A San Francisco startup says it can build homes for far less than ordinary contractors, and cut the owner’s electricity bill to nearly zero.

Zeta Communities -- which plans to make factory-built, modular multifamily homes -- is working on a 17-unit townhome project in San Francisco that it expects will cost around $165 per square foot to build.

A single unit can be completed in six weeks, said CEO Naomi Porat, who added that a traditional home takes nine months and costs $200 a square foot.

“We are 20 percent lower in price and take 80 percent less time,” she said. Ultimately, the price will drop to $134 dollars a square foot, according to Porat.

In San Francisco, the savings will even be larger. Zeta displaced a traditional contractor who had offered to complete the townhome project at $350 a square foot, Porat said.

When complete, she estimated, the 1,600-square-foot townhomes will likely sell for around $400,000, cheap for San Francisco. If the homes become popular, that could mean more entry-level homes or lower prices for existing houses.

And that price is for homes with all the green amenities –solarpanels, a thermal mass-heating unit in the foundation and “green” cement in its homes. (Porat’s brother is a founder of Cal-Star Cement, a green-cement company). The company also will incorporate green EcoRock drywall and energy-efficient windows from Serious Materials (see Green Light post).

Factory-built homes, in America, usually mean one thing: mobile homes. Modular construction, however, is a big part of the market in Japan and Europe and has started to make inroads into the United States.

Companies such as Michelle Kaufmann Designs and LivingHomes have already erected some factory-built homes and are expanding into filling in developments with modular houses.

Factory construction reduces costs in several ways.

First, the home is constructed in a controlled environment to prevent moisture and warping. Fewer beams and other materials are wasted.

In many instances, electricians and others are not subcontractors who can disappear for several weeks; they are employees of the builder and thus have to show up at the job site daily. Shorter construction time also reduces inventory and credit costs for the developer.

And the latest crop of modular builders is using the cost advantages to make it cheaper to go green.

Zeta, for example, is trying to finalize deals with developers in southern California. In 2009, it hopes to build 42 homes and expand to 200 homes in 2010. In all, it is negotiating with four separate developers on housing tracts.

Factories for the homes will be built near potential development sites. Zeta is speaking to several northern California cities to find a site for its first factory, Porat said.

The company, however, is only in stage one. It has yet to build a prototype or open a factory. The first prototype will likely come later this year, Porat said.