In the spring of 2017, Jeff Wilson felt good. Kasita, the modular housing start-up he had founded two years earlier, was thriving. For a second year in a row, he had displayed a prototype of his prefabricated apartment module at SXSW. The year before, it had won the conference innovation award for smart cities. This time around, he presented the module with a tantalizingly sleek and modern upgrade. The media loved it. They concluded, almost unanimously, that he was the Real Deal. And that was before the company had sold a single unit. If Wilson had any doubts, he didn’t show them.
“Kasita is on the verge of disrupting the urban housing market in ways not seen in real estate and development in 150 years,” he told Forbes in 2016. Wilson did not respond to requests for an interview with Texas Architect.
Kasita, a cute if unoriginal play on the Spanish word for “little house,” sought to “disrupt the housing market” using modular design and construction to produce micro-dwellings that could be built in a fraction of the time and sold at a fraction of the price of traditional urban housing. They were affordable, sustainable, and efficient, and if all went according to plan, they were going to solve the architectural and planning problems of urban growth, one Kasita at a time. It was ambitious, and maybe even visionary.
When Wilson unveiled his first prototype in 2016, it drew attention from a host of media outlets, including Dezeen and The New York Times. Texas architect Dason Whitsett, AIA, then refined the basic model to create the 2017 prototype: a 352-sf, aluminum-clad rectangular prism with a glazed cube cantilevered at one end. It featured smart home technology with which users could command lighting, temperature, and sound systems. A rendering depicted the modular units stacked on top of one another within a metal framework to create a mid-rise condominium that would appeal to developers. But the most important development was that, this time around, it was going on the market. Kasita was finally taking orders.
The design and production announcement inspired more media coverage and more investment capital. By the following fall, Kasita had raised at least $11.5 million, obtained permitting to sell in Nevada and California, and moved to a 25,000-sf manufacturing site in East Austin. It had garnered design accolades from the Texas Society of Architects for its integrated interior design that efficiently and gracefully maximized limited space.
Kasita, along with its founder, had become the darling of the Austin start-up world. The company married ground-breaking ideas with smart design and advanced technology all wrapped in an impressively marketable, very millennial minimalism. It seemed destined to succeed. In not more than a year, its manufacturing building would be closed and calls to its office would ring indefinitely.
The closure happened very quickly and very quietly. Surprisingly few people noticed. Some would-be customers on Instagram made inquiries, but otherwise the internet had gone silent on Kasita. Its website and social media accounts were up, but no one was posting. Kasita was like a ghost town, not gone but eerily silent.
Learning what happened to Kasita is interesting for the same reason getting to know someone is interesting: The discovery of remarkable discrepancies between appearance and reality. But Kasita’s story reveals more than just one company’s behind-the-scenes drama on the course of its downfall. Kasita was ostensibly positioning itself to solve one of humankind’s most pressing problems: how to sustainably manage urban growth in terms of housing and urban planning. It was using one of the most promising models architects have identified as a solution: modular design and construction. Considering this, the real question is not what happened to Kasita, but to what extent does Kasita’s failure reflect the future not only of modular design and construction, but also of the very world in which humans will soon live?
True modular design is a relatively recent phenomenon. Traditional methods of prefabrication had been applied only on a smaller scale until architects in the 1960s experimented with full-fledged modularity, which implied the prefabrication of a more finished unit of construction, such as an apartment module.
Post-World War II urban growth led architects around the world to consider how best to collectively design for a rapidly changing urban landscape. Architects in Japan such as Kenzo Tange began pioneering Metabolism, an architectural theory that viewed modularity as means of designing an urban environment adaptable to growth, notably in the wake of the atomic bombing of Hiroshima and Nagasaki. In the words of Kisho Kurokawa, Metabolism posited architecture not as “something that is completed and fixed, but rather something that grows towards the future, expanded upon, renovated, and developed.” By the early 1960s, Peter Cook of Archigram in London and Arata Isozaki in Tokyo were creating plans for utopian self-sufficient cities that coordinated technology and containerized units into an adaptable circulatory system of infrastructure.
However, the first successful project to physically realize these visions of modular design was Habitat 67, unveiled by Moshe Safdie at Expo 67 in Montreal. Safdie designed Habitat 67 as an apartment building composed of 354 identical prefabricated modules stacked to form a vertical agglomeration of linked concrete boxes that served as both individual living units and the infrastructure that connected these units. In 1968, Cerna & Garza Architects used a more industrial method of modular design to create the Hilton hotel on the River Walk in San Antonio by uniformly installing 500 prefabricated modules in a mere 28 weeks. Finally, in 1972, Kisho Kurokawa built the precedent-setting Nakagin Capsule Tower with 140 prefabricated cell-capsule units individually bolted onto a single concrete shaft. The philosophy and methodology behind the tower would inspire 21st-century designs like Kasita’s, notably in the way Kasita aimed to stack its modules into a dense residential development to relieve increasingly clogged urban residential markets.
