The solution to escalating costs may be closer at hand than we think.
By Mike Steffen, Walsh Construction Co.
It is no secret that we face an enormous crisis with housing affordability in the United States. As the housing industry attempts to address this crisis, there has been a tendency for many in the industry to look externally, toward the horizon, for solutions. Alternative delivery approaches utilizing volumetric modular construction, 3d printing, and the recycling of shipping containers for housing are just a few of the new and revolutionary technologies that have been promoted and utilized in attempts to innovate towards greater affordability. Vertical integration of the construction supply chain on a dramatic scale is another alternative that has been pushed forward. However, these emerging technologies and approaches have yet to produce compelling, sustained results in terms of increasing the speed of development or construction, or reducing the costs of the homes delivered. Not to mention the additional development costs and risks incurred by project teams that try to explore the use of these alternatives.
What if instead of looking to the horizon, we in the industry looked internally at our typical design and construction methods? Could we identify ways to modify those in ways large or small, to achieve the cost savings we are looking for, and to do so while maintaining and perhaps even increasing the quality of the housing we are delivering to our communities?
Walsh Construction Co. (WALSH) has been building affordable housing for over 60 years throughout the Pacific Northwest, creating more than 55,000 homes during that time. Although we construct a wide variety of building types, multifamily affordable housing is the heart and soul of our enterprise. The majority of WALSH’s clients develop, own and operate affordable housing: non-profit community development organizations, public housing agencies, as well as for-profit affordable housing developers. These clients have experienced tremendous challenges with rapidly escalating construction costs over the past decade, and have collectively sought out solutions to address what increasingly seems to be a wicked problem. Construction costs in the Pacific Northwest have risen to well above the $100,000 per unit that was not uncommon in the recent past. The average hard construction cost per unit is now well over $200,000 and it is not unusual for projects these days to have per unit costs exceeding $300,000. At these much higher costs, and given the limited funding available to produce affordable housing, many in our communities are finding it impossible to meet the cost of housing, which is a basic necessity for living.
WALSH has experimented proactively with innovative technologies and methods – including modular construction, mass timber, light gauge steel, insulated concrete forms and structural insulated panels – in a concerted effort to see if these alternatives can produce fundamental improvements in either the cost, speed or quality of construction. In relation to these efforts, we have consistently found that wood-based construction (or wood/concrete hybrids for taller, mid-rise buildings), built primarily at the site, remains the most economical, highest value construction type for producing high-quality affordable housing. Yet we see inefficiencies and waste in many of the typical design and construction processes used during projects. We believe that if those could be addressed by project teams through a more proactive and disciplined approach to cost efficiency, there is significant potential for actual, not just theoretical, cost savings on the projects we work on together. Additionally, we’ve seen a great deal of attention paid over the past few decades to improvements in building performance, including energy efficiency, but very little attention given to conceptions of cost efficiency. To address these shortcomings, WALSH has worked with several project teams to develop a methodology called Cost-Efficient Design and Construction (CEDC) and have utilized on a number of recent projects in the Northwest with consistent, measurable success. The value proposition underlying CEDC derives from the establishment of a reliable – and replicable – path to achieving better buildings at lower cost.
What is CEDC?
CEDC posits a set of working principles that we at WALSH feel will lead to more inherently cost-efficient buildings. We believe strongly that these are valid constraints to achieve truly affordable housing. And our experiences on projects over and over have shown this to be so. These principles are based largely in the notion of product optimization, through a focus on providing a greater degree of standardization of the basic elements and components that go into affordable
housing design: the unit plans, bathrooms, kitchens, doors, windows, corridors, stairways, and elevators. Once standardized, these elements and components can be further optimized to provide even greater efficiency, functionality, and constructability. There is also a focus on improving layout efficiency and material utilization at the building structure, enclosure, mechanical and electrical systems, and interior finishes. Prefabrication of components is leveraged to the maximum degree it can add value to any given project. The use of lean construction methods such as target value design and early integration of key trade partners are also important to the success of CEDC.
