4 ms·

Costco Broke into a Surprising New Market: Modular Housing

71 points by thelastgallon 2y ago

akira2501 2y ago
So a compliant result that makes none of the involved parties truly happy and produces an outcome that no one would have ever asked for. California is very good at this.
- gadtfly 2y ago
  This particular development is probably good. The problem is the invisible graveyard of all the other good things that never happened.
- mlyle 2y ago
  The picture of modular housing isn't at all what this project is going to look like. Yes, prefab does add some constraints but you only produce a building that looks like a stack of shipping containers if that's what you want. And, is this development really so bad? There's a bunch of additional housing created; Costco gets their store built; we have mixed use, where a lot of people aren't going to need to take a car trip to do their shopping.
  - akira2501 2y ago
    > And, is this development really so bad? It depends on how it's managed. If there _happens_ to be enough demand that people will accept it and pay a profitable rate, it might be just fine, but the cart is before the horse on this, so I wouldn't necessarily expect that outcome without other evidence to support it.
    - renewiltord 2y ago
      Even better if it's not profitable for Costco. That's like having business subsidize housing.
      - actionfromafar 2y ago
        That sounds like taxes. Heresy.
    - mlyle 2y ago
      Not sure why whether Costco makes a profit on the housing is the crucial thing; perhaps they don't, and they're just ahead in that they got their store in place sooner.
  - deleted 2y ago
    [deleted]
  - jokethrowaway 2y ago
    Buildings that could have been beautiful and enrich the city and the lives of tenants will end up being stack of containers to bypass government imposed minimum wage and endless regulations. No wonder why soviet union buildings looked like a bland block of concrete. If this is not a cautionary tale on the dangers of regulation, I don't know what is. Congrats to Costco for finding a trick and getting things done, despite the government.
    - xscott 2y ago
      That is not what happens in practice. Typically you get stick and stucco construction with flat roofs, picking the cheapest possible labor and construction materials, while putting on drywall and paint to make it look attractive for the 10-15 years it will last until termites and rot set in to the fragile bones. But it fools most people, and if you're wealthy you're going to move to a newer area before that 15 years is up anyways.
    - vidarh 2y ago
      Soviet Union buildings started looking like bland concrete on purpose when Khrushchev decided housing everyone was more important than Stalin's focus on appearances. The buildings of that era were meant to be temporary, and only remained because their economy failed. There were many awful things about Khrushchev, but at least the housing policy appears to have been a genuine attempt at improving things for ordinary people. Even though the housing was poor quality and ugly, it was a step up when they were introduced.
    - mlyle 2y ago
      I don't think the renders of the actual planned development look at all like a stack of containers. That heritage will show inside, though: there's probably not going to be any rooms that are really wide. But modern apartments tend to not have too many of those anyways.
      - m463 2y ago
        I would imagine some rooms will be double-wide. more seriously, it seems mobile homes nowadays come in 14, 16 and 18' widths and 66 to 80' lengths. It seems shipping containers are 8' wide and usually 20, 40 and 45' long. I suspect there are ways to make multiples of these dimensions. I also wonder why you couldn't just take a truck and load it up with a stack of walls that are laid out with a crane.
  - chironjit 2y ago
    Also, prefab units are not a new thing. They're common in Japan and I remember my dad mentioning the low-rise apartment he bought in the early 90s (not in Japan) being prefabbed by a Japanese company
- deleted 2y ago
  [deleted]
- johnneville 2y ago
  who's not truly happy ?
- bsder 2y ago
  Actually it seems to make most people quite happy? Costco seems okay with it. Housing gets built that circumvented the NIMBY's. The development is mixed use with a grocery store in walking distance instead of driving distance. Local labor gets paid an appropriate amount instead of being undercut by illegal labor (a HUGE problem in California). And it's not like current 5 over 1 construction is particularly aesthetic. Where's the downside?
  - mlyle 2y ago
    I find it interesting that this is on strongtowns, in that this kind of mixed use is in the exact realm of what they promote. I suspect Costco, being a "big box/warehouse", is squarely in their crosshairs; combine with any purported anti-union activity and they're quite willing to run an article that deliberately distorts what the housing is going to look like.
  - TulliusCicero 2y ago
    Calling Costco a grocery store is perhaps a bit of a stretch, but yeah the outcome seems fine to me.
- snapplebobapple 2y ago
  Tell me more. I was only aware of california being good at rent seeking the technology hub created there by the federal government and people chasing nice weather.
