California wildfires inspired a faster, cheaper way to build homes

05 May 2021

Published by https://www.fastcompany.com/

USA – After wildfires destroyed thousands of homes in Northern California in 2017, residents and local officials hoping to rebuild hit a wall. The demand for new homes in places like Napa and Sonoma counties was high, but the number of laborers and contractors able to build those homes fell far short.

“In this area, 300 or 400 houses a year had been built before and they suddenly needed to build 6,000. There simply wasn’t any local capacity to do it,” says Nikki Pechet, a resident of the area who has experience in real estate and was an early executive at the online home services marketplace Thumbtack. In the face of the shortage of construction labor, Pechet saw an opportunity.

She cofounded Homebound, a digital platform for home design and construction that uses technology to connect residents with qualified builders. By vetting contractors, establishing reliable supply chains for commonly used building materials, and even developing pre-engineered home plans and construction documents, Homebound helped speed up the process of getting homes built, cutting project times from the industry average of 18 to 40 months down to between 9 and 18 months. That model had relevance in other places that face natural disasters, and Homebound soon expanded to the Bahamas, which is regularly battered by hurricanes.

Now, the company is taking on a different kind of disaster. It’s expanding into Austin, Texas, where growth is putting extreme pressure on the city’s housing market. Instead of homes staying on the market for months, they’re often snatched up in days, making it hard for all but the wealthiest to buy. More houses sell for above asking price there than anywhere else in the United States. Pechet says Homebound offers homebuyers a way to circumvent the heat of the market by building their own homes.

With the U.S. seeing its highest rate of homebuilding activity since the housing boom about 15 years ago, worker shortages are a major bottleneck. According to recent research from Associated Builders and Contractors, construction companies will need to hire 430,000 more workers in 2021 than they did last year.

Homebound’s network also includes local real estate developers, which allows the company to provide its customers not only with construction labor but also with empty lots where they can build. “We can start any project in any of our markets within days,” Pechet says. “We have a larger network and we know who is available to get started and can pull in labor to get moving quickly.”

Sometimes, that means construction crews are coming in from great distances. The system operates somewhat similarly to Uber or Lyft, offering up jobs to prequalified workers who decide which projects they want to accept. Crews of workers in labor-rich areas may commute several hours to labor-poor regions to complete projects. In the case of the Bahamas, Pechet says Homebound relies heavily on off-island labor to come in and get jobs done quickly.

The time savings can be significant, especially when customers use one of Homebound’s dozens of preapproved home plans. The company’s digital platform also allows customers to select everything from exteriors and window styles to interior design and furniture.

“Typically what we see is [homes getting built] 30% faster than other builders that we compete with locally,” Pechet says.

About half of Homebound’s customers use one of its pre-engineered plans, while the rest bring their own architect or design and use the company only to coordinate the construction.

Pechet says Homebound’s network can bring down the cost of construction, with its own procurement team working with builders to identify the best prices on materials and ensure their availability. “A typical custom homebuilder builds on average about three homes a year, so they see pricing about three times a year,” Pechet says. “That means they’re leveraging a tiny network, and they’re at the mercy of whatever pricing and quality that network provides.”

Homebound’s approach, Pechet says, has relevance across the country, and not just in places likely to experience natural disasters. But for now, the focus is on the expansion into Austin, which is expected to become the company’s biggest market.

“All sorts of companies have announced that they’re moving to Austin but haven’t yet started relocating employees,” Pechet says. “What we’re seeing there is just the very beginning of a need for housing across the spectrum of price points and across all neighborhoods in greater Austin.”

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