By Margaret Jackson | Nov 02, 2020
Simple Homes co-founder David Schultz found a likeminded business partner when he met Jeff Hopfenbeck and the two started seeing just how challenging the labor market is for the construction industry.
When Schultz and Hopfenbeck learned about how European countries were embracing offsite construction, they decided to visit the continent to see for themselves, which led to the creation of Simple Homes. "It really kind of resonated with me," Schultz says. "We did a trip to Europe and saw how they were doing this stuff, and I really drank the Kool-Aid."
Simple Homes designs, manufactures, and assembles homes using the latest digital fabrication technology and its Swedish-inspired panelized building system. Depending on the customer's needs, the company's panels are manufactured with exterior cladding, windows, doors, insulation, and rough-in plumbing and electrical pre-installed.
The company, which partners with homebuilders and developers, installs the panels onsite, and the finish work is completed by its builder partners. "We're a framing subcontractor that has an architecture and engineering firm in-house," Schultz says.
Simple Homes can produce a 2,500-square-foot home in its factory in about a week. It takes another five days to install it on the homebuilder's site after the concrete has been poured.
Schultz estimates it shaves up to four weeks of the homebuilders cycle. "The big driver of this thing is time and speed," he says. "We can do it much quicker."
Since building an accessory dwelling unit (ADU) prototype in the back of Schultz's house in March 2019, Simple Homes has completed about 30 units, mainly single-family homes and ADUs. It also manufactures panels for small multifamily units.
Simple Homes has sold about 120 units to two production homebuilders and has about 50 multifamily sales confirmed for next year. Homebuilders the company works with include Denver's McStain Neighborhoods, Wilco Homes in Alabama, and Maryland-based Parkwood Homes.
The company recently received a $1 million grant from the U.S. Department of Energy to look at automation and robotics in the construction industry as a means of producing more affordable, energy-efficient housing.
Challenges: To be profitable, Simple Homes must be able to ramp up production in order to be able to cover its overhead. "This is a volume play," Schultz says. "You have to get to scale to make it financially viable. When you do get to that scale, then it's amazing."
Simple Homes needs to produce a minimum of 100 homes a year for it to remain financially viable. "For us, it's about trying to get to cost parity or close against a standard stick builder or framer," Shultz says. "We can charge some premium because of quality and speed, but we have to be pretty close for builders to take a risk."
Opportunities: Improvements in the technology used to build frames for homes has come a long way, which is creating opportunities for companies like Simple Homes. Schultz points to FirstSource's $110 million acquisition of Raney Components and Raney Construction, a Florida-based vertically integrated manufacturer and installer of wall panels, roof trusses, roof decking and other building materials. "The technology has just changed a lot, and the ship is beginning to move to where it's not just a niche thing anymore, and the big money is beginning to believe in offsite construction."
Needs: Simple Homes, like the entire building industry, needs for the economy to keep humming along. "The economy is cyclical, but homebuilding tends to lead recessions, which is kind of strange that we're in a recession now, and we're seeing a robust, durable housing market," says Schultz.