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DUELING CURVES The Battle for Housing

The subject is manufactured housing. In the parlance of the people, mobile homes. Author Bob Vahsholtz's early career was in the field of industrialized housing in the US and Canada--mobiles and modulars. This book is written for manufacturers of industrialized housing and their support systems.

Over his career as a designer, management consultant and corporate planner, Bob developed an overview of how economics and management combine to create business and industry success over time. He found that a key to business success in a free enterprise system is learning curve, the art and science of doing the same things over and over, a little bit better every day; every year, until you get really good at it. In housing, that's hardly been feasible because of that market's wild swings. 

One exception. During the 1950s through 1970, a new industry--manufactured housing--was born. It started with travel trailers.They were more expensive than houses by the square foot, but inexpensive overall because they were small and you could rent a place to park your home. There was a housing shortage and for a couple of decades trailer manufacturers could sell 'em as fast as they could build 'em. They got really good at it while no one was watching. That's what the book's cover illustrates. The horizontal curve shows the "real" cost per square foot of conventional housing creeping upward since before WWII. The plunging curve is the cost per square foot of an average size manufactured home over the same period. The book explains how it happened.

Today, the quality and livability of a manufactured home is on par with that of houses built stick by stick on site. Manufactured homes have grown a lot, but not as big as the average new stick built home, and the cost per square foot is about half as much.

Success, however, remains a challenge. This book tells the story of how manufactured homes gained such phenomenal quality and value improvement, yet remain stifled by the stuffy traditions of the housing industry and its doddering regulations. Click on the attachments below to read the book's foreword and introduction by a couple of respected authorities from this field.

Published 2014, 217 pages, 100 illustrations, 40 graphs, 8.5 x 11, $35, plus $7 shipping and handling.
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Reader Comments:

"Dueling Curves
does an excellent job of describing the history of housing  the past 90 years. It is well researched, thoughtfully presented with a bit of humor added, and concludes with the author giving his opinion of the future of housing."  Bob Richardson, founder and CEO of Richardson Homes

"... good book, you have some really neat history in the book and it is enjoyable reading for this factory built person." Joe Stegmayer, CEO Cavco Industries

"...
some serious research, deep thought, and helpful suggestions for improving the future of manufactured housing ..." George Allen, Allen Letter

Below is the book's Foreword by David Funk, followed by the Introduction, by John Slayter:


Foreword

 


S

Ometimes a book appears at the right time written by the right author. DUELING CURVES, The Battle for Housing is such a book and Bob Vahsholtz is such an author. Manufactured housing is at a crossroads, and in this book, Vahsholtz spells out why, and suggests what can be done.

Manufactured housing’s production level has reached lows last seen around 1950. Industry share of the single family housing market was a third of the total in 1973, but has since eroded to just seven percent. In many ways it appears to be an industry on life support. Nonetheless, conditions point to an industrialized housing renaissance—a dire need for affordable housing, growing desirability for efficient, sustainable homes, and a continuing awareness that construction efficiency has been best achieved in a factory setting.

Through the years there has been no lack of commentators setting their sights on factory construction as housing’s ultimate frontier of efficiency, but lacking a clear understanding of how that potential can be realized. There’s also no shortage of conventional home builders who incorporate more and more pre-fabricated components, yet fail to improve housing productivity. Manufactured housing’s advantages have been clearly demonstrated, but explanations for its recent malaise have been piecemeal and rare—until now. This book’s central theme is how learning curve created manufactured housing’s success, and how that process was stymied by housing’s inherent and compounded volatility.

Bob Vahsholtz has been on his own learning curve with manufactured housing since he bought his first home—a truly mobile, used, 184 sq. ft. California-built unit as an affordable option for his family during a deployment to Alaska. Educated as an industrial designer, he saw potential and sought out manufactured housing as a vocation. After finding a design position with a leading manufacturer in the industry’s Indiana home base, he bought a new mobile home right off the production line—just one other member of the office staff of 62 lived in a mobile home. He went on to head the largest design staff in the manufactured housing industry. Subsequently Vahsholtz and an engineer friend formed the industry’s leading design and engineering consulting firm, specializing in modular systems. The team grew and ultimately became operational, successfully managing a huge modular manufacturing facility as a division of Bethlehem Steel.

Vahsholtz’s evolving career coincided with the glory years of manufactured housing, where from 1960 through 1973 the industry’s production rate quintupled, selling prices plunged, quality matured and profits soared. When it all collapsed as a result of American housing’s inherent volatility, he held a variety of positions including hands-on factory operations as well as head office responsibility for design, engineering and manufacturing. That heady rise and catastrophic fall provided author Vahsholtz a first-hand look at what is possible—and what is not. That education, from the school of hard knocks and unanticipated consequences, equally informs Vahsholtz’s analysis of the industry as an alternative interconnected, mutually dependent housing system. It all adds up to a credible overview, explaining how the industry got to where it is today, the potential that remains, and a veteran sage’s context for finding a way forward. DUELING CURVES provides thoughtful answers regarding what went wrong, and a viable prescription for the future.

A house is a simple thing, but the housing industry is highly complex and surprisin

gly inefficient. Manufactured housing is also complex—far more than just factories that build houses. It’s a web of suppliers, assemblers, retailers, financiers, transport systems, community developers and set-up teams coordinated by specialized leaders, managers, designers and engineers. All of these components have come together to create a housing process far more efficient than the traditional stick building process. Until recently, none of the industry’s segments played a dominant role, nor was any company or group in a position to apply strategic planning to the overall manufactured housing process.

