Ushering in a Powerful Solution for Cost-Effective Affordable Housing

This spring, Mercy Housing California (MHC) dedicated Tahanan (pictured above), a new permanent supportive housing community in San Francisco. Partners, staff, and residents celebrated the addition of 145 much-needed affordable homes – as well an innovative new approach to building housing more efficiently and cost-effectively called modular construction.

As one of the leading affordable housing developers in the country, Mercy Housing is continually seeking ways to reduce the time and cost it takes to build affordable housing. In California, the high price of land and labor – and extended construction times – have exacerbated the affordable housing crisis. In 2019, MHC began researching modular construction technology as a potential antidote to these seemingly intractable issues.

With modular construction, instead of beginning each story of a building only after the one below it is completed, builders start by finishing every unit individually at an offsite warehouse. These units, or “modules,” are shipped to the final location of the building and quickly stacked together. Because each module arrives at the site with electricity, plumbing, drywall, and cabinetry already installed, the building is often 75% to 90% complete as soon as the units are assembled.

The success of Tahanan – which was completed in half the time and for 30% lower cost compared to similar developments – can be attributed in part to the use of modular construction. MHC’s partners Tipping Point Community and the San Francisco Housing Accelerator Fund spurred additional innovations, including providing upfront philanthropic funding, attaching ambitious cost-saving and time-saving goals to the project, and leveraging new state laws to expedite the entitlements process. In the end, the project was completed in less than three years with a reduced construction time and for less than $400,000 per unit– representing a great savings of cost and time for permanent supportive housing in San Francisco.

Building on the success of this first foray into modular construction, MHC is now counseling other affordable housing developers on the best uses for this strategy, as well as forging ahead with new modular buildings of our own. When 1064 Mission, developed in partnership with Episcopal Community Services of San Francisco, opens next year, it will be the city’s largest permanent supportive housing community – and thanks to the use of modular construction, six months will have been shaved off the construction time. MHC is also currently developing two modular communities in Los Angeles, Sixth Street Place and Whitter Boulevard, and assessing new projects in the pipeline to see if modular construction could expedite their build times and save costs.

Of course, as with all construction innovations, modular represents a means to an end for Mercy Housing: namely, improving our ability to help more residents find the stability to achieve their dreams. At the dedication event on April 28, resident Naya shared the way moving into Tahanan helped them build towards their goal to create empowering children’s literature with their YouTube channel. Partners, residents and staff expressed gratitude for the features found at all Mercy Housing residences: deep, permanent affordability, top-tier services, striking design elements, and safe, high-quality homes. At MHC, we will continue to scope out new ways to achieve that reality for as many people as possible, and to advance solutions that meet the scale and urgency of California’s housing crisis.