Would You Fund a Modular Home Development?

It’s Expensive to Live here

Everyone knows that San Jose has a home-affordability problem. A decent apartment in Downtown San Jose can go between $2,000-$3,500 a month. The affordability crisis prices many people out of a home, and many low-income earners are forced to live on the streets.

Build Them Like Legos

The Evans Lane project in San Jose was approved by the city counsel in 2016 and received it’s final approval in January of this year (2019). The project was designed to bring 61 apartment units to very-low income and formerly homeless people to live in. It’s planned to be developed on a 6 acre lot and built with old shipping containers.

The modular home design would allow the developers to create the units faster and cheaper.

Where’s The Moolah?

Unfortunately, the developers are having a hard time with seeing their vision come to light. They’re having a very hard time securing financing for this deal. Construction lenders are saying that they will not lend on modular home development because of the risks associated with it.

Modular Are Risky To Lenders

I started researching on why it was risky for the lenders, and apparently it has to do with the way it’s constructed versus stick-built homes.

For a modular home, they build it in a factory and crane the building parts to it’s final location. The site needs to be prepped and have enough space for a crane to fit inside. You also have to worry about the foundation being level. Normal homes that are built on-site have their foundations measured and created right there, but a modular home needs to be put on a flat piece of land right from the get-go.

What Now?

The developer has owned the land since 2002. Because it wasn’t able to get funding, they’re going back to their architect to see what else they can do with it. They’re looking into creating more dense housing, which includes looking into creating large 12 story buildings.

I think modular homes are a cool concept, it’s a shame that financing them is a pain. It would be interesting to live in a repurposed shipping container that has all of the amenities of a new home.

What are your thoughts? Would you finance a modular development?

You can read the original article on the business journal: https://www.bizjournals.com/sanjose/news/2019/07/02/evans-lane-affordable-housing-project-san-jose.html