Despite the Japanese developments, modular design as a means of addressing urban growth through collective housing ended in the early 1970s, when public policy and neoliberal economic theory encouraged private spending on single-family homes in the midst of a housing boom and global energy crisis. In 1973, President Nixon imposed a moratorium on all new public housing construction commitments, after which the focus of federal housing assistance shifted away from constructing new public housing units to using the existing private housing market. The privatization of the housing market would continue through the 70s and 80s as Presidents Jimmy Carter and Ronald Reagan promoted deregulation and liberal economic theory.
Now, well into the 21st century, architects are once again looking to modular design to respond to the rapid growth, expansion, and sprawl of modern cities despite the neoliberal framework in which the American economy still operates. By manufacturing large modules that are arranged on-site, architects can increase both quantity and quality while reducing labor costs and project duration. When combined with micro-unit living concepts, modular urban structures can increase density and provide adaptability to market fluctuations — if housing demand in one area dropped, for example, a modular unit could easily be moved to the next hotspot. It is the marriage of architecture and manufacturing.
“It just transfers the skill and knowledge into the factory,” architect and urbanist Sinclair Black, FAIA, says. “It builds more units, faster, with less cost in theory,” but, “what we don’t have is the means of production.”
That was precisely Kasita’s problem.
Wilson doesn’t have an architecture, design, or construction background. He co-founded Kasita with Taylor Wilson (unrelated) in the fall of 2015 after teaching environmental sciences at Huston-Tillotson University. He spent a year living in a metal dumpster on campus as an experiment in minimal living and human footprint reduction and came to be known as “Professor Dumpster.” It was Wilson’s first claim to fame, his first media fanfare, and the starting point of his idea for Kasita.
As Wilson expanded his vision from mobile, minimal living to include modular production methodology, two investors, in addition to co-founder Taylor Wilson, got the start-up off the ground. One was the COO, Brian Tochman, who soon after left to start his own venture capital firm. The other was Gary Keller, founder of the world’s largest real estate firm, Keller Williams. With that funding, Wilson hired California-based industrial designer Remy Labesque to create the original design concept for Kasita and later enlisted Whitsett to develop that prototype into a livable reality.
By spring of 2017, Wilson had done what he does best: get the word out. The release of Kasita’s 2017 design at SXSW came with an exquisite marketing package. After nearly two years of planning and venture capital courtship, Kasita seemed ready to move into its execution phase. The board of directors, however, decided the company needed a new chief executive for that stage. One Kasita executive said that “the original founder had a great story but was not a great manager of the company.” Wilson consequently became the president of the board and remained as a consultant.
During that time, Tochman left Kasita and Benji Miller took over his role as COO. Casey Wu stayed on as CFO, and, in August, the board hired Martyn Hoffmann as the new CEO. This team of executives had a diverse but thorough range of experience. Hoffman brought private equity firm Greenfield Partners on as a Series A investor, which became the major source of funding from that point on. The new leadership recognized that Kasita — like any modular housing company — would only be efficient enough to draw a profit when operating at a large scale. They needed to market to developers, not individual buyers wanting a backyard ADU.
“When you’re at scale, you can do smaller projects, but when you’re not at scale, you can’t. There’s no cost advantage,” said an executive who asked to remain anonymous.
However, they quickly discovered the challenges inherent to modular design and construction.
By November of 2017, Kasita had gone through the extremely tedious job of getting permitted to sell their modular dwellings in Nevada and California. However, that task was taking longer in Colorado and New York, where they actually had two deals with condominium developers on the table. Navigating archaic laws and plodding along to the sluggish step of bureaucracy ate up time and money, stymying the interest of developers. But there was another issue with Kasita’s attempts at expansions outside of Texas: transportation costs.
“The problem of transportation logistics in modular building construction is the problem of modular building construction,” wrote architect David Wallance, AIA, author of “Moving Parts: Architecture in a Flat World.”
The cost of transporting a Kasita to its site ate directly into the economic efficiency gained on the labor side of modular construction. They couldn’t efficiently transport their product beyond a 150-200-mile radius. Added to that was the problem of how to transport a large number of Kasitas within the same timeframe to meet a developer’s large demand.
