SEH 2 Revenue Model Scenarios

From Open Source Ecology
Jump to: navigation, search

Is the Seed Eco-Home more affordable than any other home available in the marketplace? There are several very compelling cases which make the Seed Eco-Home - a much better solution. Let's examine the financial model under various scenarios.

DIY Build Model

Summary: A 1000 square foot house that you and a partner can build in 2 weeks, for $60k in materials This does not include land, utility connections, etc - just the materials for a home.

If one already has land, and does not live in the city, and one builds the house themselves - the costs are the lowest:

  • Material cost - $60k for a 1000 square foot home
  • Plans, engineering, build instructions - free download from the OSE site. See TOC.
  • Electrical Connection - $10-30k. $500 for a subpanel if electric already exists.
  • Off-grid system - $6k
  • Labor cost - 2 people, 2-4 weeks - after spending a 60 weekends building a few modules each day.
  • Expected complete build time is 500-2000 hours, 500 for OSE-certified apprentices - 2000 for a complete novice. About half the time goes into module preparation, and half the time goes to assembly + finishing details.

What is the extreme example: a capable, motivated (hungry), DIY couple, who work full time jobs. Spend $60k on materials and their shipping onsite. They stake out and pour a foundation. They start on a flat lot with suitable soil.

Then over about 60 weekends - they each spend 8 hours on Saturday to build. They build the modules, and stash them. Total hour count is 1000.

This means that after about one year - while keeping their full time job - they build all the modules and are ready to assemble their house.

Then the 2 people spend 2 weeks - assembling it all- to the point that they can move in. This would be a 1-story structure - because to build a 2-story is harder, and recommended only for the most capable DIY people. There are larger risks - such as falling off a ladder if there are 2 stories. Most construction people are injured in ladder falls.

Is 2 weeks enough to the point of moving in? It will be a long 2 weeks, but rewarding. There may be trim details left, such as baseboard, top, window, and utility channel trim. But by move-in - house is painted, floors are finished. 2 weeks means 240 hours of work total - 60 hour weeks for each person. Only experienced people would be able to do this. For an average person - the more realistic scenario would be getting 2-4 more friends to help out. This becomes completely doable. The majority of the work has been done in the module build phase - and especially as we evolve this to the full potential - the 2 weeks becomes completely realistic. This means dedicated, ongoing development for improvements.

You may still ask - is the house really finished in only 2 weeks? The deeper answer is - a house is never finished. When a house is sold, it on average contains only 20% of the overall work to the house. Additions, maintenance, and modification of the house takes another 5x effort and cost over lifetime! This is especially easy to understand for the Seed Eco-Home. As Incremental Housing - we build not a crappy house - but 'half of a good home'!

What about water/sewer and electric? If electricity already exists at the lot, and all you need is a subpanel - that's no extra cost. If there is service but no existing utility panel - then it may cost $1-2k. If there is no transformer, one has to be installed and that may be another $4k. If a pole has to be installed, that may be $10k. If there are other access issues, such as long distances or cutting a road underground - that can be tens of thousands of dollars. For water/sewer - if you install it from an existing water line, cost is included. If you have to get a new utility connection, it can be from a few hundred to $10k [1]. If you install a lagoon for wastewater yourself, it could be a few hundred dollars, it will be do a biodigester like in the Seed Eco-Home, then the cost is $500 in materials if you do the work. Otherwise, a septic system installed by others is about $4k and a lagoon about $2500.

The cost of the house is thus $60k materials, and $10k for others: utilities, or hire some people - if you can't find 2 friends to help you.

Thus, how true is 'a 1000 sf home that you and a friend can build in 2 weeks, for $60k'? If you understand that this does not include land cost, impact fees, and utility hookup - all of which can completely derail the cost structure - then it is true. Land cost - can be anywhere from free (yes, some cities are giving away lots for free if you promise to live there) to hundreds of thousands if you really want location location location. Impact fees can be from zero to tens of thousands of dollars, depending on location - with cities struggling to maintain infrastructure for enough people can have high impact costs. Utility hookup - can be anywhere from free (off-grid and some cities) to exorbitant, such as for long distances, having to install power poles, or dig under streets. But if you don't need utility hookup and the location allows it - you can install your utilities at the cost of materials.