We have found that a highly focused and disciplined use of these principles and methods can result in 10-25% cost savings from the non-optimized designs we typically see, and what we find most commonly is that affordable housing developers – based as most of them are in mission-driven organizations – will tend to re-invest a significant increment of those savings back into the design, to “add back” and thus incorporate building performance features and amenities that they otherwise could not afford, due to a combination of budget limitations and escalating costs. For example, many clients would like to achieve high levels of durability, energy efficiency, and comfort on their projects, and CEDC provides them a path to do just that. Providing this path to achieving those cost savings, while also including the desired enhancements, is the core value proposition of the CEDC approach. The other key aspect of the value proposition is that these results can be obtained on all affordable housing projects in the US, not just those few projects around the country that are pursuing the use of emerging technologies. The principles and methods we’ve been exploring with a number of different developer partners and design teams can reliably deliver more, and better, housing that our communities desperately need. The CEDC path can be followed in any region, and the positive cost results are widely replicable.
Core CEDC Principles:
- Strive to “keep it simple”
- Larger projects = economy of scale
- Seek out “unencumbered” sites
- Efficient building plans (net to gross area >80%)
- Efficient dwelling unit plans (narrow “aspect ratio”)
- Simple and compact forms
- Building/unit layout on 2-foot module
- Optimize structure / framing
- Floor to floor heights set for drywall (increments of 48”, 54” & 96”)
- Stack the units
- Compact plumbing layouts (“back to back” is most ideal)
- Avoid cantilevers (in wood framing)
- Avoid steel (yes it is possible!)
- “Disciplined” approach to windows
- Standardize & repeat typical elements
- Seek out all opportunities to prefab
“Reduce variation” is one of the key concepts underlying lean production methods, borrowed from Six Sigma thinking. Reducing variation is necessary in production processes to reduce costs while maintaining the requisite quality and consistency of a given product. However, it is clear to anyone involved in the industry that every affordable housing project is designed nearly 100% from scratch and the result is a highly unique building, fully customized to its site and program. Unit plans change from project to project, the stairway plans are almost always different, the corridors, the elevator shafts, trash chutes, etc. The floor framing runs parallel to the exterior wall on one project and perpendicular on the next. Mechanical equipment varies as does the approach to routing ductwork and piping. Fire and sound-rated assemblies vary. We lack an integrated platform of standardized elements, and a coordinated assemblage methodology. Some of this is due to programmatic or regulatory necessity, but much of it is due to complacency and a lack of discipline. This tendency to build projects that are 100% prototypes is a major factor contributing to rapidly increasing costs, and more broadly, the lack of productivity growth in construction.
The 80/20 Concept
As part of our CEDC approach, we’ve developed the 80/20 Concept: 80% of the elements that constitute an affordable housing design are – or could be – the same or highly similar, thus reducing the almost mind-numbing variation that typically occurs between projects. These are elements that for the most part are hidden or buried behind other elements; for example, structure, insulation, mechanical and electrical systems, drywall, firestopping and acoustic detailing. If the project team can optimize the design of those elements and begin to use them more widely as standardized elements, we have the opportunity to bring costs down significantly, through reduced material use, improved constructability and productivity, and, more generally, a reduction in complexity and uncertainty for the trades involved. The achieved savings can then be used for the inclusion of more of those elements that strongly contribute to architectural quality and building performance: the other 20%. This refers to the form, articulation and exterior expression of the building, the cladding materials or interior finishes, daylighting and natural ventilation, or amenities such as balconies or roof decks. The key idea is to standardize (and then optimize) +/-80% of the basic building and reduce costs there and use the other +/- 20% for the custom elements that allow for adapting the building to its unique site and program while providing individuality and character.
CEDC in Detail: Unit Design and Structural Optimization
The approach to unit layout, unit modularity and structural concepts provides several good examples of the optimization process at work in CEDC. First, there is a focus on the aspect ratio of the unit plans. The plans must be large enough to accommodate all the spaces that go with a particular unit type, such that they are functional and livable. That said, unit plans that are narrower and deeper while accommodating the required spaces and functions will tend to provide more efficient building blocks for affordable housing design compared to wider, shallower units of the same size. The narrower units will require less exterior wall enclosure and less corridor area than the wider units. Exterior wall is an expensive component at our buildings, therefore reducing exterior wall quantity can provide cost benefits, not to mention other benefits in terms of energy performance and long-term maintenance requirements. Corridors are not as expensive, yet they mostly function simply as a means to access the apartments. Reducing the quantity of corridor area is typically only beneficial to a building’s cost efficiency.
