Boxabl Solves Housing Affordability

Table of Contents

• Boxabl and America’s Housing Crisis
• Housing Affordability: Key Drivers
• Why is Housing Affordability an Issue?
• How Boxabl is Solving the Housing Affordability Challenge?
  • About Boxabl: Affordable Home Modular Units
  • About Boxabl’s Team
  • Boxabl’s Current Financial Status
  • Boxabl’s Financial Deals History
  • Boxabl’s Affordable Home Solutions Have Helped the Company Go Viral
  • Boxabl’s Growing Success: Online Metrics
• Boxabl: Solving Global Humanitarian Challenges
• Boxabl: Disaster, Relief, Recovery and Military
• Boxabl: Radical Innovations
• Boxabl: Solving Key Problems
  • Home Building Problem #1: Shipping
  • Home Building Problem #2:  Materials and Processes
• Boxabl’s First Product: The Casita
• Conclusion

Boxabl and America’s Housing Crisis

In 2018, the National Low Income Housing Association (NLIHA) released a report titled, Out of Reach, which compared rents and wages across the United States at the city and state level.  The report confirmed that prevailing minimum and average renter wages do not allow Americans to afford even modest rental accommodations across the United States. 

Boxabl, an American company, builds small homes which expand automatically from shipping containers with seamless installation within the hour. The company is working to build a housing factory model like automotive factors to build affordable homes, at scale, because the company understands the housing affordability challenge. Housing affordability is far more severe for Americans in lower-income brackets.

In short, Boxabl solves housing affordability challenges.

The “Out of Reach” report identifies that 7 out of 10 occupations that are expected to create the most jobs over the next decade provide median wages that are lower than two-bedroom and one-bedroom housing wages.  This is a housing crisis that affects low-wage and vulnerable populations in America.   The report proposes several policy recommendations such as vouchers, public housing, and project-based rental assistance, and Housing Trust Funds.  

Understanding housing affordability is important because the situation is far more severe for Americans in lower-income brackets.

More striking, the report identifies that 7 out of 10 occupations that are expected to create the most jobs over the next decade provide median wages that are lower than two-bedroom and one-bedroom housing wages.  This is a housing crisis that affects low-wage and vulnerable populations in America.   The report proposes several policy recommendations such as vouchers, public housing, and project-based rental assistance, and Housing Trust Funds.  

NISHA’s analysis provides some alarming statistics on affordable housing across the United States.  The cost of living associated with housing arrangements is simply not sustainable.

Housing Affordability: Key Drivers

A Harvard 2018 study uncovered a disturbing truth.  Homeownership rates among young adults were found to be much lower compared to 1988.  Not surprisingly, cost-burdened renters face substantially higher low-cost housing challenges.  While the study blames soaring housing costs as the main problem for housing affordability, it also points out that median rent also rose 20 percent faster than overall inflation between 1990-2016 and median home prices rose 41 percent faster.  If you then consider the student debt burden that younger Americans carry after graduation, many are simply not in a position to afford any home and with it, are delaying marriage, starting families much later, or living with their parents much longer.

The study also makes an interesting observation that very few have reported on.  Housing quality has indeed become much better, the higher costs for building materials and labor but more so, the limited productivity gains in the home building industry have played a significant role in overall costs.  Harvard also blames skyrocketing land prices and regulatory burdens impacting land supply as other factors that influence costs and ultimately, housing affordability.  A little later, I'll introduce a company that is trying to fix the housing affordability problem with significant productivity gains in the manufacturing process.

We also know from personal experience that income growth has not kept pace with rising consumer prices and this weak income growth has been more pronounced with low and moderate-income households.  According to the Harvard report, the real median income for the bottom range of households only increased three percent from 1988 to 2016.  For young adults between 25-34, median income increased only five percent within the same time period. 

Absolutely dreadful.  

It’s clear to any reader that income inequality has fueled homeownership disparity and affordable housing continues to be the rising challenge for many Americans.   There are bigger risks.  Do we want Americans to be renters or homeowners?  After all, the American Dream was built on the premise of homeownership and a well-to-do family unit.

