2. Table of Contents
Intermodal Container Repositioning................................................................1
Cycle of Container Handling .............................................................................3
Factory-built Housing: Modular..........................................................................5
Housing Demand: Domestic & International ............................................. 11
Alternative Use for Intermodal Containers: Habitats............................... 15
Create the Prototype........................................................................................ 18
A Sea of Boxes..................................................................................................... 19
Housing the Earth’s People.............................................................................. 20
Building the Homes of the 21st Century in Factories ................................. 22
Affordability.......................................................................................................... 23
Building Systems .................................................................................................. 23
Containers ............................................................................................................ 24
Demand................................................................................................................ 24
Design .................................................................................................................... 25
Annualized Estimates............................................................................................1
Market Potential Indicators for Emerging Markets – 2004..........................2
2
3. Chapter
1
Background
Intermodal Container Repositioning
It is estimated that the global container population is approaching 16m TEU,
with a projected rate of growth of 8.5% per year for the next 10 years, and
there are approximately 2.5+m TEU empty boxes currently sitting idle in yards
and depots around the world.
In the eyes of port operators, shippers and carries, the number of empty boxes sitting at the
terminal should ideally be nil or very few. Given the fact that empty boxes have to go
somewhere, storage and repair depots represent an essential ingredient in containerization.
Storing containers is land-intensive, suffers from poor environmental credentials in terms of
unsightly piles of containers, noise and road vehicle traffic and it never is a business place with
high levels of profitability. As ports have expanded and residential areas behind the ports
have gobbled up more land for housing, storing empty containers is becoming an
increasingly serious problem all around the world, requiring special attention.
According to a New Jersey Department of Environmental Protection study of Brownfields,
“Container mountains” have become a prominent feature of the port district skyline. These
are the stacks of hundreds of empty containers, up to seven high, which have been created
on large swaths of land near the port. This study estimates that 400 acres are now devoted to
long-term storage of containers.
Terminal operators have contracted with third parties to move the empties from the terminal
areas to offsite storage locations. The practice has provoked opposition from communities,
which find themselves home to huge, ugly stacks of metal that dominate the landscape and
fill properties that otherwise might be redeveloped for more productive uses. Not surprisingly,
the mountains have strengthened local opposition to any and all freight related
development, which officials fear will only attract more trucks and more containers storage. In
the case of new Jersey, the NJDEP project team found evidence that the continuing build up
of empty containers at the port was indeed crowding out other types of development.
Because of the growing demand for land, container companies can offer property owners
an immediate revenue stream, leaving the owners free to sell or redevelop their properties at
a future date if more lucrative offers arise.
4. This container storage leaves the land undeveloped for higher economic uses that would
benefit the local community and region. For instance, one property owner was offered $3,000
per acre per month for a 10-year lease on 13 acres. The site is in a prime location where a
developer has offered to build a 330,000- square-foot warehouse, pending environmental
clearance to proceed. For the landowner, a 10-year revenue stream is an attractive
proposition compared to continuing to deal with the onerous requirements of site clean up.
However, it means that needed redevelopment of properties is being stymied, removing the
potential for jobs and tax ratables. It also has made the entire port districts less attractive to
some developers who are wary of having such mountains as long-term neighbors. While some
container storage in and around ports is inevitable, the current levels of storage appears
harmful to prospects for realizing and sustaining increased trade.
The current global imbalance of trade is reflected by the following charts:
Source: UNCTAD, Review of Maritime Transport.
Containerized Cargo Flows along Major Trade Routes, 2000-2003 (in millions of TEUs)
Container flows are quite representative of global trade imbalances. For instance there are 2.5
times as much containers moving from Asia to the United States (10.2 million TEUs in 2003) than
there are from the United States to Asia
2
5. In 1,000 TEU’s, Source: UNCTAD, Review of Maritime Transport,
US Containerized Trade with Asia, 1996-2003
The trade balance of the United States with several countries of the Pacific is chronically
imbalanced, notably with China. This trend has implications on the movements of containers as
well as on transport costs. As of 2003, the ratio was 2.48 TEUs moving east for each TEU moving west
(this figure was 1.19 to 1 in 1996 and 1.73 in 2000). The Asian crisis exacerbated imbalances in
transpacific containerized shipping, mostly due to currency fluctuations. In addition, the costs of
moving a container from East Asia to the United States have been reduced by 50% during the
1990s, but due to trade imbalances Asian exporters pay on average 50% more in container
shipping costs than their American counterparts.
Cycle of Container Handling
Empty container trips occur for various reasons, including conditions of business agreements
between shippers/consignees and the ocean carriers (who are generally the owner or
supplier of shipping containers) that require all containers to be picked up and returned to
container yards (CY) at the carrier’s terminal, regardless of whether they are loaded or
empty. Basically, for inbound and outbound cargo, loaded containers are picked up by
trucking companies from the carrier’s terminal and are delivered to the consignee for
unloading.
They are then returned to the carrier’s terminal, usually by the same trucking company. The
same practice is in place for outbound cargo. Trucking companies pick up empty containers
required by an exporter from a carrier’s terminal and deliver these empty containers to the
exporter for loading. After a container has been loaded, a trucking company will transport
the loaded container to the carrier’s terminal where it will be stacked at the pier prior to
loading on to a container ship. It is clear that, in the case of both export and import cargo, at
least two-thirds of the required truck trips involve empty container movements, either for
empty pickup or empty return.
For port operators, empty container problems will worsen as terminal land availability grows
scarce. Empty containers are often allowed a longer dwell time at marine terminals
(anywhere from 14 to 50 days), and the current practice of local terminal operators is to store
containers, especially imports, on a wheeled chassis instead of in grounded stacks of
containers, as is the common practice of terminals in Asia and Europe.
3
6. According to the Gateway Cities study (Ports of Long Beach and Los Angeles
region), “empty containers move back and forth because, at present, there is
no alternative.”
The current practice—the manner in which empty containers are distributed and re-
located—has developed over the past few decades along with the growth of international
trade and containerization, and as an integral part of a competitive market environment that
has encouraged ocean carriers to search for all possible solutions to reduce such non-
revenue generating activities as repositioning empty containers.
