Business / Corporate

Japanese housebuilding startup Homma seeks to give U.S. housing market a dose of innovation

by Kazuaki Nagata

Staff Writer

Not every Japanese entrepreneur manages to launch a startup in Silicon Valley, and odds are even lower if that person wants to take on the challenge of the U.S. housing market.

But this is an adventure that Takeshi Homma has embarked on with his company, Homma Inc.

“Efficiency and industrialization have been neglected in the U.S. homebuilding industry, I want to change that,” Homma, the CEO and founder of the company, said in a recent interview.

Homma, a former Rakuten Inc. executive, said the U.S. housing market has yet to go through an innovation phase, so he plans to provide middle- to high-end houses that are built more efficiently and feature the know-how and quality products of Japanese housing firms.

He also said that as the U.S. housing market is expected to grow in line with an increase in the American population, Homma’s venture will give those Japanese companies a chance enter a new market.

Homma’s company is planning a project to build several prototype homes, called Homma One, in Benicia, California next summer. It also aims to eventually provide 100 homes built in the next several years, targeting U.S. millennials.

“Looking at Tesla’s (electric vehicles) and Apple’s iPhones, Silicon Valley companies have brought innovation to something that has become a commodity. In that sense, the house has not changed in America,” said Homma.

According to a report by McKinsey and Co. released in February 2017, the productivity of the U.S. manufacturing, retail and agriculture sectors has increased by more than 15 times compared to 1945, while the construction industry has “barely increased at all.”

Some U.S. media reports have pointed out that the construction sector has been reluctant to streamline operations, since the low profit margins of the industry discourage homebuilders from investing in more efficient operations.

Homma said it is still common for carpenters to build houses on-site from scratch, which is inefficient because wood may be cut in the wrong size, and progress is affected by weather.

Being a U.S. resident himself, Homma is also unhappy with U.S. houses.

“American homebuilders are mainly focused on getting cheap land, building houses there and then selling them as high as possible. They are not really particular about pursuing design and comfort,” said Homma, who has lived there for about 10 years.

For instance, while American houses are spacious compared to those in Japan, they tend to lack built-in storage space. Thus, people need to buy a lot of furniture for that purpose, said Homma.

Homma wants to solve this by incorporating off-site construction and Japanese-made products with high usability and quality design.

Many Japanese firms have industrialized their manufacturing process for various items, such as with kitchens. The so-called system kitchen, a concept where a sink, storage and cooking stove are all built in one, is popular in Japan. Such a kitchen can be manufactured efficiently.

Given that the U.S. housing market has plenty of room for innovation and its demand is expected to grow, Homma thought Japanese firms may have a chance.

“When you look at Japanese housing demand, it will shrink. But there are excellent manufacturers producing housing products. I was wondering what would happen to them,” said Homma.

Homma has partnered with major domestic players such as Panasonic Corp. and Lixil Co.

Although Homma is seeking to bring a new wave to the housing scene, the U.S. homebuilding industry is pretty much dominated by domestic companies. The Builder Magazine’s top 100 builders ranking shows the top 10 firms are all U.S. builders.

However, his business plan has drawn support from a number of investors, including internet tycoons such as Rakuten CEO Hiroshi Mikitani and Mercari Inc. CEO Shintaro Yamada. Homma has attracted about ¥1.2 billion ($10.5 million) in investment so far.

Actor Masi Oka, who starred in the popular TV show “Heroes,” is also chipping in and joining Homma’s firm as an adviser.

In the meantime, there are also emerging trends that U.S. companies, including startups, are adopting, such as more prefab or off-site manufacturing.

In September, Amazon announced its first investment in Plant Prefab, a homebuilding startup, in an apparent aim to incorporate its Alexa-voice agent into homes more directly. The Plan Prefab’s website says that 90 percent of its homebuilding process is done in-factory, making it 50 percent faster to construct a house.

Asked how his company would differentiate from rivals, Homma said while his startup will sell homes, it eventually plans to sell communities by concentrating its homes in the same areas.

Selling homes as communities will create scale, reducing costs and also generating new business opportunities.

Homma, for instance, said his company can provide services, including security and gardening, that can be shared by people in the community through a subscription business model.

“The goal of existing homebuilders is to build and sell houses. Their business ends there. But when we sell houses, we want to make it a start of our relationship with customers,” said Homma.

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