deleted 2y ago
[deleted]
gnabgib 2y ago
Discussion (66 points, 8 days ago, 62 comments) https://news.ycombinator.com/item?id=40686048 https://news.ycombinator.com/item?id=40686048
mannyv 2y ago
All housing is prefab, at least on the low end.
- forgetfreeman 2y ago
  I've worked in the trades off and on since the 90's and modular construction has always been superior to stick built in terms of build quality. Why this style of construction gets lumped in with manufactured housing (trailers) is an enduring mystery to me.
joshe 2y ago
An excellent unintended consequence of forcing builders into modular housing might be a much more robust modular housing market. Sort of like Tesla starting with higher cost Roadsters and Model S cars until there is scale to compete at volume. It would be terrific to see some productivity gain in construction, which as actually declined since 1987. See the Single-Family graph here: https://www.bls.gov/productivity/highlights/construction-labor-productivity.htm https://www.bls.gov/productivity/highlights/construction-lab... It's worth also noting that despite the drama, Costco is not looking to lose money on these. So the apartments will be nice enough to rent. Nimbys tend to forget the discipline of the market, especially in their talking points.
- thelastgallon 2y ago
  Robust and energy efficient. From: https://cleantechnica.com/2024/06/12/one-home-builder-grows-the-entire-heat-pump-water-heater-market-by-30/ https://cleantechnica.com/2024/06/12/one-home-builder-grows-... Clayton, a leading single-family home builder, recently made big environmental news by deciding to convert nearly all of the 42,000 modern manufactured homes it builds annually to be certified ENERGY STAR and Zero Energy Ready Homes (ZEHR). These certifications mean that its manufactured homes will be much more efficient, save homeowners money on their utility bills (up to 50%) and provide premium energy-efficient appliances that are often considered unaffordable to the average family. Clayton’s switch to ZERH also means nearly all of its homes now come with a heat pump water heater (HPWH), which likely represents the single largest procurement of HPWHs in the history of the technology. To put it in context, the entire HPWH market in 2022 shipped 141,000 units, and Clayton alone will increase this total by 30%!
ChrisArchitect 2y ago
[dupe] Actual article: https://www.urbanproxima.com/p/the-costco-of-housing-iscostco https://www.urbanproxima.com/p/the-costco-of-housing-iscostc... More discussion: https://news.ycombinator.com/item?id=40686048 https://news.ycombinator.com/item?id=40686048
skybrian 2y ago
I think this is bit misleading. Costco contracted with a builder for this particular store. If it works out, maybe they'll go with them for a second store, and then who knows? But it doesn't mean Costco has become a builder, and the conditions resulting in the store being built in this particular way are local to some parts of California.
- w0z_ 2y ago
  Comment is also a bit misleading. Costco contracts all of their products, or for a better on-topic example - their air conditioning installation. It's the same with Home Depot. They don't "make" anything, they contract everything out (Home Depot-line tools, i.e. Ryobi, their flooring installations to some of the cheapest local installers, etc.).
ramesh31 2y ago
I'd be perfectly fine with modular homes if they were any cheaper than traditional construction, but they're not. It really makes no sense at all for anyone other than remote/rural builds.
- ericd 2y ago
  What about the part where factory-constructed housing is more consistent and higher quality than site-constructed? If I ever build custom, I'd love to use prefab panels, at least.
  - ramesh31 2y ago
    >What about the part where factory-constructed housing is more consistent and higher quality than site-constructed? If I ever build custom, I'd love to use prefab panels, at least. That's kind of my point. Modular is mostly a design/aesthetic/quality choice for people who can afford it. You would think that the entire purpose would be affordability vs. onsite with the huge labor savings. But these things are so marked up it ends up being pointless in that regard.
    - ericd 2y ago
      Hm I wonder why they’re so marked up, any idea? Maybe because the transportation is less efficient because the panels/modules pack less densely than a pile of 2x4s and sheathing?
thelastgallon 2y ago
Lets hope Costco actually gets into the home building business and offers dozen packs of homes with a Super Premium Membership, $1000/year. Like they do with Chicken. Costco’s inflation-proof $4.99 rotisserie chicken, explained: https://www.vox.com/future-perfect/23207301/costco-rotisserie-chicken-poultry-farming-inflation https://www.vox.com/future-perfect/23207301/costco-rotisseri... "But there’s another reason the birds have remained so affordable. In 2019, Costco made an unprecedented move to source its chicken at even lower margins: It set up its own feed mill, hatchery, and slaughter plant in Nebraska, and contracted nearby farmers to raise over 100 million birds each year, all under the name Lincoln Premium Poultry (LPP). It could be saving the company up to 35 cents per bird."
deleted 2y ago
[deleted]