The reuse of empty containers for local export is considered to be a potential solution for
rationalizing the movement of empty containers and thereby reducing unnecessary empty
trips. Reuse of empty containers is the direct reuse of import empty containers for local export
cargo without an intermediate return of the empty to the marine terminal.
However, the current practice that requires all empty import containers to return to marine
terminals whether empty or loaded is inefficient. There are number of practical reasons for this
practice. Firstly, all carriers have their own container yard located at the terminal, making it
impractical for them to duplicate operating costs for facilities and personnel at inland
container depots.
Building more inland depots involves greater investments in capital and operating funds, and
additionally, it creates a more complicated system for controlling their inventory operation.
Secondly, except for leased containers, which can be off-hired in the local region when not
needed, to keep an adequate supply of containers for their operations worldwide, the same
number of containers brought into the U.S. must be relocated back to Asia, regardless of their
being empty or loaded.
Due to the relative lack of local export cargo, most import containers are shipped back
empty. Thus, it is better off for carriers to have these containers returned to marine terminals for
their earliest possible repositioning to the area of relative shortage. On the other hand, with
leased containers, there are number of designated locations established by container leasing
companies to receive off-hired containers. In current practice, off-hired empty container
movements are often more flexible than those of carrier-owned empty containers.
4
7. Factory-built Housing: Modular
By 2010, home design and construction is efficient, predictable, and
controllable with a median cycle time of 20 working days from
groundbreaking to occupancy with resulting cost savings that make
homeownership available to 90 percent of the population.
This will be achieved through improving the whole house design and the
manner in which a house is constructed using new and innovative products,
systems, and processes.
ABOUT THE MANUFACTURED HOME INDUSTRY
New homes can be and often are built partly or almost entirely in factories rather than on site.
Factory construction offers many opportunities for economizing and increasing efficiency in
the production process modeled after experience gained in other industrialized sectors of the
economy.
Production of new homes in a factory differs in many important ways from construction of
homes on site, and general opportunities for efficiency exist in this centralized, controlled
environment compared to construction on scattered sites. For example, factories built in low-
cost areas where prevailing wage rates are lower can achieve a competitive advantage by
selling finished products into markets where the wage rates for similar work performed on site
would be much higher.
These savings are attractive to the extent they outweigh the costs of transportation and
installation that are unique to factory-built housing. In addition, capital investment for plant
and specialized equipment used in assembly-line operations shifts the mix of labor and capital
inputs and raises labor productivity. Unskilled, less expensive labor can be used more
effectively when production takes place on an assembly line and can be organized into
simple, repetitive operations. Workers in the plant are generally employees of the firm, not
subcontractors, and as such can be scheduled, managed, trained and deployed by a single
authority in the interests of productivity and efficiency.
These factors, which characterize both HUD-Code and modular home production, differ
greatly from the institutional contracting and subcontracting arrangements that characterize
conventional site-built homes and home building firms. Industry sources report that the labor
content of HUD-Code homes typically ranges from 8 - 12%of total cost, compared to total
labor costs for site-built homes which have been estimated to constitute 40% or more of total
cost. Of course, to some degree a smaller labor share will be offset by higher costs of capital
for any firm with investment in fixed production facilities, but the successes of industrialization
throughout the economy are powerful evidence of the opportunities to reduce production
cost by substituting capital for labor.
5
8. Modular Home Manufacturers (7%)
There are about 200 modular home manufacturers that make assembled sections of housing
inside factories. Most modular units are made in complete, box like sections, and multiple-
section units and stack-on units are common. Modulars are the strongest of all frame homes
built, and are 95% complete when they leave the factory. They are sold direct or through
local builders or builder/dealers. During 2004 about 206,000 modular homes and apartments
were sold.
HUD-Code (Mobile) Home (5%)
Ever since the passage in 1976 of the U. S. Department of Housing & Urban Development
Manufactured Home Construction & Safety Standards (HUD-Code), exterior frame
construction of mobile units has been on par with site-built homes, and HUD-Code homes are
now generally safer dwellings. HUD-Code homes are made by approximately 90 companies
operating about 350 factories using techniques similar to modular methods but with generally
lighter construction and always with a metal chassis as part of the floor system. It is believed
that double-section HUD-Code homes which look like site-built homes will account for most
low-cost housing in the future. HUD-Code homes are sold through dealers on display lots or
from model homes in subdivisions. In 2004 about 140,000 HUD-Code homes were sold, and
over half of those were double or multi-section units.
Production Builders (44%)
These companies usually build single-family homes and low-rise apartment buildings in
subdivisions near major metropolitan centers. More than 95% of the nation's 7,000 large
production builders use factory-fabricated roof trusses. Use of other factory-made
components, such as floor trusses and wall panels, is growing rapidly because of soaring site
labor and construction loan costs. Some of the biggest production builders operate their own
component factories. However, all production builders sell their homes directly to end buyers
rather than through builder/dealer networks, which distinguishes them from panelized home
manufacturers. In 2004, production builders sold about 1.254 million units.
Panelized Home Manufacturers (44%)
The panelized home manufacturers are the biggest and most diverse segment of U.S.
housing. They include: 1) Hundreds of conventional panelizers who sell their packaged homes
through builders and builder-dealers; 2) Log home builders, over 200 strong, who sell direct or
through dealers; 3) The mass merchandiser chains and local lumber yards and home centers
who perform all functions of a package home producer; 4) Producers of dome homes and
other alternative systems including light-gage steel, lightweight concrete, foam-core panels,
foam blocks--plus component firms who cross over into package homes. In 2001 the
estimated 3,500 panelizers collectively built about 1,254,000 units, equaling the production
builders.
Special Unit Manufacturers
Special unit manufacturers are in-plant builders of commercial structures of all types. There are
about 170 of these companies who build an average of about 1,665 structures per year. They
sell direct or through dealers and also lease their units. Their output, usually built to more
stringent commercial building codes, includes classrooms, offices, banks, hospitals,
construction offices, equipment shelters, restaurants, kiosks, jails, airport terminals, strip
shopping centers, and dozens of other commercial buildings. This industry is growing fast as
6
9. owners and investors discover the speed, cost and quality advantages of specifying modular
commercial structures. It must be remembered that all the previously mentioned housing
producers also build commercial buildings. Total output of commercial structures by both in-
plant special unit and housing companies was estimated at 283,000 units in 2004. GE Modular
Space is a major player in the sector.
