Buena Vista, Colorado
"My background is in manufacturing, not development or construction," begins Chupp.
Before moving into affordable housing with Fading West Development, Chupp was CEO of his family's business, Load King, a Florida-based maker of kiosks for Starbucks and other food-service brands, for more than a decade. The company standardized its processes in order to deliver more than 10,000 kiosks. "I fell in love with manufacturing," he says.
After leaving his post at Load King in 2013, Chupp moved to Buena Vista and quickly saw a need for affordable housing. "It was forcing teachers out and police officers," says Chupp. "There was this migration of the workforce outside of this area."
That led to the acquisition of a parcel of undeveloped land in 2015 and the launch of Fading West to develop affordable housing on it in the form of The Farm at Buena Vista.
"How do we create high-quality, architecturally interesting, diverse communities that are attainable by a family in the workforce segment of the market?" says Chupp. "I had built my house out here, and realized there are no general contractors, there are no subcontractors, it's massively expensive, so there's really no way to build them at the site."
Targeting households that are between 80 and 120 percent of the area median income (AMI) in Buena Vista (or about $40,000 to $60,000), Fading West worked with a Nebraska-based manufacturer and local general contractor for the first 102 units of housing at The Farm before bringing manufacturing in-house to a new 110,000-square-foot facility in November 2021.
The strategy of shipping pre-manufactured housing units to finish in Buena Vista worked, but legacy modular manufacturing "is really construction under a roof," says Chupp. "It's really not manufacturing. The way they approach it is very much a construction mindset."
Chupp says working with contract manufacturers "was a really good education," but his vision involved rethinking the status quo to further streamline the process.
"The goal of the factory is not to minimize manufacturing cost, it is to minimize the total cost," says Chupp. "One of two major initiatives was a radical reduction in site work. Everything that happens at the site is easily five times more expensive than it happening at the factory -- and you can't find the subs to do it."
The second big push is keeping the catalog simple: three floor plans and six bolt-on additions. "It gives over 500 combinations of houses," says Chupp. "It's a pretty crazy flexible design, but it doesn't allow for any customization. There is zero customization on our floor plans. At our old factory in Nebraska, they had 19 pages of single-spaced options on a spreadsheet."
That level of customization is antithetical to building an economy of scale. "We're applying Lean to construction, bringing the Toyota Production System into the construction side of it," says Chupp. "We have one countertop -- white quartz. We have two cabinets. We have one wall color, one trim, one interior door, one fan."
The metrics are impressive: The time from permit to move-in date dropped by 44 percent in 2021, as the time from pouring a foundation to completing construction went down by 58 percent.
For the units manufactured in Buena Vista, Chupp expects costs will be down by about 40 percent as the process becomes even more efficient. And the company is realizing the vision of providing attainable housing to Buena Vista's workforce: A new two-bedroom, two-bath townhome at The Farm sells for about $300,000.
"The model is a little bit different than any other factory," says Chupp. "We don't sell to dealers and we don't sell to individual homeowners. We sell to developers and we do our own development. As a development company, the factory is a tool for our developments. So about half of the output of our factory will go towards our own developments -- like The Farm -- and the other half of our output will go to developers and housing groups that are focused on the 'missing middle' housing and attainable housing."
Fading West hired more than 80 employees to launch manufacturing in Buena Vista. Chupp says the task was surprisingly smooth, due in part to good benefits and an average production pay of about $21 an hour. "We have had no trouble staffing up the factory," he says. "It's actually been one of the good surprises we've had."
Chupp says he sees the company's processes as part of a necessary change in construction due to the ongoing housing crisis. "This is not getting any better," he says. "The United States needs radical change."
Challenges: "I think it's going to be scaling up our capacity to meet and satisfy the demand," says Chupp. "For the groups we are working with now, the demand is overwhelming, and to be able to continue to supply them so they can be successful in their developments is our biggest challenge."
Opportunities: Other markets in need of affordable housing, and there are no lack of them in Colorado. Beyond Buena Vista, Fading West is working with partners near Telluride in Norwood and other municipalities in resort areas. "There are some interesting socioeconomic issues when no one who works in a town can live in a town," says Chupp. "That can have serious economic repercussions across Colorado, and it's super unhealthy. It doesn't create thriving communities, and that's one of our passions."
Chupp says Fading West will focus on making a dent in Colorado's 175,000-unit housing shortage until 2025, but notes that affordable housing is a national issue: The U.S. has a deficit of more than 7 million homes. "On the supply side, in order to make a project more attainable, they subsidize the houses and developers sell it at a lower price. But you're still fighting over the same general contractors. Our passion is to increase the supply side."
Needs: More employees and more manufacturing space. "Even though 110,000 square feet sounds big, it's not big enough," says Chupp. He's eyeing the Front Range for a campus that would eventually be home to multiple 300,000-square-foot manufacturing facilities, but first will hire another 80 employees by mid-2022 to staff a weekend shift in Buena Vista.
Another need: "continued coordination and cooperation with the state and local municipalities," says Chupp. "The state has been really supportive. We've been working with them on moving the needle."
He adds, "It's very hard to do development. It's a very undefined, time-consuming, risky process, and we really need to work hand in hand with the state and these local groups to get housing in."