71 points by thelastgallon 2y ago

So a compliant result that makes none of the involved parties truly happy and produces an outcome that no one would have ever asked for. California is very good at this.

gadtfly 2y ago
This particular development is probably good. The problem is the invisible graveyard of all the other good things that never happened.
mlyle 2y ago
The picture of modular housing isn't at all what this project is going to look like. Yes, prefab does add some constraints but you only produce a building that looks like a stack of shipping containers if that's what you want. And, is this development really so bad? There's a bunch of additional housing created; Costco gets their store built; we have mixed use, where a lot of people aren't going to need to take a car trip to do their shopping.
- akira2501 2y ago
  > And, is this development really so bad? It depends on how it's managed. If there _happens_ to be enough demand that people will accept it and pay a profitable rate, it might be just fine, but the cart is before the horse on this, so I wouldn't necessarily expect that outcome without other evidence to support it.
  - renewiltord 2y ago
    Even better if it's not profitable for Costco. That's like having business subsidize housing.
    - actionfromafar 2y ago
      That sounds like taxes. Heresy.
  - mlyle 2y ago
    Not sure why whether Costco makes a profit on the housing is the crucial thing; perhaps they don't, and they're just ahead in that they got their store in place sooner.
- deleted 2y ago
  [deleted]
- jokethrowaway 2y ago
  Buildings that could have been beautiful and enrich the city and the lives of tenants will end up being stack of containers to bypass government imposed minimum wage and endless regulations. No wonder why soviet union buildings looked like a bland block of concrete. If this is not a cautionary tale on the dangers of regulation, I don't know what is. Congrats to Costco for finding a trick and getting things done, despite the government.
  - xscott 2y ago
    That is not what happens in practice. Typically you get stick and stucco construction with flat roofs, picking the cheapest possible labor and construction materials, while putting on drywall and paint to make it look attractive for the 10-15 years it will last until termites and rot set in to the fragile bones. But it fools most people, and if you're wealthy you're going to move to a newer area before that 15 years is up anyways.
  - vidarh 2y ago
    Soviet Union buildings started looking like bland concrete on purpose when Khrushchev decided housing everyone was more important than Stalin's focus on appearances. The buildings of that era were meant to be temporary, and only remained because their economy failed. There were many awful things about Khrushchev, but at least the housing policy appears to have been a genuine attempt at improving things for ordinary people. Even though the housing was poor quality and ugly, it was a step up when they were introduced.
  - mlyle 2y ago
    I don't think the renders of the actual planned development look at all like a stack of containers. That heritage will show inside, though: there's probably not going to be any rooms that are really wide. But modern apartments tend to not have too many of those anyways.
    - m463 2y ago
      I would imagine some rooms will be double-wide. more seriously, it seems mobile homes nowadays come in 14, 16 and 18' widths and 66 to 80' lengths. It seems shipping containers are 8' wide and usually 20, 40 and 45' long. I suspect there are ways to make multiples of these dimensions. I also wonder why you couldn't just take a truck and load it up with a stack of walls that are laid out with a crane.
- chironjit 2y ago
  Also, prefab units are not a new thing. They're common in Japan and I remember my dad mentioning the low-rise apartment he bought in the early 90s (not in Japan) being prefabbed by a Japanese company
deleted 2y ago
[deleted]
johnneville 2y ago
who's not truly happy ?
bsder 2y ago
Actually it seems to make most people quite happy? Costco seems okay with it. Housing gets built that circumvented the NIMBY's. The development is mixed use with a grocery store in walking distance instead of driving distance. Local labor gets paid an appropriate amount instead of being undercut by illegal labor (a HUGE problem in California). And it's not like current 5 over 1 construction is particularly aesthetic. Where's the downside?
- mlyle 2y ago
  I find it interesting that this is on strongtowns, in that this kind of mixed use is in the exact realm of what they promote. I suspect Costco, being a "big box/warehouse", is squarely in their crosshairs; combine with any purported anti-union activity and they're quite willing to run an article that deliberately distorts what the housing is going to look like.
- TulliusCicero 2y ago
  Calling Costco a grocery store is perhaps a bit of a stretch, but yeah the outcome seems fine to me.
snapplebobapple 2y ago
Tell me more. I was only aware of california being good at rent seeking the technology hub created there by the federal government and people chasing nice weather.

deleted 2y ago

[deleted]

gnabgib 2y ago

Discussion (66 points, 8 days ago, 62 comments) https://news.ycombinator.com/item?id=40686048 https://news.ycombinator.com/item?id=40686048

mannyv 2y ago

All housing is prefab, at least on the low end.