Recent research from Statista confirmed that the homeownership rate rebounded in America in 2019 at 65.1%.  The data also confirms that homeownership decline was the result of the 2007-2009 financial crisis due to mortgage instruments which came due across America at substantially higher mortgage premiums than at the outset.  The subprime loans were toxic, worthless instruments created by financial institutions and sold to other institutions and countries as a financial investment vehicle built upon debt and ultimately becoming a house of cards ready to fall.  That was our financial virus.

It is safe to say that the American desire for homes and the American dream through homeownership never faltered; they simply could not make payments at the higher mortgage premium and defaulted.  This set off a domino effect which came down like a tsunami on the U.S. and the world economy at large.  It’s taken nearly 10+ years for the global economy and U.S. homeownership to even begin a rebound from a foolish Wall Street business model.

Based on Statista’s chart data, there is some good news.  It does show that the homeownership rate surpassed the 1990 rate, a full twenty-nine years later.  It’s important to note that data is still being compiled to see the impacts on the homeownership rate as a result of the COVID19 pandemic which started to take hold in early 2020. 

Why is Housing Affordability an Issue?

The shift by Americans to seek affordable housing options has been driven by a growth mindset that was the purview of naturalists and environmentalists and has since evolved to include minimalists who finally realize they don’t need all that stuff that modern, commercialized society promotes.  Though not directly attributed to them, Joshua Fields Millburn, and Ryan Nicodemus, have helped over 20 million people live with less.  They were successful in reaching this audience through a documentary, a book, and a series of articles.  

Minimalists are a large and diverse audience.  They include a new generation of millennials looking to live with less and accepting that they cannot afford a larger home.  On the extreme and more bold end of things, some are off-the-grid types who want to live without any access to modern infrastructure.  Others may have been attracted to the environmentalist movement, grew up during the era when hippies were considered counterculture and were inspired by more modest and communal methods of living.  Some are simply seniors who want to live within the means of their retirement income.

The demand for affordable housing may be the result of another interesting theory that is being largely driven by the next generation of consumers. A podcast made us think about this further. Millennials, Gen X, and Gen Z'ers do not want to accumulate debt; especially after the burden of mounting student debt and the limited economic opportunities to repay it reasonably.

The podcast is called Prof G with Scott Galloway, and the episode that made us think about this further is titled "Capitalism Needs Empathy".   The famous professor interviews Andrew Eisen, CEO of AfterPay, an Australian Fintech company that has achieved a $30 Billion Market Cap.   The company currently has 11 million users and is the second-largest traffic generator for online retail stores in Australia after Google.   As new retailers join, AfterPay adds the retailer to their marketplace and informs the installed user base about new retailers that have joined to offer flexible payment plans.

In the podcast interview, AfterPay's CEO theorizes that millennials, Gen X, and the Gen Z generation no longer accept the currently accepted norms of the financial economy which has encouraged consumers to carry massive debt.  This has forced retailers to re-build their retail model and allow consumers to pay for major purchases with their bank or debit cards over a four-week period.  No fees are incurred by the consumer and AfterPay charges fees to the retailers to manage the transactions.  If you're old enough to remember the Lay-Away Plan of the 1970s, this model has a similar approach but is very different since the money to retailers sooner but allows consumers to avoid incurring debt and financing charges.  Under a Lay-Away plan model, the Archie Bunker and Brady Bunch family saved up in a layaway plan the retailer managed to buy the major appliance, for example, at a later date.

In addition, many Americans are naturalists or environmentalists that seek modest accommodations because their attachment is to the natural environment versus a modern, urban environment. 

The list goes on and on but one thing connects these distinct audiences.  They have accepted the idea of living modestly with affordable housing so that they can be free to experience life on their terms.

When you think about it, most Americans soon discover that ⅓ to ½ of their income is dedicated simply to having a roof to live under.  There is nothing evil about this.  It fulfills the basic needs tier under Maslow’s Hierarchy of Needs which speaks to safety and shelter.  Yes, homes meet this basic need but we’ve also been told that we need a home as an asset or investment vehicle and indeed, it’s true that many have made fortunes through real estate.