Mobile/Modular/Panelized Dealers
Builders and dealers for HUD-Code (mobile) homes, modular homes and panelized homes
account for sales of 56% of all housing. Sometimes called "builder-dealers" for modular and
panelized homes, they may sell for one or several manufacturers. Normally they sell homes
only in a given territory, and it is their responsibility to prepare the site, do foundation and utility
work, and supervise completion work on the homes after delivery. Most HUD-Code home
dealers sell units from display lots, mobile home communities or both. A growing trend among
HUD-Code home dealers is to sell models in conventional real estate subdivisions.
THIS INDUSTRY IS GROWING SWIFTLY. From the late 1930s when modern industrialized housing
companies started emerging in New England and the Midwest, HUD-Code, modular and
panelized home companies have grown to where they now produce 56% of all single-family
homes and low-rise apartments. This does not count the industrialization of site-built homes
where 95% use factory made roof trusses, and a rapidly growing number use pre-hung doors,
floor trusses, wall panels and other components.
WHY THE FAST GROWTH? Faster construction time, lower costs and better quality. While "stick
builders" may need from six to 12 months or even more to build a house at a job site,
industrialized builders need only one to three months to finish a componentized home, six to
eight WEEKS to finish a panelized package home, and only one to three weeks to finish a
double- section HUD-Code or modular home! Speed means fewer material cost increases
and less or even no cost for construction loan money. Precision factory fabrication methods
also deliver vastly better quality in construction.
WHO BUYS THE PRODUCTS? Home builders or factory fabricators themselves. Independent
research shows flooring brands are specified by 90% of production builders, 83% of panelizers,
94% of modular manufacturers and 80% of HUD-Code manufacturers. Siding is specified by
90% of production builders, 76% of panelizers, 91% of modular manufacturers, and 92% of
HUD-Code manufacturers. These figures are representative for ALL products going into
housing today.
MODULAR BUILDING SYSTEM
A modular home is the culmination of one type of building system. Modular homes actually
begin as components; designed, engineered and assembled in the controlled environment.
It is when these components come together on a building site and the final finish is completed
by a builder, that the components become a home.
Modular units are usually placed on conventional foundations, either crawlspaces or full
basements, and are most commonly sold to builders representing customers with land or to
third-party builders who own scattered lots. The builders are typically responsible for
excavation, final grading, construction of a suitable foundation, and connection of utilities.
Consequently, modular builders are subject to the same local regulation in these areas as site-
builders.
7
10. Efficiency begins with modern factory assembly line techniques. A house travels to
workstations, with all the building trades represented. Work is never delayed by weather,
subcontractor no-shows or missing material. Quality engineering and modular construction
techniques significantly increase the energy efficiency of a modular home.
Modular producers either provide a full line of services at the site as a so-called “turnkey
operation,” or only provide a “rough-set” of site services. In the rough-set, the modular
producer provides a crane and its rough-set crew removes the units or boxes from the trailer,
places them on the foundation, and seals the home so that it is weather-tight, while a builder
does the finishing and the remaining site work (e.g., porch, deck, garage and landscaping).
The turnkey producer, on the other hand, not only sets the unit but also does the finishing
activities at the site.
Modular buildings that have already been inspected in-plant and certified according to state
regulations and procedures are usually issued permits for site work by local enforcement
agencies after local review of floor plans, elevations, plans for site-built construction and
installation, and installation instructions. Local or state code officials defer to in-plant
inspections and approvals but are responsible for inspecting work performed on site to
determine whether it is in compliance with the applicable regulations.
MODULAR COSTS
The calculated sales price of the modular home is approximately 90% of that for the site-built
home, primarily due to lower structure costs from prefabrication. The efficiencies of factory
production are counterbalanced by the desire for modular producers to do more
customizations to compete in a more upscale market, and the necessity to meet the
requirements of varied local codes.
Construction costs include labor and materials for both the structure and the foundation. For
site-built homes, all labor and materials are consumed on site. For factory-built homes, most
labor and materials are consumed in the factory. Modular homes are 85 – 95% complete
when they leave the factory while manufactured homes are approximately 98% complete.
Factory-incurred overhead costs are embedded in the structure costs or invoice price that
the modular builder or manufactured home retailer pays to the producer.
Profitability for modulars is slightly above the rate for site-built homes, consistent with the idea
that only some of the lower production cost will flow through into selling prices. To some
degree modular producers may set prices to “meet the competition” and translate lower
production cost into higher margins. Finally, inasmuch as profit represents economic return on
invested capital, persistent differences in profitability across sectors of the industry can be
expected to the degree that capitalization requirements and capital/output ratios vary
between sectors.
All builders incur financing costs, but they are lower for modular and manufactured homes
compared with site-built homes. Site-built homes can take three months or more to build and
the builder’s carrying costs during this period can be substantial. Manufactured home
producers, on the other hand, typically build units on direct order from the retailer in about
five days. As a result, the financing cost of operation and inventory is minimal for the
producer, and much of the cost of inventory is shifted to the retailer. The cost of the retailer
inventory of models used to sell homes is financed by banks through “floor financing,”
typically at 2% above prime, which is less expensive than construction loan financing for site
builders.
8
11. Modular manufacturers are in a similar position to that of manufactured home producers, but
their period of construction is slightly longer and more complex due to the amount of
customization and possible variation in local codes. Modular builders need fewer draws from
the bank than site builders and are able to build a home over a shorter finance period,
making it less expensive to borrow money for financing construction.
MODULAR MULTIFAMILY BUILDINGS
Although some might think that factory-built housing applies only to single-family homes, a
number of builders are realizing time, and sometimes cost, savings with modular apartments.
Modular multiple dwellings are available as customized buildings that look like site-built
structures, assembled in a factory while earthwork, foundations, and utilities are prepared
onsite. The scale and repetition that characterizes many multifamily buildings lends itself to an
automated solution, especially in areas located near the factories. The controlled indoor
environment and stable, experienced labor are conducive to assemblies with consistent
quality, often at reasonable cost. Workers familiar with their product can more easily integrate
unfamiliar materials and techniques with other trades working side-by-side. Also, the rapid
building cycle of modular construction can reduce or eliminate jobsite and theft.