forgetfreeman 2y ago
I've worked in the trades off and on since the 90's and modular construction has always been superior to stick built in terms of build quality. Why this style of construction gets lumped in with manufactured housing (trailers) is an enduring mystery to me.

joshe 2y ago

An excellent unintended consequence of forcing builders into modular housing might be a much more robust modular housing market. Sort of like Tesla starting with higher cost Roadsters and Model S cars until there is scale to compete at volume. It would be terrific to see some productivity gain in construction, which as actually declined since 1987. See the Single-Family graph here: https://www.bls.gov/productivity/highlights/construction-labor-productivity.htm https://www.bls.gov/productivity/highlights/construction-lab... It's worth also noting that despite the drama, Costco is not looking to lose money on these. So the apartments will be nice enough to rent. Nimbys tend to forget the discipline of the market, especially in their talking points.

thelastgallon 2y ago
Robust and energy efficient. From: https://cleantechnica.com/2024/06/12/one-home-builder-grows-the-entire-heat-pump-water-heater-market-by-30/ https://cleantechnica.com/2024/06/12/one-home-builder-grows-... Clayton, a leading single-family home builder, recently made big environmental news by deciding to convert nearly all of the 42,000 modern manufactured homes it builds annually to be certified ENERGY STAR and Zero Energy Ready Homes (ZEHR). These certifications mean that its manufactured homes will be much more efficient, save homeowners money on their utility bills (up to 50%) and provide premium energy-efficient appliances that are often considered unaffordable to the average family. Clayton’s switch to ZERH also means nearly all of its homes now come with a heat pump water heater (HPWH), which likely represents the single largest procurement of HPWHs in the history of the technology. To put it in context, the entire HPWH market in 2022 shipped 141,000 units, and Clayton alone will increase this total by 30%!

ChrisArchitect 2y ago

[dupe] Actual article: https://www.urbanproxima.com/p/the-costco-of-housing-iscostco https://www.urbanproxima.com/p/the-costco-of-housing-iscostc... More discussion: https://news.ycombinator.com/item?id=40686048 https://news.ycombinator.com/item?id=40686048

skybrian 2y ago

I think this is bit misleading. Costco contracted with a builder for this particular store. If it works out, maybe they'll go with them for a second store, and then who knows? But it doesn't mean Costco has become a builder, and the conditions resulting in the store being built in this particular way are local to some parts of California.

w0z_ 2y ago
Comment is also a bit misleading. Costco contracts all of their products, or for a better on-topic example - their air conditioning installation. It's the same with Home Depot. They don't "make" anything, they contract everything out (Home Depot-line tools, i.e. Ryobi, their flooring installations to some of the cheapest local installers, etc.).

ramesh31 2y ago

I'd be perfectly fine with modular homes if they were any cheaper than traditional construction, but they're not. It really makes no sense at all for anyone other than remote/rural builds.

ericd 2y ago
What about the part where factory-constructed housing is more consistent and higher quality than site-constructed? If I ever build custom, I'd love to use prefab panels, at least.
- ramesh31 2y ago
  >What about the part where factory-constructed housing is more consistent and higher quality than site-constructed? If I ever build custom, I'd love to use prefab panels, at least. That's kind of my point. Modular is mostly a design/aesthetic/quality choice for people who can afford it. You would think that the entire purpose would be affordability vs. onsite with the huge labor savings. But these things are so marked up it ends up being pointless in that regard.
  - ericd 2y ago
    Hm I wonder why they’re so marked up, any idea? Maybe because the transportation is less efficient because the panels/modules pack less densely than a pile of 2x4s and sheathing?

thelastgallon 2y ago

Lets hope Costco actually gets into the home building business and offers dozen packs of homes with a Super Premium Membership, $1000/year. Like they do with Chicken. Costco’s inflation-proof $4.99 rotisserie chicken, explained: https://www.vox.com/future-perfect/23207301/costco-rotisserie-chicken-poultry-farming-inflation https://www.vox.com/future-perfect/23207301/costco-rotisseri... "But there’s another reason the birds have remained so affordable. In 2019, Costco made an unprecedented move to source its chicken at even lower margins: It set up its own feed mill, hatchery, and slaughter plant in Nebraska, and contracted nearby farmers to raise over 100 million birds each year, all under the name Lincoln Premium Poultry (LPP). It could be saving the company up to 35 cents per bird."

deleted 2y ago

[deleted]