A typical one bedroom unit is commonly designed at 24-26 feet wide, whereas an optimized one bedroom unit plan can be developed with a width of 22 feet. This relatively straightforward optimization will result in 8-15% quantity reductions at the exterior wall and the building corridor. Combined with a sectional optimization to reduce typical building floor to floor height from 10-3” (with 9 foot ceilings) to 9-1” (with 8 foot ceilings), the exterior wall quantity reduction can increase to more than 25%.
Typical One Bedroom Unit Plan (572 SF)
Optimized Unit Bedroom Unit Plan (572 SF)
The other primary benefit of a narrow aspect ratio with respect to unit plans comes into play at sites in urban areas, where site configurations are often tight and unit yield will be enhanced through the use of optimized, narrower plans. Depending on the particular site and how the building layout is developed, unit yields can be increased 10-20% by using such optimized unit plan elements.
A few caveats are in order here: First, there is no question that larger, wider units are more desirable in housing design. However, with affordable housing design we are striving to find a balance between functionality, livability and efficiency, for the sake of identifying the most optimal solutions that will allow for more, better homes to be built overall. And all that with constrained funding sources, and often on highly-constrained sites. We may not be able to build “the best” homes, but we can build high-quality, “better” homes and do so more efficiently. Secondly, this notion of aspect ratio can be taken too far. One example is the so-called “Urban One Bedroom” unit, where the width has been reduced to 16-18 feet and the bedroom is placed in or near the center of the unit plan, away from the exterior wall. Access to views, daylight and natural ventilation is severely restricted for residents with this type of unit layout and we do not recommend such a solution. We assume that all living areas and bedrooms in affordable housing should be located along exterior walls, with operable windows providing access to views, daylight and natural ventilation.
Standard unit plan elements in CEDC have been developed on a 2-foot grid as this corresponds to the standard dimensions of many building materials. This simple to understand principle optimizes material use, reduces waste and increases productivity with framing, drywall and other trades. While not used often at larger, taller multifamily buildings, advanced framing – with wood members spaced at 24” o.c. – can be widely used at wood framed structures up to four stories in height in most areas of the country, and can even be used at taller structures with knowledgeable, diligent efforts by the design and construction teams. We have explored the use of advanced framing methods, combined together with modified platform framing (where the floor “platform” is hung off the sides of wall plates rather than set on top of the plates) and find this hybrid alternative can reduce the amount of wood framing materials by over 25%, a reduction that has positive cost implications for projects, particularly given the current state of the wood products market.
Structural Optimization Process: Comparison of Standard Framing and Advanced Framing
CEDC in Action: Case Study Projects and Results
In 2015, Meyer Memorial Trust (MMT) issued a paper titled “The Cost of Affordable Housing Development in Oregon” which reported the work of a task group that MMT engaged to study the problem of escalating costs. Subsequently, MMT issued an RFP soliciting grant proposals from project teams to investigate the use of innovative technologies and methods as a way to reduce construction costs. WALSH joined three project teams that received Innovation Grants from MMT, with two of those teams interested to explore the viability of CEDC principles and methods.
As a recipient of the MMT grant, REACH Community Development Corporation initiated the Wy’East Plaza project in 2017, with the intent to use the CEDC approach, together with a deep push into lean construction ideas and methods. In the project programming phase, REACH set an aggressive goal to deliver housing at Wy’East at 30% lower than the total development cost limits established by Oregon Housing and Community Services, the state housing agency. Working with WALSH (and a design team led by Ankrom Moisan Architects), REACH exceeded that goal by delivering the 175-unit project at 39% below the TDC limits. The hard construction cost on the project – completed in 2020 – was $19.4 million ($111,359/unit; $194/sf) which was dramatically below the costs seen on other projects in the Portland region during the same time period.
Wy’East Plaza, Portland, Oregon. Developed by REACH Community Development, this project was completed in Autumn 2020, providing 175 units of affordable workforce housing adjacent to a regional light rail transit stop on Portland’s eastside. Photo credit: Quanta Collectiv
Northwest Housing Alternatives (NHA) also received the MMT grant, choosing to use the CEDC approach on two consecutive projects in the Portland area, producing similar results in cost reduction. Working with WALSH (and a design team led by MWA Architects) on a large affordable workforce housing project in Portland’s Gateway district, NHA found it possible to deliver the 159-unit Buri Building at a hard construction cost of $19.5 million ($122,833/unit; $213/sf). This project was also completed in 2020. The cost reduction achieved here is particularly notable given the need for the project to go through Portland’s rigorous design commission review process as well as the need to carry significant right-of-way dedications and public street and bikeway improvements that were triggered by the project. Following on the cost reduction results at Wy’East Plaza, and achieved here with an entirely different developer and design team, the results at the Buri Building provide solid evidence of the replicability of the CEDC principles and methods.