But if we exclude the Self-Actualization tier of Maslow’s Hierarchy which sometimes translates into a person’s perspective in meeting one's full potential, it also means that many are spending a large part of their life (!) paying off ridiculous mortgages over 25 years; in a post-financial crisis era, this payment schedule has been extended to 35 or 40+ years, in some cases.  Essentially, people are paying (renting?) their mortgage premium for more than half of their healthy life.  Due to the ridiculous real estate environment of late, they will not likely pay off mortgages in their lifetime. In some major urban centers, shoebox-sized condominiums are selling at $1 million or higher in some urban centers.  

To put this into perspective, 76% of Americans are living paycheck to paycheck, as reported by CNN Money in 2013.   The higher cost of homeownership in a “typical sized” house, along with associated expenses, is forcing people to be cash poor but rich on paper.  If they’re paying for a mortgage throughout their entire life, homeowners hope the equity in their home and the future resale value will be more than their current mortgage.  

In other words, homeownership can be a lottery if you're in it for the investment asset angle!  Homebuyers then are trapped with a large mortgage, buying stuff they don’t need by refinancing their mortgage and continue to work to furnish their home and pay off their mortgage.  So the rat race becomes self-sustaining as Americans need their jobs to pay for their home and a lifestyle. 

Is the American Dream really what it’s cracked up to be or was this sold by marketing dollars spent by financial institutions to make money off dreamers who will likely pay for the rest of their lives just to be part of the rat race.  

What are in the midst of a small (maybe larger) transformation for some Americans who have opted to down-size and live within their means but use their income to travel, save for medical care, and find better ways to optimize and enjoy life?

Beyond policy tools and lawmakers, are there solutions to make housing affordable? There is one company that we believe could make a huge difference and it’s at the early stage of radically transforming the home building industry.

The company is called BOXABL and is based in Las Vegas, Nevada.

How Boxabl is Solving the Housing Affordability Challenge?

We have been following the company for a while through its various promotional channels because of our interest and background in key innovation initiatives in various industry sectors.  Over time, we've become impressed by the company, its executive team, and its philosophy.  Their passion to solve major home-building challenges has put the company on a trajectory of success.

About Boxabl: Affordable Home Modular Units

The company is a manufacturer of factory-built houses designed to significantly lower the cost of homeownership for everyone.  It also specializes in building customized rooms in a precision factory environment using cutting-edge materials and packs units with the latest technologies to help reduce construction costs.  In return, Americans and consumers worldwide can own homes at a cost-effective price in a hassle-free manner.

About Boxabl's Team

The company has 3 key members which are driving its business, strategy, and growth plans. They include Paolo Tiramani (Co-Founder, CEO), Galiano Tiramani (Co-Founder, Chief Strategy Officer, Business Development), and Kyle Denman (Senior Engineer).

Boxabl's Current Financial Status

At the time of this writing, the company was seeking $10 million in venture financing from undisclosed investments as of May 31, 2020.  The company did raise $2.8 million from a targeted $10.5 million of equity crowdfunding through WeFunder and plans to close on the remaining raise by the end of 2020.  

The company has raised over $100 million to date and is well-capitalized to establish factory-plant operations at scale to serve a massive home-building market and a real estate environment in desperate need of affordable housing and shelter.   

Boxabl's Financial Deals History

Financing Type	Time Period
Early Stage VC	Upcoming (late 2020)
Crowdfunding	Announced 2020
Series A	Completed
Early Stage VC	Completed 2018
Capitalization	Completed 2017

Boxabl’s first early-stage VC raise was completed in March 2018 with 500group.com out of Las Vegas, Nevada.

The great news is the company is building momentum and has commercial revenue as the value proposition becomes instantly clear for individual consumers, the military, and disaster recovery agencies.

For a complete list of Boxabl filings at the SEC, please look at the following EDGAR search results page. 

