things they are doing even above Lead certification levels. This show will focus on the accessory dwelling units and some trends in that space. Aaron asked Steve if his phone is being blown up with questions about ADUs. He said yes, and he has actually been getting a lot more lately. Aaron said one of his frustrations is that California politicians do a lot of talking about affordable housing, and it’s interesting that the state is having to force the issue. Steve’s product is very well designed, and it’s not cheap.
Aaron asked Steve what his experience has been like in California with development in general. Steve said that at Living Homes, they have done some development. Plant Prefab and Living Homes was merged into Plant living homes, which then spun out into Plant Prefab, which then finally merged with Living Homes. They are no longer developers, although they did do some at Living Homes. They are officially a design and construction company, and they have mostly worked in California.
They did not get out of it because they had problems with development. They actually did pretty well with their last development, but it takes time and patience. There is a lot more overhead than there ideally would be to get things done. They understood that going into it since they had worked with a lot of developers. It was no surprise.
Aaron asked Steve if he likes the conversation around accessory dwelling units as being a solution to affordable housing. He said first of all, there’s no solution. There are a bunch of things that need to happen, in his opinion, and people much smarter who really think about this for living to create far more affordable housing. However, this is absoulately an important part of a portfolio of activities. In cities where the challenge of affordable housing is most acute and where your labor costs and most expensive, paying from neighborhood disruption is most problematic.
You can’t invent land. Things you can do is you can increase density and deal more responsibly with parking and making that a little bit easier on developers. This way they can create more and denser housing in certain areas. However, that’s only a solution for areas that allow denser housing. SB 50 was just struck down, or wasn’t enacted into law, the week before, which would have made it easier to do more dense housing in areas. But regardless, even with that, there was still the issue of what to do in areas that are zoned for single-family homes. In this case, you can do what Minneapolis did a few months ago which was abolish single-family home zoning. It’s gone. In Minneapolis, you plan on a lot with a single-family home subject to size and how big the lot is in coverage for your existing home.
You can now do multi-family. It may only be a duplex or triplex, but they said one of the ways they can create more affordable housing is to allow people to do more housing and smaller housing. That, by definition, makes them more affordable. A: If we do more housing, then that increases housing stock and should theoretically push down prices. B: if they’re smaller homes, that should also, by virtue of the fact that they’re smaller homes, make them more affordable. A couple of years ago, California Governor Brown signed a law that mandated that all municipalities must accept accessory dwelling units, and that comes from a similar space. They want to make it easier for people to do smaller homes and basically use their space in their backyards because they’re smaller and will be more affordable. That’s the philosophical underpinning behind this.
As a designer and a builder, Steve knows that ADUs have some of the most expensive rooms just packed into a really small space. Aaron said when he is looking at a lot of the designs that are out there, it’s not cheap. It will be interesting to see the kind of demand that we we land on. We have 3D-printed housing. Aaron has already had a conversation with a developer who will be moving forward with this. It’s a very different-looking product than something they have on their website. He really sees a shortage of labor in the construction field, so he really thinks the solution is going to be prefab or 3D-printed homes. Aaron asked Steve if this is where he sees the trend going.
Steve said he doesn’t think there’s any single solution, but he does hope more homes will be built off site. It certainly can be a more constant and time effective way to do this. They have certainly seen a significant uptick in the business, so that does seem to suggest that there is a growing market. 3D printed homes will find their way, although it will be a bit with the number of challenges there. Most people are wanting to live in concrete homes. Concrete is incredibly resource-intensive as a building material. It’s basically a pound of carbon relieved through every pound of concrete. There are new types of materials people are experimenting with that are more expensive, but that will likely come around. The other problem is that it’s like panelization. You’re saving on framing, but you still have to do a bunch of work on site such as electrical plumbing, windows, and more. All those labor shortages and expenses still apply.
Aaron next asked what the turnaround times are for accessory dwelling units. He wondered how long it take to put something together in a factory. Steve said it depends on the size, but about one to three months once production gets started. It can take one to two months to get materials in, and they don’t start until they have all the materials. But once they do, it’s very quick. This is extremely quick, considering stick built can take eight months to a year. When you’re dealing with something that’s redesigned and going to be built in the factory, Aaron asked about when he is working with different municipalities. With so much of it being done on his site, he wondered if it easier to work with the different municipalities and if he can dual track the permitting process.
Steve first clarified that the home is not done in one to three months. Overall, what they’re seeing is six to nine months from the start of production to completion. In the Los Angeles area, 18 to 24 months to get homes done. He never hears eight months. Certainly some of the production builders go more quickly in suburban areas. However, for custom home builders it seems to be a little bit longer. They have to go through the same planning approvals that a site built home goes through. But once you once you go through whatever zoning setback you have, whether it’s coastal commission or architecture review, you have to do all that. For your building permit, it’s actually a bifurcated process. The state is responsible for reviewing the permits for the vertical, for the structure itself. They actually outsource it to a third party group. There’s 13 different agencies that do it, and they’re all private companies and super efficient. We get our building and technically our RTI issued within like two-three weeks. The local municipality is responsible for your local zoning.
Steve’s business does 90+ percent of the work on the vertical, or everything involved with the modules in the factory. They’re doing all finished plumbing and electrical, cladding, drywall, paint. They’re doing millwork, appliances, installation, and tiles grouted. All the inspections are done at the factory, and the modules are actually sealed. The local municipality has no right or authority to do any inspections behind the walls. That part is a little bit more efficient.
In the last few sessions, Aaron has really been exploring the manufactured housing space, and it sounds like a good idea since the timeframe is so short it’s very cost effective. However, the lending space just does not like mixed inventory. If you have a stick-built primary and then are throwing a manufactured unit in the back, it’s causing a lot of issues on the funding side. But all the product that you’re building falls within Title 24 stick-built. Legally, these are considered the same as as the site-built home. There is no disclosure requirements. Aaron asked if thre is there anything coming up in the Title 24 changes in 2020 that is affecting his design or if they are already well above the minimum requirements. Steve said they tend to be above it.
The radio guest from last week, John Arendsen, did a tour of Steve’s facility a couple weeks ago, and he was really impressed. John specializes in manufactured housing and is based in San Diego. Aaron wanted to interview because he meets with clients and actually wanted to meet Steve’s team to be able to offer this as a solution as well. Depending on the site and the client and meeting their objectives, he is able to say whether you need to do stick-built, manufactured home, or prefab space. It’s just cool to be able to offer everything that’s out there.
Aaron said a lot of his clientele is real estate investors. If they’ve got existing rentals at the moment, looking at all the viable options out there as skilled labor becomes an issue, speed is important as well as financing for these kind of projects. It’s just a really interesting opportunity. From the design side, Aaron has a little bit of a design background. He just thinks of what all these owner occupants are going to do and if they’re going to mess up the fung she of their home. It’s going to be interesting to watch how this unfolds. He’s following SB 13 very closely to see how this progresses.
Aaron next asked Steve how he sees planned prefab really getting more into the ADU space and offering a few models that people can buy that are already existing and don’t have to go through a custom timeline process. Steve said they do this already. They have their own unit that they design called the AD1, and they have a model from one of the top industrial designers in the world called the YB1. You can find them both on their website at www.plantprefab.com under Homes and Projects<Standard Homes. You can actually configure them like cars with finishes and fixtures that you select. The other home is at their factory for tour. They have tours every Wednesday at 10:00 and once a month on Saturdays. Those can be scheduled online. If you want more information, go to www.plantprefab.com, and we’ll be back next week.
The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669. For more information on hard money lending, go www.thenorrisgroup.com and click the Hard Money tab.