Battling soft margins, dicey demand and chronic labor shortages, can homebuilders leverage a pivot to factory-built components as an offset to build more efficiently and scale with fewer workers?
This is a question that Taylor Morrison’s Austin division began asking just before the onset of the COVID pandemic. Over the last several years, the builder found that, despite the higher upfront sticker price of offsite components, the savings from faster cycle times, better trade coordination and operational efficiencies helped offset the upfront cost.
During a session at the Pacific Coast Builders Conference in late July, Alex Northam, Purchasing Director for Taylor Morrison’s Austin Division, and Sean Shields, Director of Strategic Partnerships at the Structural Building Components Association, unpacked how the builder evaluated the costs, efficiencies and labor implications of using offsite components.
Why the builder began betting on offsite components
The Austin division’s use of offsite components began in 2020. Before, the builder constructed homes entirely through conventional stick framing. That changed just before the onset of COVID, when Taylor Morrison acquired William Lyon Homes and its more component-heavy operations. This acquisition introduced additional experience and capabilities that helped shape the division’s evolving approach.
By 2022, the Austin Division found that components could outperform stick framing in construction cycle times. A year later, components became a preferred strategy for new communities, heralding a broader shift.
The division continued refining its component strategy through 2024 and 2025, including through a “Total Cost of Ownership” analysis, and by January 2026 it began piloting component construction on move-up homes.
“Over the last couple of years, we entered into a very different market. Cost pressure has started to be the primary driver of a lot of our decision-making, and so we had to shift the focus,” Northam said during the session.
Measuring the true cost of components
Northam explained that evaluating component construction requires looking beyond the upfront bid price and considering the broader total cost of construction. Builders, he said, should weigh the total investment needed to change processes and designs, scalability, quality, customer satisfaction and potential efficiencies that can translate into savings across the trade base.
The overarching goal of the evaluation process, Northam said, is to determine whether components provide immediate cost benefits and create longer-term strategic value.
Northam called out several factors that can make offsite components an attractive alternative to traditional stick-built construction. Offsite component usage can generate value beyond upfront material costs through quicker cycle times, lower carrying costs, reduced overhead and interest expenses, improved safety outcomes, better trade coordination and fewer workers.
Features such as open-web trusses and precision-built components, Northam noted, can create a more efficient job site and make it easier for short-staffed trades to complete their work.
Shields argued that one of the biggest challenges in evaluating offsite construction is that builders often compare it too narrowly, focusing only on a one-to-one replacement of materials and labor. From his perspective, this analysis needs to expand beyond direct costs to consider the broader benefits of engineering, manufacturing efficiencies, quality improvements and operational savings that offsite systems can provide.
In the case of Taylor Morrison’s Austin division, Northam explained that the initial cost comparison showed a 16.1% premium for components compared with traditional labor and materials. However, when factoring in the total cost calculation, including quicker cycle time savings, reduced overhead, lower waste, safety improvements and reduced rework, the cost difference narrowed significantly.
According to internal research, the total cost premium, once those other factors were factored in, narrowed to 0.7%. Reduced construction cycle times were the biggest factor.
Internal Taylor Morrison data from 2022 showed up to 46 days of savings in start-to-completion cycle times, which narrowed to 18 days of savings in 2024 and 16 days in 2026. The biggest gains came during the framing inspection stage, where component homes moved through inspections and reached insulation readiness faster. Overall, the builder saw roughly a 29% improvement in cycle time, creating benefits through faster deliveries, lower carrying costs, reduced overhead and more predictable production schedules.
“What was really interesting, and what we saw again here, is in that frame inspection stage, from dry-in to passing frame inspection and getting the OK to insulate, is where we see the biggest gain,” Northam explained.
Northam emphasized that adopting new construction processes can be difficult without measurable data to prove the value. Having performance data enables builders to better understand whether upfront investments and process changes are translating into tangible outcomes and improvements. In the case of Taylor Morrison’s Austin division, internal data helped demonstrate where the builder was able to capture operational efficiencies.
Why labor shortages may make the case for components
Northam views component usage as a long-term scalability strategy, not just a response to current market pressures. Labor shortages and affordability challenges are pushing adoption today.
This need for offsite solutions may be particularly acute in markets like Austin that continue to experience chronic construction labor shortages. Nationally, the Home Builders Institute estimates that the residential construction industry needs to hire about 723,000 construction workers each year to make up for its current labor gap.
“Just within the last month or so, the labor impact from immigration enforcement and the perfect storm of the volume of work is pointing me back towards component usage because of the scalability that I have there, the simplicity of being able to put those things together, and our ability to expand what a single crew or single worker can do with his time,” Northam explained.
Since offsite components usage requires fewer workers, the larger opportunity may lie in creating a more efficient operation that can scale faster when demand returns.
“The market that I operated in 2022 is not the market that we’re operating today,” Northam added. “At some point, this thing’s going to turn back around, and I don’t want to be one that’s scrambling for labor, incapable of scaling my business up to deliver when the market’s ready to absorb some more markets.”