Modular multiple dwellings consist of box-like sections stacked vertically and horizontally with
a crane. Each box is approximately 14' wide by 50' long (this varies considerably), one-story
high, and includes all partitions between a fully-framed floor and ceiling. Although companies
accommodate various configurations, most are orders for side-by-side duplexes in two-story
attached townhouses. Other arrangements include townhouse flats, duplexes over flats, and
"quads" with two flats over two flats. Less common are apartment buildings with shared
entrance halls.
The numbers of modular multi-housing units, while still small, are growing. Multifamily projects
accounted for 5 percent of the estimated 43,000 modular units shipped in 2004, said Thayer
Long, assistant vice president of the Manufactured Housing Institute's National Modular
Council. This market share has remained steady for several years, but its stability belies real
growth in the overall number of units being made: 37,800 modular units were shipped in 2003,
up from 35,000 in 2002.
PROSPECTS FOR MODULAR HOUSING
The nascent modular home building industry has the opportunity to garner an increasingly
larger share of new housing both domestically and internationally over the next several
decades.
The principal drivers will be the application and improvement of industrialization concepts
that have been successfully used in other industries to the process of home building.
A study performed by Virginia Tech for HUD, “Industrializing the Residential Construction
Site” (O’Brien, Wakefield, and Beliveau, July 2000), provides an excellent overview of
what is going on in the home building industry in the United States and abroad, as well as
manufacturing concepts successfully used in other industries. Industrialization concepts
that have worked in other industries and that currently may be in use by production
builders need to be considered.
9
12. Examples include:
Just-in-time (JIT) manufacturing that includes effective supply chain management.
Although the supply chain management that works well for GM is not applicable to
individual small builders, several of those builders may form alliances to gain
leverage. (Supply chain management is addressed in the Information Technology
Roadmap.)
Flexible, agile, lean production systems.
Concurrent engineering and design for manufacturers that use various techniques
and processes to enhance the manufacturability of the product.
Manufacturing requirements planning (MRP), manufacturing resource planning (MRP
II), and enterprise resource planning systems (ERP), which are processes that are
enabled by information technology.
Concurrent design, where communication among designers and the producers
(construction foremen, site supervisors, trade contractors) can significantly improve
the efficiency of production. Communication up the chain, from the people at the
job site back to the designers and sales force, typically is inadequate at best.
Time and space-based scheduling that facilitates keeping track of who is where,
doing what, and when. This type of scheduling is especially appropriate for
construction activities, as crews move among sites.
10
13. Housing Demand: Domestic & International
“Affirm that, in the interest of affordable housing for the poor, it is necessary to
promote cooperation among countries in order to popularise the use of
adequate low-cost and sustainable building materials and appropriate
technology for the construction of adequate low-cost housing and services
within the reach of the poor.”
The UN Declaration on Cities and Other Human Settlements in the
New Millennium
DOMESTIC
The Commerce Department said that construction was started on new homes in February at
an annualized rate of 2.2 million units. That was 15.8% higher than a year earlier and the fastest
pace of residential construction starts in 21 years. Starts for single-family homes, the largest
component of residential housing, reached an annual rate of 1.78 million units, a record. Even
though many economists believe these numbers will ease in the months ahead as inventories
of unsold homes start to pick up, it still is likely that 2005 could be the biggest year for home
construction in decades.
Why does the U.S. need so much new housing?
The simple answer, of course is, rising demand. But what is behind the demand is worth
considering. First and foremost, the demand for housing reflects two key demographic trends
-- new household formations and immigration. Economists at Harvard University's Joint Center
for Housing Studies believe that household formations in the current decade will outpace
formations during the 1990s, when they estimate that 12.5 million households were formed.
Growth has been due in part to many Gen-Xers establishing households at younger ages
than even their baby-boomer parents did. Over the next 10 years, the Joint Center
estimates that between 13.4 million and 14.5 million new households will be formed,
depending on the level of immigration.
The U.S. Census Bureau estimates that immigration is running at about 850,000 a year, but
the Joint Center says the actual number is between 1.2 million and 1.3 million. If
immigration comes in on the high side, household formations will begin to approach levels
last seen "when the baby boomers stormed into adulthood in the 1970s," says Eric Belsky,
the center's executive director.
Rising wealth is a second factor behind strong housing demand. As baby boomers come
into their peak wealth years, a good percentage are buying second homes. According
to a recent report by the National Association of Realtors, 2.82 million second homes were
sold in 2004, up sharply from the previous year. Exactly how many of those homes were
newly constructed is hard to know, although estimates range from 5% to 15%.
11
14. Current Population Survey and the Housing Vacancy Survey
There's another, less-discussed factor fueling demand for new construction: The rapid
replacement of unusable and undesirable homes. According to housing-industry
economists, the U.S. housing stock is in the process of being rebuilt, as aging stock is torn
down to make room for newer stock.
The average age of an American home is about 33 years -- older than any previous time
in U.S. history. The number of homes older than 50 years rose to 25.8 million in 2000 from
about 18.8 million in 1990. The average age of the U.S. housing stock swayed between 23
and 27 years from 1940 to 1990, then started a persistent rise. As the housing stock ages,
new construction starts "will be permanently elevated because we need to replace
housing stock which is wearing out," says Fannie Mae economist David Berson.
The Census Bureau is forecasting net removals will total about 450,000 annually between
now and 2013.
12
15. INTERNATIONAL
It is projected that the world population will rise from 5.7 billion in 1995 to 8.9 billion in 2050,
growing at the rate of 1.3 % per annum in the period 1995-2000 to 0.3 % per annum in the
period 2045-2050. The assumption is that there will be a massive fertility decline in the
majority of countries, a scenario expected to produce ageing populations, i.e.
populations in which the proportion of children is declining and that of older persons is
increasing.
More than one billion of the world’s city residents live in inadequate housing, mostly in the
sprawling slums and squatter settlements in developing countries. Such areas are regarded
as one of the most visible expressions of human poverty. The lack of adequate housing in
the cities of developing countries is one of the most pressing problems of the 21st Century,
and the cost of providing adequate shelter for all is immense. Yet, the cost of doing nothing
may be even greater, for the new urban slums are potential breeding places for social and
political unrest. The global data on housing adequacy is rather limited, however, and what
is considered adequate in one part of the world - or at one point of time - may not be
regarded so elsewhere.