As a consultant and as a corporate strategic planner, inside and outside the industry, much of Vahsholtz’s career involved synthesizing pieces of information into coherent business strategy—thinking critically about the unique challenges and ultimate requirements for sustained success. With broad exposure to the entire manufactured housing process, he came to understand the critical role of leadership at both corporate and industry levels. Too tight a focus on management alone effectively blindsided otherwise exceptional companies.

DUELING CURVES shines light on an overlooked area of enduring business success—the e

volution of efficacy and innovation through strategic feedback that leads to continual product improvement simultaneous with reducing cost—learning curve. Understanding that process and its potential is critical reading for those in operations, management, and leadership roles in all branches of industry.

Manufactured housing serves as a useful context for examining the benefits and challenges of learning curve in practice. From 13th century homes designed around open hearths to the failure of Edison’s housing venture, the improbable success of Sears kit homes, right up to the cutting edge factory-built homes of today, Dueling Curves provides a critical history of housing. That history is fascinating, and has broad applications, but does learning curve matter moving forward? Indeed, will the manufactured housing industry be relevant in the years that come? Vahsholtz eloquently and systematically builds the case that the potential is there. A solid foundation has been laid. Ultimately manufacturing efficiency must surely prevail against long-standing housing handcraft traditions. Whether success is at hand or awaits future attempts depends upon the current industry’s ability to seize the opportunities that abound.

The recent financial crisis and ensuing fall in home prices served to release some pressure on a long-term and frightening decline of affordable U.S. housing. Other economic ills such as a shortage of employment opportunities served to draw attention away from the plight of low income families seeking housing. For decades, there has been an affordability gap, with the bottom 40 percent of households increasingly unable to afford U.S. housing prices. Housing incentive packages were abused, are essentially gone and housing prices are headed up. New home prices continue their upward spiral in both price and size. The bottom 40 percent of families, with an upper income level of $40,000, is increasingly excluded from the housing market. Credit standards are tight and as existing, distressed for-sale homes are worked through the system, options for the working poor diminish f

urther. Rental affordability is near an all-time low. Stick builders are not focused on housing the bottom 40 percent, but manufactured housing has the potential to satisfy that huge market.

In his research, Vahsholtz found that the learning curve that is inherent in competitive factory production created manufactured housing’s edge during a period of strong housing demand. But that great strength has been eroded by housing’s inherent volatility—those wild market swings that have always been a major factor in attaining efficient housing production. Stickbuilders have always faced that kind of volatility and found ways to cope. Manufacturers are still learning and devising methods of smoothing the production cycles. Manufactured housing’s cost advantage over stick builders endures. Despite losing 90 percent of its peak volume manufacturers emerged with their quality improved and price advantage intact.

Affordability is not the only ace in the manufacturers’ deck. They provide good jobs for ordinary Americans and build homes at unmatched efficiency in use of materials. In addition to their price advantages those homes are green, creating nominal production waste, while providing efficient and ergonomic living space and optimum energy efficiency. Such factors appeal to today’s small families, retirees on limited incomes, the baby boom generation and millennials desiring a transitional, sustainable, small-is-better housing paradigm. 

Vahsholtz began this book with a desire to demonstrate the power of learning curve but with some pessimism about the future of the manufactured housing industry. His research, however, affirmed the industry’s immense potential today, and serves as a call for strategic thinking, leadership and united action to move forward. Success will not be attained through a bold breakthrough, but rather the hard work of incremental innovation and application applied to specific markets and niches that play to manufactured housings’ strengths. The industry’s consolidation around a small group of dominant and efficient manufacturers is identified as the prime cause for optimism. Leadership potential exists in the form of Clayton, Cavco, and Champion. In ad

dition, smaller companies such as Blu Homes can explore windows of opportunity for continued development of learning curve and innovation. Today’s environment of focused manufactured housing competitors holds promise of evolving strategies to attract new markets, distinguish itself from stick-built competitors and lead the way toward affordable and attractive housing for all.

Read to understand learning curve, and for a history of manufactured housing, but be prepared to come away inspired about the future of factory-built housing and a blueprint for getting there.

 

David L. Funk

Director, Baker Program in Real Estate 

Cornell University


Introduction

W

hy hasn’t housing made the tremendous advances over the past few decades that, say, the automotive, aircraft, medical and electronics industries have? Well, it may be that housing is carrying thousands of years of social, political and cultural baggage that these other industries need not cope with. Sure, there have been hundreds of technical advances with what we attach to a house but not so much in how we create a house.

One sector of the housing industry that did see significant growth, as well as meaningful technological and process development, was mobile homes in the 1950s and 1960s. Throughout this period our author was intimately involved with the design development of this product, and with the people and companies that made it happen. As such, he brings us a unique perspective on the who, why and how this strange concept came to be and where it might be going. Later as a principal of the nation’s leading industrialized housing consulting firm, he had the opportunity to grapple with the generally futile efforts of our largest corporations to industrialize the process.

Using learning curve theory, he puts forth a convincing case that the mobes had it right the first time and remain viable today. We only need the kind of leadership and savvy management of the early years, but without its fragmentation, to once again mass produce affordable housing.

John Slayter

Retired from 50 years with the mobes and mods