Op-Ed: What everyone gets wrong about prefab

Development is usually viewed through a financial lens. This makes sense given the substantial costs involved in such projects. However, I posit that economically viable housing is downstream of good design and engineering making development an engineering problem above all else. It is with this perspective that my firm has approached its first prefab rental project in Toronto, a journey that has given us a better understanding of the true value proposition of prefab systems in housing delivery.

Prefab is often hailed as the solution to our housing crisis for its speed, quality control, and potential cost savings. The federal government has taken note, pledging $26 billion in investment to stimulate growth in the sector. But when speaking to developers, the sentiment is more, “I’ll believe it when I see it”— at least for now. It’s common for developers to critique prefab as “possibly faster, but not cheaper.”

This outlook may reflect the industry today, but not its potential. Prefab products can be an effective solution to building faster, cheaper, and more sustainably when embedded into an improved design and delivery system. However, without this integration prefab remains little more than an incremental improvement to our traditional project-based building models, which is largely how industry implements prefab today.

Prefab products are seen as alternative parts to be used in traditional construction. For instance, a developer may substitute cast-in-place concrete for prefab concrete. Perhaps this substitution is cheaper and faster but offers little systemic value. This reductionist perspective—where the total cost of a building project can be reduced to the sum of its parts—misses the point of prefab entirely. Moreover, prefab’s value proposition is to enable a better system of housing delivery (scale, quality, speed, affordability, sustainability), not just provide cheaper and faster parts.

The potential for prefab to afford a new delivery system stems from the unique qualities prefab offers over traditional construction. This includes productization, product lifecycle thinking, supply chain integration, just-in-time delivery, batch production, BIM-to-fabrication workflows, cloud-based coordination, embedded data in components, and platform-based delivery. These are qualities that can be leveraged to build a better development strategy that systemically improves on the status quo.

There are a few reasons why the industry is trapped in this reductionist, non-systems-based framework. First, the development industry is very well established and tightly calibrated to the building approval process. This establishes significant inertia, which is challenging to overcome.

Second, the industry is incredibly siloed: so problems don’t get solved at the systems level (or even the project level for that matter) but at the trade- or discipline-specific level, producing only local improvements. Non-traditional project management approaches like integrative project delivery (IPD) have tried to reorganize project workflows, but such approaches don’t change the underlying inefficacies of our models—they merely attempt to coordinate more effectively.

Lastly, our Excel-obsessed underwriting reinforces development as a financial problem reduced to a series of independent and easily adjusted variables on a spreadsheet. This is especially the case for complicated Excel models that mistake number of variables for explanatory power. Our underwriting habits contrast the basic scientific principle of parsimony, which favours simple models with high explanatory power.

Our preoccupation with local improvements can even be at odds with system-level improvement. This is because system level improvement may produce counterintuitive results at the local level, e.g., greater component costs, in service of the greater system-wide improvement, e.g., lower overall costs. As an example, Amazon often sends oversized packages relative to the item being shipped. What gets missed is that Amazon optimizes their system-wide deliveries—not the delivery of individual packages—which seems wasteful, if not understood in the context of the full system.

Indeed, prefab offers solutions for producing large quantities of high-quality housing quickly and sustainably. However, prefab strategies need not be the only model in town. In theory, one could envision a multi-pronged strategy where prefab is leveraged for high output development and project-specific methods get used when scale is not a factor. Right now, we’re somewhere in the middle, exploring some prefab strategies, but within the constraints of our existing development models, offering neither sustainable scale nor exceptionalism for one-off projects. Instead, we regress to the mean: employing a very aged development model, and applying it across the board.

It is no wonder the industry is exploring new prefab methods of building, given the challenges our housing sector faces. These new prefab-based delivery approaches seem to offer far more than isolated, incremental improvements to a structurally inefficient system. Prefab can facilitate a step change in how we design and deliver sustainable housing at-scale.

This optimistic future, however, is only possible when prefab is embedded into a broader system of design and delivery that leverages the qualities that prefab building elements offer.

Jonathan Diamond is a Principal at Well Grounded Real Estate, which owns and operates retail and multi-family properties across Ontario. He entered the industry after completing a PhD in neuroscience, a background that informs his technical approach to development. Jonathan views housing as an engineering and delivery challenge, one that requires moving beyond traditional project-based models. This approach is currently being piloted through a 185-unit modular building at 1925 Victoria Park.

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