Boxabl's Affordable Home Solutions Have Helped the Company Go Viral

The company’s first product called a Casita is a 375 square foot prefabricated studio.  Naturally, videos like the ones in this article went viral on social media and interest hasn’t really stopped since then.  The Casita is priced at USD 50,000 which is a far cry from the mortgage millions many Americans face when they consider their first home.

The company has solved some major barriers in the home building industry.  We’ll go over those a bit later.  But one thing that is working in the company’s favor is general and wider acceptance of the Accessory Dwelling Unit (ADU), a legal and regulatory framework, which allows for a secondary home or apartment to be shared on the property (most likely, the backyard) for a larger, primary house.  More and more states are now extending ADU’s to allow for them to exist independent of the main property as long as the homeowner has purchased land and connected to municipal infrastructure (water, power) so that they contribute to the municipalities tax base.

Boxabl also has plans to sell other sizes and formats such as 20 x 60 feet, 20 x 40 feet, 20 x 30 feet to accommodate varying needs.

Boxabl's Growing Success: Online Metrics

Boxabl: Solving Global Humanitarian Challenges

Looking at the global landscape, you could easily find major opportunities for Boxabl to serve governments in challenge-developed countries that suffer from burdened over-population and environmental challenges. 

Governments in Brazil could improve life for many Brazilians who live in shantytowns which are simply improvised shelters.  Governments across Africa could help their populations with better shelter solutions at an affordable cost.  Companies like Boxabl could play an important role in efforts by the United Nations within refugee camps or even have the International Monetary Fund implement conditions that must be met if a country receives any financial assistance to address the housing disparity by using solutions like Boxabl's prefabricated Casitas.

Boxabl: Disaster, Relief, Recovery and Military

It’s logical to see how Boxabl serves across many practical applications.  In a disaster situation,  agencies like FEMA could allocate budgets to set up shelter communities after a major hurricane to house displaced Americans under temporary conditions.  

The ability to set up prefabricated studios within an hour or many within a day was previously unimaginable but could solve the inherent problem of limited and overloaded facilities like schools and other public facilities in a disaster environment.  Further, imagine how the situation could dramatically worsen if Americans were battling a pandemic like COVID19?  Generally, FEMA and other relief agencies have required people to congregate into school gyms simply because the shelter was required.    Without a fully deployed vaccine, the consequences and operational nightmare for this situation become more obvious.  

In regions impacted by hurricanes and flooding, Boxabl modular units could help because they are water-resistant and won’t damage due to flooding as they will simply dry out.  For more remote and impacted settings, the units are extremely energy efficient and compatible with off-grid capabilities or integration to existing utility infrastructure.

Boxabl modular units are built at the factory and include the kitchen, bathroom, electrical flooring, heating, ventilation, air conditioning. Internal furnishings like a couch or bed are excluded.

Looking to California, it's an annual struggle with forest fires is an ongoing challenge for firefighters, both local and abroad, who need to stop fires but also organize accommodations.  Imagine how Boxabl could help firefighting operations in America or worldwide?  The modular units are fire resistant which could be helpful for temporary communities away from the fire zone.

For the military, accommodations at Nellis Air Force Base or even Kandahar Camp in Afghanistan could help accommodate new tours by service personnel, support temporary training operations and reduce the cost of established physical infrastructure should base operations be temporary in nature.  The Boxabl units are extremely strong and durable and while demonstrator units are not bulletproof, military applications with kevlar are possible.

The range of Boxabl applications is potentially limitless and only limited by the imagination of accountants looking to save money within existing operations.

Boxabl: Radical Innovations

The company co-founders believe what they are working on is set to radically change the world. Let’s look at housing today.  If you live in a large urban center, you have seen the construction sites. 

Endless unmarked roads, job sites full of 2 x 4 lumber,  lumber stick frames, partially completed homes or neighborhoods, concrete, gravel, muddy roads, cement trucks, construction workers, and so on. A typical home (let alone a complete neighborhood project) might be built from 6 months to as much as 12 months.  

