Or how capsule homes could be the solution to the housing crisis
A robust Chinese lady has gone viral for her social media videos promoting capsule homes manufactured by a Chinese company called Etong. Her accent is unique, and it’s hard to comprehend what she’s saying without subtitles. Yet, her personality and confidence more than make up for it. I think Etong has cracked the social media algorithm on this one, and they have a potential goldmine on their hands. (Not affiliated)
Now that capsule homes have my attention, I went down the rabbit hole to figure out what they’re all about. I wanted to know if this is just a gimmick, a passing fad, or something earth-shattering and heaven-shaking.
$25,000 is all it takes!!!
A quick search on Alibaba reveals that there are several capsule home manufacturers. The price varies from about $25,000 to $50,000 for a 500 square foot capsule home. The shipping fees to North America are about $2,000.
There’s minimal setup required to install the house on location. It’s literally plug and play.
How is it different from an RV?
I think it mostly comes down to fit for purpose. RVs are built with mobility as a key parameter, while capsule homes try to optimize for comfort.
Most RVs are a hack job at best, while these factory-built capsule homes look as if Tesla and Apple had a baby.
How do they compare with traditional houses?
In order to make a like-for-like comparison, we need to remove the cost of land and consider only the cost of house construction on an empty plot of land.
Depending on where you live, the cost of constructing a house can vary between $100 and $300 per square foot. Of course, there’s no real upper limit on how much you can splurge on your home, but there is a definite lower limit.
At an average of $200 per square foot, building a 1,000-square-foot house would cost $200,000. A capsule home for the same area would cost about $50,000.
Traditional houses suck
Building a house on-site is essentially in-situ manufacturing done by semi-competent workers with often pathetic tools and techniques. You, as the home buyer, are responsible for quality control.
It’s analogous to letting your local strip-mall mechanic build a custom car for you. Sure, the car will have a personality, but it’s the personality of a succubus.
Traditional house-building techniques are antiquated and rely on ancient materials like wood, paper, steel, cellulose, asbestos, lead etc. These materials don’t have longevity and need constant maintenance and upkeep. Termites, rodents, rust, and rot — all want their unfair share.
In sharp contrast, these capsule homes are built in a factory using precision machinery and modern materials like aluminum and triple-glazed glass.
If you don’t own 100% of the house, why do you have to pay 100% of the costs, like maintenance, property taxes, fire insurance, flood insurance, etc.?
Why traditional house ownership really sucks (IMHO)
Homeownership is a massive expense. It’s probably the single biggest expense in our lives. For all the hard work and toil we put in, we’re not the ones who gain the most out of it.
A house ties you down. People use the phrase “putting down roots” as if it’s something positive. Being stuck in one place all your life is eerily similar to the life of a peasant in medieval Europe.
The peasant was bound to the land and wasn’t free to move. All their life, generation after generation, they were forced to work the land and sponsor the feudal lord’s fancy lifestyles.
Homeownership in its current state is no different. You may think you own the land, but in reality, you rent it from the government. If in doubt, check how much you pay in property taxes. More importantly, see how much it has gone up over the years.
A house is something sentimental and emotional for you. Big banks know this and use it as the basis for building complex mortgage-backed derivative products. Your house is unique and special only to you. Once you sign your mortgage, your house is sliced and diced many times over and traded on exchanges all over the world. Until the day you’ve completely paid off your mortgage, your house is owned by unknown strangers around the world, including sovereign wealth funds of countries with questionable ethics.
Your sentimental attachment to a house is the rock on which all these people build their “houses.”
Until you pay off your mortgage in full, part of your house is owned by your bank, and through them, dozens of other investors. If you don’t own 100% of the house, why do you have to pay 100% of the costs, like maintenance, property taxes, fire insurance, flood insurance, etc.?
You’re spending your time and money to maintain someone else’s investment.
Doesn’t it sound convoluted? Well, it does because it is.
Why am I excited about capsule homes or manufactured homes in general?
Firstly, they reduce the cost of building a house. Second is the maintenance of the house. Thirdly, and most importantly, they represent a change in mindset.
A manufactured home evokes the perception and attitude toward it like any other manufactured good, such as a laptop, phone, or refrigerator.
Most people don’t develop attachments to appliances. A similarly low attachment toward a house is a game-changer for the vast majority of us.
Uproot and move
When you treat a house like any other appliance, you unlock a radical superpower. You’re no longer a tenured peasant but a “Nomad.” You can now move yourself and your family to greener pastures, wherever they may be.
Being a Nomad means you’re always surfing the wave of opportunity instead of being anchored in place, come rain or shine.
Envisioning the future
I imagine a future where all houses are manufactured in factories and can be assembled in complex patterns, like Lego blocks. With higher scale and advancements in manufacturing and materials science, we’ll be able to customize our homes based on our user profiles.
This isn’t a new concept. We’re familiar with the concept of user profiles on the iPhone. You can factory reset any iPhone in the world, log in with your Apple credentials, and suddenly it feels like your own phone.
In the future, nobody would “buy” houses but lease them with full flexibility to transfer leases. Capsule homes will unlock housing in areas that are hard to build in due to constraints like the availability of labor or materials.
Finally, with scale, the cost of housing will come down drastically, while the quality of living standards will go up. I hope this is the future we’re heading towards.
Nomadism 2.0
If you liked the ideas presented in this article, then I recommend my book Nomadism 2.0 — A Lifestyle Design Guide to Unstuck Your Life – now available on Amazon.