Whether they call it affordable housing, workforce housing, next-generation housing or senior housing, virtually all communities are faced with the challenge of providing adequate and affordable housing to their residents. Many communities have tried using incentives including cash grants, loans, free land and density bonuses to entice developers to build affordable housing. Others have used zoning to force the development of affordable homes. Some have been successful with these approaches. Most have little to show for their efforts. None have figured out how to get a large number of affordable houses built quickly.

The major cost components of a new home are land, construction, interest, and developer profit. The lowest home price can be achieved without sacrificing quality when each of these costs is minimized or eliminated.

Land: Virtually every governmental unit, be it the state, a city, county or school district owns land. Some of this land (tens of thousands of acres across Florida) is surplus and can be donated to affordable housing projects. Land can also be donated by local employers and various civic and philanthropic groups.

Construction: The cost of construction is determined by the cost of labor and materials. Building a house is an inherently inefficient process. Materials are purchased in small quantities and stored on site. Tradesmen are in short supply. Scheduling is rarely smooth.
Modular building, on the other hand, is efficient and inexpensive. A house that takes months to build on site can be built in a factory and shipped to the site in modules and erected in one day. This is not a mobile or manufactured home. It is fastened to a permanent foundation and meets all local building codes. Because of factory efficiency and volume purchasing, the cost of a modular home can be 30 - 40% less than site built.

Interest: Typically, the developer takes out a construction loan and pays interest from the project start date until the loan is repaid from the sale of the homes. Site built single family homes take from 5 - 7 months to build (Townhomes: 10 - 14 months).
Modular homes and townhomes, however, are erected in one day and ready to sell in 8 to 10 weeks. Thus, the construction loan accrues less interest for a shorter time. Additionally, some modular manufacturers are willing to finance the cost of their homes until they are sold to the end user.

Profit: Developers are in business to make a profit. And they have investors who need to be compensated for the risks they take. There’s nothing wrong with this. It’s the way real estate has been financed for centuries. Developer profit is typically 20 -25% of the sales price of a house. This profit can, however, be avoided and the selling price lowered accordingly if the project sponsor is willing to take a few extra steps.
Let’s look for a moment at what a developer does. He acquires the land, designs the project, secures the entitlements , hires the builder and provides the money. In the scenario above, however, the governmental sponsor provides the land and the entitlements, and the homes are pre-designed and built by the modular manufacturer who is also willing in some cases to provide the financing. By engaging a development consultant to oversee the process, the sponsor can eliminate developer profit.

Thus, the cost of work force housing can be cut in half by employing the above strategies.