From November through the spring of 2018, Kasita executives continued strategically negotiating deals with developers in Denver and in New York City, despite the aforementioned problems. However, the ultimate, intrinsic problem that prevented a deal from solidifying was scaling.
“It always came back to our ability to scale and our ability to be funded,” a supply chain project manager at Kasita said. “We didn’t have an ability to scale that large without any funding.”
Kasita had raised millions by the spring of 2018, but by that time, Greenfield Partners had lost interest in the company due to its inability to close a deal. They started scaling back their funding, making the task of closing a deal that much more difficult.
Since modular design and construction is essentially manufacturing, time and cost efficiency increase on a large scale, as is the case with any mass-produced good. Since Kasita’s manufacturing facilities couldn’t produce more than approximately 50 Kasitas in a year, they needed at least $20 million more to begin producing at the scale developers required.
As in the 1970s, this is an instance of neoliberal economic theory grinding urban design innovation to a halt. Kasita, like the modular design and construction industry at large, required risk and cost absorption on the part of the investor. Any business attempting to “disrupt” an entire industry — such as the construction and housing industries — is going to meet a significant headwind. As long as these start-ups are governed by the whims of circumspect investors, it will remain difficult to spark significant change.
“Anyone that hasn’t raised $50-100 million is in the same boat,” an executive said. “I just don’t know how anyone else is going to overcome the exact same issue.”
However, Kasita had its own internal problems that exacerbated challenges in managing these industry-wide issues. There was the ever-changing leadership, to start. Martyn Hoffman, the newest CEO, left the company within six months for personal reasons. That left the CFO and COO running the company for three months while trying to negotiate a deal for its sale as their investors balked.
But before that deal was finalized, they were shocked to discover that someone else had bought out their investor: Jeff Wilson. According to employees, Wilson fired the COO and CFO on his first day back. He also fired the heads of marketing and sales, who had been hired under that leadership. In an announcement, he told the remaining employees it was necessary to cut those payrolls to keep the company afloat, but some saw his move as vindictive.
One employee described the environment afterwards as frightening in terms of job security. Another said everybody was excited when Wilson came back. Whatever the prevailing opinion, it was clear that Kasita had suffered from a chronic lack of direction with a high executive turnover rate.
The company also could have been smarter with its spending before it reached the execution phase in 2017. Instead of pumping money into executive salaries, massive marketing campaigns, and technology development for its smart home capabilities, it could have invested in assets for manufacturing.
There was also argument over the economy of the design. The cantilevered support system for the glass cube added significant cost to manufacturing the module. Some executives wanted to make it optional, but others considered it an iconic part of the design. This provoked the enduring question of the balance between trying to maintain an architectural vision and the reality of what a customer is willing to pay.
After returning as executive, Wilson wasn’t able to make any deals with developers. In late fall of 2018, Wilson announced the closure and sale of Kasita. A company quickly bought its assets and that was that.
Where this leaves modular design remains unclear. Kasita was a company with big ideas and inventive design but an inability to execute. Even excluding its missteps, it’s uncertain if Kasita would have been able to succeed, considering the construction industry’s reluctance to innovate and investors’ distaste for risky propositions that are costly in the short run. What it does show is that modular design and other solutions to urban growth need more than one ambitious company to succeed; they need industry-wide collaboration and willingness to change.
Christiana Sullivan is a freelance journalist based in Austin.
I was interested in Kasita and even went to an open house road show they had in San Jose. I’m very sorry to hear they are gone. I can agree with the basic point that transportation and logistics costs would have to be more reasonable to make the entire prefab concept worthwhile, and that’s not a problem exclusive to just Kasita. Ideally a prefab operation would have regional manufacturing centers that could scale as needed….but this requires vast capitalization. But obviously an interested home buyer in say Alaska, or Key West, or Hawaii is going to be sticker shocked by the cost to transport and install one of these $90k modules and have to conclude they aren’t worthwhile. Even the cost of getting one from Texas to Oregon was quite high, regardless of their ability to help with permitting. I can see how developers would be especially wary when questions of scale start to arise.
I would like to know if there are any Kasita homes for sale (back stock, or private owners) at this time.
October 27, 2020
I’m on the same page as Kathy…are there any left for sale? Can I buy the leftovers?
Since one of the problems of modular construction units is proximity of the factory to the installation site to reduce transportation cost perhaps the modularity concept could be applied to the factory. A factory that could be disassembled and moved near a site where a large number of units would be sold, thus minimizing transportation cost of the completed individual units. The construction equipment could be placed in a rented warehouse or similar structure. Of course it would only be a viable option if a large number of units were needed in one area.