Almost two billion people currently live in urban regions of the developing world. This
figure is projected to double over the next 30 years, at which time urban dwellers will
account for nearly half the global population1. Moreover, most of these new urban
dwellers are likely to be poor – resulting in a phenomenon termed as the ‘urbanization
of poverty’. Slums are a physical and spatial manifestation of increasing urban poverty
and intra-city inequality. However, slums do not accommodate all of the urban poor,
nor are all slum dwellers always poor.
The global housing stock in cities
amounts to 700-720 million units of all
types. It is estimated that 20 to 40
million urban households are
homeless. A significant number of
those housed, however, cannot be
regarded as living in adequate
shelter. Worldwide, 18% of all urban
housing units (some 125 million units)
are non-permanent structures, and
25% (175 million units) do not
conform to building regulations. Most
deficient housing units are found in
the cities of developing countries,
with more than half of all less-than-
adequate housing units located in
the Asia and Pacific region.
The number of people living in
inadequate shelter may be as high
as 1.3 billion world-wide because
most cannot afford otherwise.
Acute shortages of adequate
housing exacerbates the situation,
as low supply tends to increase prices. Some 40-50% of urban residents in developing
countries own heir dwellings, and another 20-30 % are legal tenants.
13
16. Many cities also have large squatter settlements, where people rent rooms or whole units. In
industrialized countries, higher prevalence of rental housing provides for a greater variety of
demand and internal mobility. Nevertheless, some towns in the South have more than 70%
of their housing stock as rental housing (such as in Kisumu, Kenya; Jinja, Uganda; or
Conakry, Guinea).
Generally, a housing structure is considered durable when certain strong building
materials are used for roof, walls and floor. Even though some houses may be built
with materials classified as durable, the dwellers may still not enjoy adequate
protection against weather and climate due to the overall state of a dwelling.
Alternatively, a material may not look durable, in the modern sense, but is, in the
traditional sense, when combined with skills of repair. Such cases are vernacular
housing made of natural materials in villages, maintained by its residents annually.
Durability of building materials is to a very large extent subject to local conditions as
well as to local construction and maintenance traditions and skills. Which materials
are considered durable under local conditions has to be determined by local
experts. This is also true for the common problem that dwellings in the semi-urban
outskirts of cities of developing countries often follow rural construction patterns by
using materials, which can be considered non-durable under urban conditions. In
addition, compliance with local regulations and the quality of the location form part
of the definition. These two indicators cannot be easily observed as they require
specific knowledge about the legal condition and the land use plan as well as skills to
determine hazardous areas.
Developing countries have the advantage of not being tied to heavy investments in
technologies of the past. Therefore, instead of resting on the limited productivity of
craftsmanship or before yielding to the seduction of impulsive technology transfers, they
are invited to consider a full range of prospective options offered by “Reproduction”:
research and development of innovative processes truly capable of simplifying the
production, therefore avoiding long sequential operations of craftsmanship nature.
Options generated through a double matrix between the available resources (materials
and processes) and the basic strategies of industrialized building systems (Site Assembled
Kits of Parts, Factory-Made Modules and Hybrids).
(Sourced in part: United Nations Human Settlements Programme)
14
17. Chapter
2
Proposal
Alternative Use for Intermodal Containers: Habitats
Even if the estimates of nearly 9% growth per year in empty containers were halved, global
unfilled containers will approach a glut of 5,000,000 by 2010. While any number of methods
will be employed to modulate excess supply, as long as the U.S. is faced with a trade deficit
with Asia, empty containers will remain a reality. Given that inevitability, alternative
redeployment of empty containers should be considered.
The use of intermodal containers as habitats is one way of addressing the issues of an ever
growing supply of empty containers, as well as, the ever growing demand for housing, both
domestically and internationally.
Three rather distinct approaches proposed here, of using containers as housing are
representations of design work by LOT-EK Architects from New York City (pronounced LOW-
tech – http://www.lot-ek.com/):
1. Domestic
Projected Units Average
Market Product (initial) Wholesale Price*
Individual Home Owner Container Home Kit 200 $225,000
Live-Work Space Container Home System 50 $100,000/unit
Student Housing Container Home System 50 $79,000/unit
DOD Military Housing Container Home Kit 100 $110,00
a. Market Rate Homes – the following illustrations of Container Home Kits (CHK) is
to answer a request for homes with a particular aesthetic appeal. The CHK will
be available using 2–8 – 40’ containers either a in a compact or loft
configuration. The structures can be arranged as townhouses or as one-off
single family units. These homes can be marketed to individual home-owners,
to builder/contractors, or to the Department of Defense (DoD’s Housing
Privatization program)
b. Multiple Units – the Container Housing System (CHS) uses multiple containers
for a variety of apartment building configurations. These buildings will be
marketed to builder/contractors, with a particular emphasis on Live-Work
Space and Student Housing.
* price estimates of the basic dwelling, excluding land, site prep, and transport
15
18. Container Home Kit
The CHK, Container Home Kit,
combines multiple shipping
containers to build affordable
homes. Conceived as a kit of
parts, the basic unit, a 40-foot-
long shipping container, is
transformed into an expandable
module. The container functions
as both the structure and shell for
the habitat.
Sections of its corrugated metal walls can be cut out without compromising its structural
integrity. The resulting openings can be used to join containers side by side to make up
larger spaces, or for vertical connections between them.
The Container Home Kit is available in two lines: CHK compact and CHK loft, in
configurations that range from 2 to 4 bedrooms using 4 to 8 containers. The houses are
positioned on site on 2 parallel strips of concrete that are also used for pedestrian as well
as car access through the lot. The houses built with this system are recyclable themselves
as they can be disassembled and reassembled elsewhere.
Container Housing System
The CHS, Container Housing
System, is designed to exploit
the containers natural stack-
ability, stretched geometry,
and industrial/mechanical
detail. The apartment units
are placed side by side in two
parallel lines, along the front
and back of the building,
leaving a gap in the middle,
which becomes a circulation
hallway on each floor. The
containers with pierced floors
and ceilings stack vertically to
generate shafts for stairwells
and mechanicals.
