Innovative Construction

6 min read

Are Shipping Containers An Affordable Housing Solution?

In recent years, the rising cost of traditional construction—we’re looking at you, lumber—has pushed some affordable housing producers to explore modular options. One style that has generated enthusiasm, even earning its own HGTV show, are container homes. These are old freight shipping containers that are repurposed into small units. Some firms believe that such unorthodox construction could lower rents by lowering lag times and construction costs. Do they have a case, or is this just fadical hype?

Affordable housing built the traditional way—either with wood, brick or concrete—can be expensive. In addition, developers must, depending on the jurisdiction, meet prevailing wage requirements, satisfy abutters (often, including through legal action), tackle high land costs, and, with Low Income Housing Tax Credit assistance, be willing to accept below-market rents. Then there are national issues from outside the jurisdiction, such as our current inflationary period that has driven up home prices themselves, creating opportunity costs for those working in the affordable space. If using container homes can be one form of savings, that’s not insignificant.

Numbers from Israel find a per-container cost of $42,000, inclusive of acquisition costs. Kaley Overstreet, with ArchDaily, concludes that total costs are typically around $100,000 once accounting for installation. Still, this is considerably cheaper than conventional affordable housing, which averages around $116 per square foot. In California, affordable units tend to cost $500,000 each.

One firm now exploring container homes as a cost-saving measure is the New York-based SG Blocks. It produces both commercial and residential structures, and wants to expand into affordable container housing provision at scale, according to CEO Paul Galvin in an interview with Multi-Housing News.

By using prefabricated material, container homes can avoid lengthy construction times. Using multiple containers allows for developers to add more units. The aforementioned Israeli cost estimates, for example, come from two student housing projects utilizing shipping containers. The developments, which went up in an area recovering from bombings, were turned around in six months.

There’s ample supply of shipping containers: one estimate projects that 11 million are currently going unused within the global supply chain. This means there are environmental benefits to using them as housing, rather than having to extract materials anew. SG Blocks claims additional environmental benefits: the prefabricated material “can substantially offset a development’s carbon footprint and reduce the use of natural resources,” says Galvin. The material meets LEED standards, and can be recycled once reaching the end of its useful life.

But how do these price and environmental benefits hold up against the possible negatives of container homes? Some analysts warn that the shipping container trend, inasmuch as it exists, is a passing, unsustainable fad. Overstreet argues that it cannot attract a wide enough consumer base in part because the properties are small, and cost savings are eaten up by the renovations needed to make the properties livable.

“It takes significant effort, money and time to take something so materialistically durable and turn it into something with the human condition in mind,” writes Overstreet.

For another matter, combining container units, as is often proposed, creates additional structural challenges. Architect Mark Hogan notes that the reinforcement work adds significant expense and complexity.

“The rails at the top and the roof of the container are not structural at all (the roof of a container is light gauge steel and will dent easily if you step on it). If you cut openings in the container walls, the entire structure starts to deflect and needs to be reinforced because the corrugated sides act like the flange of beam and once big pieces are removed, the beam stops working. All of this steel reinforcing is very expensive, and it’s the only way you can build a ‘double-wide’.”

Access to utilities and insulation is also an issue. Hogan states that the HVAC system needs to be more powerful in order to account for poor insulation. The insulation issue also requires additional costs and poor comfort.

In addition, containers need to be sanitized or otherwise remediated to remove toxins that remain from being used for freight.

“You can track down the locations that the container has been to around the world, but you can’t track exactly what it has carried,” says Belinda Carr, a building science researcher. “So, it could’ve carried toxic chemicals, such as pesticides, and the contents could have leaked into the wooden floorboards.”

Consequently, California only permits shipping containers that have been used once, so that their freight history is more traceable.

This has not prevented container homes from rising in popularity, with the global market for them expected to leap from $48 billion in 2020 to $64 billion in 2025. But only eight states now allow them for residential use, and they will surely draw community opposition as they become more popular. In particular, aesthetic complaints about what looks little different than a rail boxcar may eat into whatever time or cost advantages that container homes offer.

Shipping containers are, of course, not the only modular housing out there. One San Francisco firm, Panoramic Industries, has worked to develop small steel-based units targeted at providing rapid housing for the homeless. The 160-square-foot MicroPAD units cost $200,000 each. Unfortunately, says CEO Patrick Kennedy, their rollout has been stalled by regulatory barriers, namely unions who dislike how modular units reduce their labor hours.

Container homes also present interesting questions regarding LIHTC financing. LIHTC-compliant properties are typically multifamily, and using the credit for modular units, much less containers, isn’t exactly the norm. But examples do exist, such as a LIHTC-financed homeless veterans container project in Vacaville, CA, or the Lomax container project, which will provide 19 units at 60 percent area media income (AMI) in southeast Dallas.

Both projects can be testing grounds for whether or not shipping containers should be favored in state allocation guidelines. At the same time, society at large will have to figure out if the container home blueprint is one that will be cost-effective, environmentally-friendly, comfortable to live in – or even permitted by law.

This article featured additional reporting from Market Urbanism Report content staffer Ethan Finlan.