Buri Building, Portland, Oregon. Developed by Northwest Housing Alternatives, this project was completed in Summer 2020, providing 159 units of affordable workforce housing adjacent to a regional light rail transit stop in Portland’s Gateway district. Photo credit: David Papazian
In Seattle, beginning in 2017, Low Income Housing Institute (LIHI) engaged a design team lead by Runberg Architecture Group, as well as WALSH, to develop plans for a site adjacent to Othello Park in the city’s Rainier Valley district. Due to unrelenting cost escalation that was hitting the Seattle region particularly hard at the time, early conceptual designs for the project were estimated to cost well over the target budget that LIHI had established. Funding could not be obtained for the project at the estimated cost, so it was shelved for a time, as happened with many other projects in the region. The team reconvened in late 2018 to take another go at the project, utilizing a CEDC-informed approach. LIHI, WALSH, Runberg, and key subcontractors standardized the proposed unit designs and optimized the building layout and systems design to achieve a target budget reduction of approximately $2 million – approximately half of which resulted from the re-design and half of which was accomplished through collaboration with the framing and plumbing subcontractors, who provided pivotal cost-efficiency suggestions for their trade scopes.
George Fleming Place under construction in Seattle during early 2021. Photo credit: Northwest Skyview Imagery
The project received the needed funding commitments and construction began shortly thereafter, with completion in September 2021. The experience on George Fleming Place indicates that positive cost results can be achieved when development teams are flexible to re-conceive a project using CEDC principles and methods. With the achieved savings LIHI was able to “add back” valuable amenities such as a large photovoltaic array that helps power the electrical system in the common areas, and a sizable roof deck, accessed from the top floor lobby and offering accessory living space to all residents, together with spectacular views of Lake Washington, the Cascade Range and Mt. Rainier.
George Fleming Place. Seattle, Washington. This project, developed by Low Income Housing Institute, and recently occupied, includes 106 homes for low income families in Seattle’s Rainier Valley district. Photo credit: Northwest Skyview Imagery
First Cost Savings + Life Cycle Cost Savings
The disciplined approach to building layout in both plan and section in CEDC generally results in reduced surface area (of floors, walls and ceilings) and reduced building volume when considered on a per unit or per resident basis, compared to typical, non-optimized designs. These reductions yield savings on construction costs, but they also have the potential to bring down operating and long-term costs for building owners. By reducing the area and volume in the building that must be lit, heated, cooled and ventilated, incremental operational cost savings are likely. The same holds for regular ongoing cleaning/maintenance costs as well as repair or replacement costs over time: the reduced surface area and volume within the building will yield additional life cycle cost savings, compared to a non-optimized design.
Prefabrication of housing elements and components – combined with factory-based automation – offers great potential to reduce costs, shorten schedules, and improve quality. Just as importantly, an increase in prefabrication and off-siting of certain parts of the construction process has the potential to address the acute labor shortage that is currently impacting the construction industry.
Project teams using the CEDC approach should investigate all opportunities to utilize prefabrication wherever it can add value to the project. Components such as windows and cabinets that traditionally were site-built are now almost exclusively prefabricated. The same for roof and floor trusses. In affordable housing, the primary opportunities to leverage additional prefabrication are currently found in the structural components such as wall and floor panels. Other opportunities include the piping, ductwork, wiring and equipment associated with individual units, as well as the potential to use prefab bathroom pods or kitchens. Designers should be mindful to design housing elements to facilitate efficient and cost-effective prefabrication at the factory and installation at the site, following the principles of Design for Manufacture and Assembly (DfMA). A greater degree of standardization in the design of elements and components could facilitate increased use of prefabrication in the future, as this will reduce complexities and increase the economies of scale in the product manufacturing and associated automation processes.
