Company bets on affordable modular housing PUTTING IT ALL TOGETHER

March 23, 1992|By Ellen James Martin | Ellen James Martin,Staff Writer

NORTHEAST -- The plant, which carries the strong, sweet stench of paint, is a frenzy of activity -- pneumatic nail pounding, power stapling and painting. Everyone seems in a rush to build the big wooden boxes, modules that will be trucked to home sites and assembled there.

This is not mobile-home building. No, these are virtually the "Home Sweet Home" houses built stick-by-stick in well-heeled suburbs across America, insists Regional Building Systems, the Columbia-based company that runs the Northeast factory and another in Fredericksburg, Va.

These days, the price range of a modular house to the consumer runs from $80,000 to more than $200,000.

"We think that plant-built housing is the wave of the future," says Jim Umland, a vice president of majority shareholder Nagelvoort & Co. The private New York investment banking firm bought an 84 percent stake when the unit, formerly known as Ryland Building Systems, was spun off from the Ryland Group last July.

Already listed by trade journal Automated Builder as the nation's largest modular builder, RBS scored a business coup recently when it won a U.S. Navy

contract for 1,000 modular town houses at the Stapleton Homeport on Staten Island, N.Y. Under the $43 million, two-year contract, RBS will manufacture, assemble and sell the houses to the developer of the "Aspen Knolls" subdivision.

The lingering recession has not made life easy for Regional Building Systems. Revenues fell to $30 million last year, compared to $60 million annually during the homebuilding boom of the late 1980s. Net income has steadily risen, though company officials declined to provide details, noting the company is private.

One reason RBS has weathered the homebuilding recession -- unlike other modular builders -- is that it has stressed affordable housing, including town houses and apartments for low-income buyers in inner-city areas.

RBS has become a major supplier of modules to subsidiaries of the Columbia-based Enterprise Foundation, founded by James Rouse. RBS modules have been used, for instance, in West Baltimore's Nehemiah project, which is designed to encourage homeownership among low- and moderate-income families.

"The market for affordable housing will be insatiable in the next five years because almost no one has serviced that market," says Ann McGee, director of administration at RBS.

The market for modules -- which represent 80 percent of a completed home -- is growing because of domestic demand for low-cost housing and the potential for exports, says Lance Carlson, an executive at Automated Builder.

Gone are the days of pure "stick-built" homes, when virtually every part of a house was created on-site. Today floor and roof trusses, kitchen cabinets, bathroom tub enclosures, staircases and railings are among the components routinely made in a factory. The use of factory-made pre-hung doors and windows has become common, and many builders also buy pre-built walls. About 10 percent of RBS sales are for "panelized" products.

Modular housing has become a realistic alternative to stick building, says Jim Hanna, director of codes administration for Maryland's Department of Housing and Community Development.

For example, he notes that modular builders are no longer limited in terms of the pitch of a home's roof because they've developed hinged roofs that collapse for transport through tunnels and under bridges. "Roof hinges are a great feature that allow builders, for example, to build a Cape Cod."

Still, modular home building accounts for just 6 percent of the residential building market, Mr. Carlson says. Module makers have captured only about 20 percent of the homebuilding market on the East Coast. And modular building is less often used on the West Coast because of the popularity of contemporary homes, which don't lend themselves as easily to modular building techniques as the boxy, traditional homes prevalent in the East.

RBS and other builders believe modular homes will become more popular as the "downscale" stigma vanishes.

RBS routinely provides modules to builders serving America's middle and upper-middle classes. One of its biggest customers is Ryland, which is using the modules in its Meadow Ridge subdivision in Columbia.

And judging from model homes at RBS' Northeast factory, the building technique is as applicable to expensive detached homes as to the small town house units destined for inner-city Baltimore. RBS' more elaborate models are virtually indistinguishable from pricey stick-built homes. The only noticeable difference: Walls within a modular home are thicker where the modules adjoin.

Modular homes needn't be constructed on slabs -- most have basements. And they can easily be higher than one story, because cranes can hoist one module on top of another when the house is assembled. RBS offers 40 different styles of homes to its customers, a network of builders.

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