In both cases, the interior finishes of the CHK or CHS will not betray the fact that these are
homes built from retired shipping containers.
16
19. The CHK and CHS are the brainchildren of LOT-EK Architects, from NYC, which has worked
in both the design and application of this technology for many years. The partners, Giuseppe
Lignano and Ada Tolla, have adopted the container as a design signature, using it along with
oil tanks, airplane fuselages and other industrial castoffs. In fact, LOT-EK is the most prominent
of an emerging school of architects using inexpensive recycled containers as temporary or
permanent homes, offices and galleries.
2. International
Projected Units Average
Market Product (initial) Wholesale Price*
Shelter (developing nations) Container Home Kit 1250 $5,120
Multifamily Apartments Container Home 150 $8,000/unit
System
a. Shelter Habitats – a compact version of Container Home Kit (CHK), at
approximately 59m (640 sq. ft.) is a suitable dwelling for either transitional or
permanent housing. It would be targeted to nations looking to improve the
problems of substandard housing.
b. Multiple Units – in the developing world, including Eastern Europe, the
Container Housing System (CHS) multi-container configurations, will marketed
to apartment building developer/investors, again in those countries making a
commitment to alleviate substandard housing.
* price estimates of the basic dwelling, excluding land, site prep, and transport
17
20. Create the Prototype
LOT-EK is currently seeking financial and in-kind participation from General Electric for the
development and production of a prototype of the Container Home Kit (CHK), 3X3 Loft
design. The firm has a thorough and well-positioned architectural design concept (Step1 in
the DFMA process below).
Engineering, developing, and testing a prototype house using the standard structural and
mechanical interfaces described previously would be the next phase of work. This would
include testing in the field and evaluation of the factory manufacturing, field assembly,
durability, and quality of the homes.
LOT-EK estimates the cost of the prototype to be $250,000, with its completion between 90 –
120 days. The expense and execution can be absorbed or mitigated by exploiting GE’s cross-
divisional access to material, including ISO containers, its engineering capabilities, as well as,
its supply chain resources.
Design concept
Suggestions for
Designs for assembly simplification of
product structure
Suggestions for more
Selection of materials
economic materials
and processes and
and processes
early cost estimates
Best engineering
concept
Detail design for
Engineer for
minimum
manufacture
manufacturing costs
Prototype
Typical steps in Design For
Manufacturing and Assembly
(DFMA) process
Production
18
21. Chapter
3
Implications
A Sea of Boxes
The problem of excess containers needs to be addressed from several different vantage points.
One of many solutions for disposal is to use containers as structural building blocks. The efficiency
with which intermodal containers are stacked, racked and transported can easily be transferred
to their use as the shell and structure for an array of buildings, including housing.
The following scene is being replicated around the world, as local resources, and that of shipping
companies are being strained by keeping up with a flood of containers.
The NY/NJ port has seven terminals with more than 1,200 acres devoted to container
storage. Empty boxes are flooding West Coast ports with very few exports to fill them. The
turmoil generated by the trade imbalance has spread beyond the docks and into offices
around the Portland area.
In Australia, the Nationwide News Pty Limited, Weekly Times, reported in January 2003
that, “At Sydney, there has been nearly a 50% increase in empty containers in the past six
months and that has been replicated in other ports.” Shipping chief executive in Australia
explained the reason behind this stacking, as the drought that beat the volume of
agricultural products being exported. He added that the containers full of imports still
come in at the same rate while the empties keep piling up on wharves of the port due to
the insufficient exports that take up. It was found that sending empty containers back
overseas was far expensive. It costs $300 to $650 to return a container to overseas markets,
making it "easy to imagine the cost impact of having to send back 200,000 containers
over the next year."
19
22. Housing the Earth’s People
Construction Growth by Region
(Annual percentage changes) According to Global Insight International
1998-2003 2003-2008 construction is expected to grow by nearly 3%
Asia -0.8 3.3
through 2008.
Non-Japan Asia 3.2 5.1
Eastern Europe 2.1 3.5 With ongoing construction growth projected in
Asia, Eastern Europe, the Middle East & Africa, and
Middle East & Africa 0.0 3.2
with GE expecting to receive as much as 60% of its
North America 3.8 2.7
revenue growth from emerging markets, these are
South America -4.3 2.9 regions where GE can realize scalablity within
Western Europe 1.3 1.8 opportunitic segments of the construction industry.
WORLD TOTAL 1.2 2.6
Source: Global Insight Inc. Further analysis points to urban development as a
specific area for growth, given the current
projections for population migration over the next 20 years. The strains on poor and
substandard infrastructures and its associated problems will create an incredible demand for
scarce resources, thus creating the circumstances leading to further worldwide instability.
Urban and rural development 1950-2030
For Less Developed regions and More Developed regions
Source: Population Div ision, UN: World Population Prospects: The 2004 Revision and World Urbanization
Prospects: The 2003 Revision.
Note: More developed regions; they comprise all regions of Europe plus Northern America, Australia/New
Zealand and Japan. Less developed regions; they comprise all regions of Africa, Asia (excluding Japan), Latin
America and the Caribbean plus Melanesia, Micronesia and Polynesia.
20
23. More than "one billion human beings still lack adequate shelter and are living in
unacceptable conditions of poverty" (Habitat Agenda, paragraph 53). The vast majority of
live in developing countries and -- as a result of the urbanization of poverty -- an increasing
number live in urban areas. Sprawling informal settlements and slums of developing countries
are fast becoming the most visual manifestations of poverty itself. According to UN-HABITAT,
some 924 million people were living in slums and informal settlements by 2001.
The objective of the Habitat Agenda, shelter policy is to create frameworks for efficient and
effective shelter delivery systems, while emphasizing "the increased use and maintenance of
existing stock through ownership, rental and other tenure options, responding to the diversity
of needs."
While the Habitat Agenda stresses that housing policies should pay attention to the role of the
informal sector to housing policies, this sector lacks the wherewithal to mobilize the resources,
both fiscal and technical, in order to affect fundamental change in housing these
populations.