The manageable labor promise is true, if you build the modules for the Seed Eco-Home beforehand on weekends - and if you get 2 people to help you for 2 weeks. Completely realistic if you do the work yourself. If you start hiring subcontractors - costs and time add up. Now who will be the first person to show this? We should fund a reward for the first duo that demonstrates 'a 1000 sf home that you and a friend can build in 2 weeks, for $60k'.

Turnkey Production

Most people do not build their own house, as attractive as the above offer is. OSE is thus providing a turnkey package at a $50k turnkey service cost. The costs are:

Scenarios

edit

Subsidized Builds and General Contractor Training Model

OSE is interested in developing subsidized yet scalable models of house construction, where savings are passed on to the buyers or are otherwise distributed depending on the specific case. The following can be developed in the early stages:

The general economics above show about $10-20k in general contractor costs, and about $15k - $30k in OSE service fees. The cost structure of a house can be subsidized by private individuals in the format of Extreme Manufacturing experiences (for companies, civic organizations, individuals), on the job-training that reduces labor-costs, sweat-equity by home buyers (400 hours in Habitat for Humanity sweat equity model), and on-the-job training programs for general contractors. General contractors would undergo build process training (General Contractor Training Program), under the guidance of OSE. In such a model, the operation must show a sustainable revenue model, where any of the subsidies can be utilized. These subsidies are not government subsidies, these are private sector and private subsidies obtained via an entrepreneurial approach - and thus likely to be more flexible and scalable. An equivalent amount can be deducted from the sale price.

In numbers, the limit of the above is:

  • Labor: limit of up to -$100k for labor costs+ via on-the-job training, sweat equity ($50*400 hours = -$20k), Extreme Manufacturing experiences (-$50k labor, -$50k education)
  • Education: General Contractor training: -$10k for the OSE contractor ($15k market rate, $5k OSE rate), and -$15k for the revenue of one month intensive training (book) and two live events. The General Contractor (Build Leader) is trained in the first one, and leads in the second one according to 100% OSE protocols.

Subsidies can also come from city partnerships or land banks, where cities donate land as part of affordable housing programs (-$25k for land).

We estimate further that 3D printing and Compressed Earth Blocks can reduce the materials cost by 50%, thus saving another $30k.

If achieved, the upside is $180k of subsidies from the above, and a purchase price starting at $20k for the subsidized housing option of a 1000 square foot house. This is interesting only in so far as this model can be replicated widely, where we estimate that up to 10% of the housing can be subsidized fully in the US market, and just about any house can be subsidized at least in part, depending the level of commitment on all sides (city, builder, buyer). The partial subsidy can be anywhere from $20k up to the full subsidy. How quickly this is achieved is up to you.

Lifetime Costs

Average household size- 2.65 [11]

  • $115/mo per household for electricity [12]
  • $1000/yr household water [13]
  • Average gas bill - $77/mo [14]
  • $1609/mo - mortgage [15]
  • Toilet paper - $11k [16]per person for a lifetime. $29k per household.
  • Total utilities are $2.3k/year [17] - gas, electric.

Lifetime Costs

Average household size- 2.65 [18]

  • $115/mo per household for electricity [19]
  • $1000/yr household water [20]
  • Average gas bill - $77/mo [21]
  • $1609/mo - mortgage [22]
  • Toilet paper - $11k [23]per person for a lifetime. $29k per household.
  • Total utilities are $2.3k/year [24] - gas, electric.

Links

Retrieved from "https://wiki.opensourceecology.org/index.php?title=SEH_2_Revenue_Model_Scenarios&oldid=276935"