In other words, the home building today is very slow! There is a lot of friction from start to finish which makes it expensive too.

The methods of construction have not changed in a century!  People are also facing longer time frames to get into their homes or condominiums because of a massive shortage in unionized labor across the country, let alone the equipment such as cranes!

The home building industry problem isn’t just an issue in America. It’s a worldwide phenomenon.  Inefficient home manufacturing processes contribute to the housing affordability crisis.

According to the co-founders at Boxabl, this is because housing or home building is still pre-factory.  Comparing this to auto manufacturing, iPhone production, and television screens, these consumer products are made in large factories with robotics and automation.  This scale of efficiency helps lower costs and increase quality at a mass-production scale.

Like Henry Ford’s assembly line a century ago, the assembly line brought the combustion engine and car to the mass consumer.  But only in one color as long as it was black. 😉 Home building automation or assembly line processes have not existed at scale.  

Homes are big and difficult to ship. In fact, Boxabl’s team feels that many factory house builders lose a lot of their money during….

…. SHIPPING

For the Boxabl team, their view is that if you can’t ship it, don’t bother to build it in the factory because you’ve already lost it.  As such, most home developers build right at the site.

Boxabl: Solving Key Problems

Home Building Problem #1: Shipping

BOXABL approach? Tackle the Shipping Problem first.  Rather than build something that could force shipping to be transported as a wide load, the company went ahead and created a module that folds up 8.5 feet wide, making it compatible with all existing shipping logistics systems.

If they need to send 1000 units to Africa, they could easily put them in a shipping container to be shipped by ocean.  One hundred units could be shipped on a train. They can even be shipped on 18-wheeler trucks and or pick-up trucks.  Even a helicopter can fly one of these folded modular units to more difficult-to-reach locations.

Welcome to scale in distribution and logistics. That’s a huge deal. 

Home Building Problem #2: Materials and Processes

The company’s founders then dove into everything else.  They asked, “What materials are we going to use?”  A lot of research was done to make sure it was compatible with assembly-line principles and automation to ensure full compatibility with robotics. 

Boxabl is not looking at traditional lumber stick frame walls or cinder blocks.  Their strategy is to use advanced materials for the factory assembly line with automation to support mass production.

Boxabl's First Product: The Casita

The Casita is the company’s first modular home or office unit and comes in a 20 by 20 dimension and can act as a studio apartment.  Boxabl’s initial goal was to target the emerging backyard housing market that now exists in states like California due to regulatory changes which allow backyard homes to be legal.  

When we consider the nature of the current COVID19 pandemic, the amount of people forced to work remotely has also created a cottage industry for backyard offices to allow people to have quiet spaces to do their work or serve as a place to re-charge or meditate away from a busy family household.

The company is planning to expand its operations to other modular sizes and configurations which can be larger modules with different interior configurations.  The company is smarter than we think.  They’re planning this in such a way that these modular units can be stacked to build any type of imaginable building structure desired.  Technically speaking, modular units like the Casita are engineered to build a large thousand unit or multi-family unit.

The upside for the company is huge as they are positioning themselves to be a mass manufacturer for any building type for use anywhere in the world.  

According to the company, they have already received OVER A BILLION DOLLARS in PRE-ORDERS from the general public.  Unbelievable!  This includes a few high-profile customers including a casino (and reportedly, Elon Musk!) and the United States government which has made a $10 million purchase order.  A Boxabl-based casino was set up and installed in Boca Chita, Texas.

Conclusion

Beyond active efforts for additional venture capital financing, the company has entered into a lease for a very large warehouse, in Las Vegas, where the Boxabl starter factory will be built.  Boxabl expects the factory to produce between 3000 to 5000 casinos annually.  

We’re big believers in the company because their vision, strategy, and pre-orders are key signals to market demand and product fit.  The company has the potential to help millions of people worldwide including any American that is seeking an affordable housing option.

The Boxabl mission is to significantly lower the cost of homeownership for everyone. Obsessively designed to the highest standards of quality, strength, and sustainability to last for generations.

That’s radical innovation by Boxabl.

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