Fundamental change is however possible through direct investments in construction projects
for both housing and supportive infrastructure for the foreseeable future. In fact, Global Insight
projects 2% and 3%, respectively in worldwide construction growth (U.S. dollars) between now
and 2013, again with the bulk of that growth coming from emerging markets. (see Market
Potential Indicators for Emerging Markets – 2004)
According to the U.S. Census Department, the housing construction industry generated in
excess of $232 billion in sales.
Addressing the domestic housing sector with a focus on market niches, the use of container-
based, modular home design, and advanced technological building systems, will yield sizable
share of market over the near to mid-term.
The following is an estimate for annualized sales by market segment, and shows how a
modest number of units could quickly scale. These units represent a total of 54,300 TEU’s or the
equivalent of 2.2% of the 2.5 million estimated empty intermodal containers around the world.
$100
Millions
$50
$0
Single Liv e/Work Military Student Emerge/M Emerge/Sh
Units 200 50 100 50 150 12,500
Rev enues $45,000,000 $5,500,000 $11,000,000 $3,950,000 $1,200,000 $80,000,000
21
24. Building the Homes of the 21st Century in Factories
Housing can’t be built fast enough, using the current primary means of construction, to keep
up with worldwide demand.
Homes today are, for the most part, still being built in the same way they were in the 19th
century. The Partnership for Advancing Housing Technology (PATH), administered by the
Dept. of Housing and Urban Development (HUD) projects that factory-built housing, especially
modular with become the predominate way to construct housing, both single and multi-
family, accounting for as much as 90% within 20 years, as technology continues to improve.
The PATH Mission points in this direction:
Increase energy efficiency
Improve durability
Raise quality
Ensure labor safety
Minimize environmental impact
In order to achieve this, the currently ultra-
fragmented housing sector must look to
transfer the best business practices from
industrial manufacturing to construction.
One such innovation is the Whole House
Building System which is predicated on a
single on-site production facility utilizing
high capacity hoisting, non-sequential
building techniques and bulk material
handling in order to streamline
production.
Improvements in housing technology will likely be the only way to maintain supply to meet the
demands for new affordable homes, replace old structures, provide for disaster relief and
transitional habitats in sufficient numbers. There will be a few players that will be able to
deploy the resources, as well as have the economies of scale required to establish and
operate such factories on a global scale.
22
25. Chapter
4
Rationale
Here, we will answer the question, why this proposition is timely, viable and scalable?
Affordability
1) Modular housing is inherently less expensive then traditional stick-built housing, because
of the economies of scale, systems and standards, optimum value engineering (OVE),
etc. Savings with standard modular buildings can be offset with the travel and handling
of over-sized modular sections. However, with the proposed LOT-EK modular structures,
travel and handling are done in the same manner as any other intermodal containers.
2) The builder/contractor/developer of single family homes, being sold at market-rate, will
either be able to pass along the savings to the consumer or retain a higher margin
based on local market conditions.
3) Several base designs with a fairly limited package of upgrades will keep the domestic
product moderately priced.
4) The products targeted for emerging markets must be priced to compete with locally
derived, competitive housing. Use of local labor and locally sourced materials along with
the installation of manufactured housing systems will allow for this product to be volume
driven (even though market entry estimates are set a fairly low unit levels).
Building Systems
1) The adaptation and application of manufacturing processes to home building,
especially with modular dwellings will revolutionize the industry, by reducing waste,
meeting increasingly important green standards, managing labor, etc. And only those
players at the edge of innovation, as well as, with the capacity to scale-up operations
will emerge as market leaders.
2) Standardize the Module Footprint and Interfaces – The premise is to have only a few
basic module sizes, allow for some variations in appearance and configuration to
provide some of customization consumers want. Potential benefits of standardizing are:
Reduces the number of components
Allows for interchangeability of parts or components from a variety of
manufacturers
Reduces the onsite tasks to a rather simple and standardized assembly
Provides options, variety, and personalization
Simplifies the inspection and approval process as most of this is can be moved to
factories
23
26. 3) Stakeholders can work with the national code bodies and selected state and local
code offices to develop a streamlined approach to approvals and inspections. The goal
is to move as much of the inspection process as possible into the factory. For example,
modules manufactured under ISO 9000/14000 quality systems could be pre-approved or
certified so that building inspection of each individual trade is not required. One
inspector could handle sign-off on all systems assuming the certified modules were
properly interfaced. This would apply internationally as well, especially when using ISO
systems.
4) GE is well poised to be a leader in the industrialization of the home building process for
several very obvious reasons, namely:
Resources (knowledge based, human, fiscal, engineering)
Vision to see that emerging markets will represent the lion’s share of its
life-blood, and the commitment and dedication to pursue it.
Vertical and horizontal integration across divisions
Technological innovation
Containers
1) Empty containers are abundant, will become even more so and remain so as long as
the world maintains a trade imbalance with the leading export nations, who also are the
leading container suppliers.
2) Intermodal containers are by their nature durable, maneuverable, modifiable and
affordable, all of the elements that make them appropriate building blocks for housing.
3) Some ports in emerging markets may not have terminal yards that store a sufficient
supply of suitable empty containers. Container transportation costs can be mitigated by
using local labor for fabrication and construction.
4) With the emphasis on recycling, each container will be determined to be habitable and
imposing little or no environmental impact.
Demand
1) There is a nearly insatiable need, both domestically and internationally, for deliverable
housing that is affordable, durable, attractive, safe, and environmentally friendly. The
aggregate demand for quality housing throughout the world is in the millions of units.
2) Home building systems will allow for suppliers to keep up with demand by creating
housing in a highly efficient manner.
3) Given the changing dynamics of the workplace, Live/work Space is becoming an
alternative for many transitioning from the office, for artists and artisans, and for home-
based entrepreneurs.
4) Quality student housing is required by America’s academic institutions not only for
undergraduates, but also graduate students, faculty, administrators, support staff and
young alumni who need housing close to campus.
24
27. 5) The Department of Defense has a mandate to renovate and build new military housing
on nearly all of the bases throughout the country.
6) Not everyone will be suited for, or in a position to acquire a home, as such the
builder/contractor/developer of multifamily properties requires quality buildings for their
tenants.
