Housing Shortage Catches Google’s Eye

The supply of housing is so limited, even Google has taken notice. On Wednesday, the technology giant announced its own efforts to alleviate the ever-tight (and ever-expensive) housing market of Silicon Valley through an investment in modular housing.

The company will purchase 300 modular home units from start-up Factory OS, a deal Factory’s CEO says is worth $25 to $30 million.

Modular building technology, which allows homes to be built off-site and then pieced together on the buyer’s property, could reduce home construction costs 20 percent and be 40 percent faster, though their goal is to reduce costs by 30 percent and cut construction time in half, according to Factory_OS.

"The majority of American industries are more productive than they were 20 years ago -- but not construction," Factory_OS's website explains. "Over the past two decades, capital and labor productivity in construction have plummeted by 32 percent and 22 percent, respectively. Factory OS makes construction productive again. Today homes can be built 40% faster and with a savings of 20% over conventional construction."

Though out of its typical tech wheelhouse, John Igoe, Google’s Director of Design and Construction, said making housing more affordable is something Google is highly interested in—particularly in the San Francisco area.

"Anything that can help us to move forward with a greater knowledge of how we can produce housing more effectively is something we're interested in," Igoe said. "We absolutely are confident that it will work. Hopefully it doesn't become false bravado."

According to the Wall Street Journal, home prices in San Francisco have risen nearly 100 percent since 2009, and inventory has been dropping steadily over the past year, driving demand—and prices—even higher. Year-to-date, home prices in the city have appreciated 5 percent—the second-most of all major U.S. markets.

But according to Rick Holliday, CEO of Factory OS and owner of Holliday Development, this project could help alleviate all that. In fact, a previous modular building project of Holiday’s saved tenants $700 per month in rent, thanks to the low costs of construction.

“We won't have much of a housing market if we don't figure this out," Holliday said.

The modular units, technically purchased by Google’s parent company Alphabet Inc., will be produced in the Factory OS facility in Vallejo, California—located just north of Google’s headquarters—in the fall. They will likely be used as short-term housing for Google employees.

This isn’t the first time a tech company has ventured into the housing space. Facebook recently announced plans to design and add 1,500 modular units to Menlo Park—15 percent of which will count as affordable housing.