Many builders are leveraging prefabrication and automation in a variety of ways to improve productivity and increase value in the construction process, while keeping other aspects of the process intact. While panelized construction has become widespread, some framing contractors are still building largely at the site, but are using precut framing packages that have all the assembly markings preprinted on the lumber. This recently developed technology facilitates faster and more accurate installation of the walls and floors, and addresses the labor shortage by allowing contractors to erect structures with smaller crews and less skilled workers. Photo credit: EstiFrame Technologies
Mass timber holds promise as well as an alternative wood-based construction method for affordable housing, particularly as a substitute for the concrete frame construction that is typically used at taller buildings (eight stories and higher). At low and mid-rise buildings, rather than framing the entire building out of mass timber, there may be opportunities to combine prefabricated mass timber floor elements together with prefabricated light wood frame walls, as a more optimal way to use this method in a more cost efficient and schedule-accelerating manner.
Volumetric modular construction – where entire dwelling units are factory built and trucked to a site for assembly into a building – may provide a cost-effective solution at certain projects depending on the particular site and schedule dynamics. This is particularly true in a few of highest cost US housing markets such as the San Francisco Bay area, but not yet in the Pacific Northwest or most regions across the country. Proponents of modular construction highlight its advantages, of which there are several, however the disadvantages that come along with the modular approach are significant and continue to hamper its uptake more broadly in the industry.
Argyle Gardens. Portland, Oregon. Developed by Transition Projects, Inc., designed by HOLST Architects, and built by Walsh Construction Co. (with modules supplied by ModsPDX), this project was completed in Spring 2020, providing 72 units of permanent supportive housing in the Kenton neighborhood on Portland’s northside. Volumetric modular construction methods were used to erect all four buildings on the site. Photo credit: Jamie Goodwick / Portland Drone
Lastly, after all this discussion of cost reduction, it is important to underscore one key concern…and that has to do with the question of Quality. These cost efficiency ideas are not mutually exclusive to housing quality and design quality, rather they are placing a priority on avoiding design moves that tend to add considerable additional first cost, without adding commensurate functional or practical value for the short or long term. It is probably accurate to say that many design moves are undertaken primarily if not completely for aesthetic reasons, and – in the context of many budget challenged affordable housing projects – those motivations need to be recognized and judged accordingly by project teams as they work together to evaluate the relative merit of incorporating various elements and moves into affordable housing designs.
“One of the biggest challenges in developing new affordable housing is escalating construction costs,” says Dee Walsh, chief operating officer of Mercy Housing (no connection to WALSH Construction). CEDC, she says, “can help us achieve cost containment without sacrificing quality. At Mercy, we’ve built three communities using modular construction with mixed results. Building smarter, rather than differently, is an approach that is accessible to everyone. We’ve used this approach on projects in the Northwest with good results, and plan to expand this approach to other parts of the country.”
The underlying premise of CEDC is that if we as project teams make the appropriate strategic decisions in terms of those larger scale measures on our projects, we will discover we have more resources available within budgets to incorporate the features and measures that truly enhance building quality and durability. At Wy’East Plaza, the project team was able to establish not only how to get costs down close to $100,000 per unit, we were able to do so with no net reduction in quality from our typical projects. Furthermore, we were able to show our client a path to meeting the Passive House performance standard for less than a 5% cost premium, which on Wy’East would amount to an additional $6,000 per unit in construction cost. At the Buri Building, with deft leadership by our design colleagues, the project team was able to show that the CEDC approach is not only replicable but that it can be adapted with skillful architectural effect to satisfy even the most robust requirements of a local jurisdiction’s design review process and produce a very fine-looking building. Underscored by these project examples, quality is essential to our vision of what CEDC can accomplish for those who develop affordable housing as well as the people and communities we serve.
Mike Steffen is an architect and builder with 30+ years of experience working on housing across the western United States. Following more than a decade working in architectural practices, he joined Walsh Construction Co. in 1999 and has served as Quality Director, General Manager, and Director of Innovation over the past two decades. In his current role at WALSH, Mike advises construction team members, developer clients, and design team partners on innovative methods, materials and technologies for use in the design and construction of projects.
Note: This paper was developed in response to a number of articles about alternative construction technologies that were published by Shelterforce in late 2021 as part of their Under The Lens series, called Building Differently. Those articles can be viewed at https://shelterforce.org/category/building-differently/. A shorter version of this paper can be viewed there as well.