Design
1) LOT-EK Architects have created a series of designs that will convert these steel boxes into
eminently livable space, thus mitigating concerns about whether a prospective home-
owner would find these designs aesthetically appealing, functional and affordable.
2) LOT-EK has designed a fairly wide variety of structures – container habitats are one of a
long list of buildings using large industrial cast-offs.
3) The adaptability of these boxes allows for configurations ranging from a simple, yet
elegant shelter to multi-unit apartment buildings that retain the same design elements
over greater dimensions.
4) The concept of designing for manufacturing efficiency has been applied successfully in
many industries for decades. The idea is to reduce the overall number of parts and the
number of different kinds of parts, and to use parts that are easy to assemble and install,
resulting in lower costs for materials and labor
25
28. Conclusion
The building of any business starts with a seed of an idea and a vision. Whether that vision can
be transformed into a profitable entity calls on the confluence of elements that first and
foremost answer the question, “is this doable?”
We believe that the proposition just laid out not only can be doable, but in fact, must be
doable for the following reasons:
The quality of life as we are accustom to in the developed world will be severely and
adversely affected if we do not get a handle on our levels of waste – millions of
empty and retired containers is a gross, untenable and ultimately unsustainable level
of waste.
Again, our quality of life will be even further constrained unless we, in the developed
world (in both the public and private sectors) are willing and able to re-orient the
plane of wealth distribution. We enjoy a high level of a quality of life, while the majority
of the world does not – this imbalance can only haunt us for generations, unless we
make a concerted effort to invest in improving those quality-of-life fundaments
presently enjoyed by a minority of the world’s population. Adequate shelter is one of
those fundaments. If for no other reason, our own self interest should be a primary
driver in this regard.
Americans will continue to require, into the foreseeable future, better and more
affordable housing in ever increasing numbers, as older stock is retired and the
demands for new development strain our abilities to deliver. Industrialized home
building systems are really the only method to meet this level of demand – quality,
quantity, durability, affordability and sensitivity (environmental).
It really boils down to these three key elements that will drive, what at a conservative
estimate, is a $146m business: create quality housing out of recycled and cast-off materials,
and use technology-driven systems to efficiently do so.
Our current plans call for prototyping as the first step to this process. We trust that GE/SeaCo,
as well as, GE Modular Space will intend to be collaborative partners with LOT-Ek and
ComLoc, Corp. in this initial step forward.
26
29. Annualized Estimates
(Year 1)
Empty
Containers Deployed Market Gross
(TEU's) (1) % Mkt. TEU's Unit Type Segment (2) TEU/Unit Unit Size Unit Cost (3) Cost /Unit Price/Unit (4) Unit Sales Revenues
2,500,000 sq. ft. meters sq. ft. meters
0.10% 2,400 CHK Single family 12 1,960 -- $91.84 $180,000 $225,000 200 $45,000,000
0.01% 300 CHS Live/Work 6 960 -- $91.67 $88,000 $110,000 50 $5,500,000
0.03% 800 CHK Military 8 1,280 -- $68.75 $88,000 $110,000 100 $11,000,000
0.01% 200 CHS Student 4 640 -- $98.75 $63,200 $79,000 50 $3,950,000
Emerging
0.02% 600 CHS Mkts./Multi 4 640 59 $10.00 $108.47 $6,400 $8,000 150 $1,200,000
Emerging
2.00% 50,000 CHK Mkts./Shelter 4 640 59 $8.00 $86.78 $5,120 $6,400 12,500 $80,000,000
Totals 2.17% 54,300 13,050 $146,650,000
$100
$80
Notes:
Millions
(1) Estimated # of global empty containers $60
(2) Single family homes represented here
are 3X3 Loft Units $40
(3) Estimated unit cost, a handle on actuals
$20
will be derived from prototyping
(4) Estimate of wholesale unit prices @ 25% gross margin $0
Emerging Emerging
Single family Live/Work Military Student
Mkts./Multi Mkts./Shelter
Units 200 50 100 50 150 12,500
Revenues $45,000,000 $5,500,000 $11,000,000 $3,950,000 $1,200,000 $80,000,000
32. DIMENSIONS AND MEASURES OF MARKET POTENTIAL
Dimension Weight Measures Used
Market Size 10/50 Urban population (million) -20031
Electricity consumption (billion kwh) - 20022
Market Growth Rate 6/50 Average annual growth rate of commercial energy
use (%) - between years 1996-20011
Real GDP growth rate (%) - 20031
Market Intensity 7/50 GNI per capita estimates using PPP (US Dollars) - 20031
Private consumption as a percentage of GDP (%) -
20021
Market Consumption 5/50 Percentage share of middle-class in
Capacity consumption/income (latest year available)1
Commercial 7/50 Telephone mainlines (per 100 habitants) - 20033
Infrastructure Cellular mobile subscribers (per 100 habitants) - 20033
Number of PC's (per 100 habitants) - 20033
Paved road density (km per million people) - 20021
Internet hosts (per million people) - 20033
Population per retail outlet - (latest year available)4
Television sets (per 1000 persons) - 20031
Economic Freedom 5/50 Economic Freedom Index - 20045
Political Freedom Index - 20046
Market Receptivity 6/50 Per capita imports from US (US Dollars) - 20037
Trade as a percentage of GDP (%) - 20031
Country Risk 4/50 Country risk rating - 20048
Data used are those available for most recent year.
1 Source: World Bank, World Development Indicators - 2003
2 Source: U.S. Energy Information Administration, International Energy Annual - 2003
3 Source: International Telecommunication Union, ICT Indicators - 2003
4 Source: Euromonitor, European Marketing Data and Statistics - 2004
Source: Euromonitor, Asian Marketing Data and Statistics - 2004
5 Source: Heritage Foundation, The Index of Economic Freedom - 2004
6 Source: Freedom House, Survey of Freedom in the World - 2004
7 Source: U.S. Census Bureau Foreign Trade Division, Country Data - 2004
8 Source: Euromoney, Country Risk Survey - 2004
For more information on methodology index, refer to: "Measuring The Potential of Emerging
Markets : An Indexing Approach" - S. Tamer Cavusgil Business Horizons, January-February 1997, Vol.
40 Number 1, 87-91.