Fostering Innovations in Housing
Innovations in building technology that make housing less expensive, easier to build, and more cost effective to maintain are important for reducing long-term housing costs. From June 10 to 12, 2022, HUD, along with the National Association of Home Builders (NAHB), hosted the Innovative Housing Showcase in Washington, D.C. The day before the start of the showcase, the convening organizations hosted an event, “Addressing Housing Supply Shortages Through Innovative Building Technology,” during which panelists and presenters laid out challenges to housing innovation as well as recent developments in building technology.
Market and Policy Challenges to Housing Affordability
Robert Dietz, chief economist and senior vice president for economics and housing policy at NAHB, and Caitlin Walter, vice president of research at the National Multifamily Housing Council, reviewed current market conditions for both single-family and multifamily housing production. Dietz identified tightening monetary policy and rising interest rates as key factors that will increase the cost of buying or developing housing in the future, depressing housing affordability. Driving this lack of affordability, said Dietz, is the persistent underproduction of housing (housing production in the United States is approximately 1 million units short of demand), fueled, in turn, by a shortage of approximately 450,000 workers in the construction industry, increasing the cost of construction labor while throttling production. One way to address the cost-raising effects of this gap, said Dietz, is through increased worker training alongside innovations in labor productivity in the construction sector, which has risen by only about 12 percent since 1993, far short of the 50 percent increase in labor productivity in the U.S. economy overall.
Walter identified the high costs of regulations on housing production. Across all levels of government, reported Walter, compliance with regulations accounts for an average of 40.6 percent of total development costs for new housing. Walter also pointed out that some regulations that were intended to ensure adequate production of subsidized affordable housing have the perverse effect of reducing housing production and increasing housing costs generally. Walter cited survey data indicating that rent control and inclusionary zoning requirements can be strong deterrents to developers. Furthermore, policies that enable neighborhood objectors add an average of 7.4 months to development timelines, slowing housing production. All these factors, said Walter, translate into higher costs for developers that ultimately are paid by renters and homebuyers.
Innovating Across the Housing Landscape
The event also included a panel moderated by Jenny Schuetz, a senior fellow at Brookings Metro, and featured Michael Parker, vice president of public affairs and marketing for Ivory Homes, and Joan Glickman, program manager for the Residential Buildings Integration program at the U.S. Department of Energy. The panelists discussed emerging technologies as well as the ongoing challenges to their broader uptake among housing developers.
Glickman discussed the urgent need for affordability and sustainability innovations in housing construction, arguing that learning how to streamline the construction of resource-efficient homes is important to address and adapt to climate change. In particular, she noted that the average house is responsible for 60 percent more greenhouse gas emissions than the average passenger vehicle. Because approximately half of the housing in the United States is more than 40 years old, innovations that can be retrofitted into existing structures will also be important for increasing affordability by lowering operating and maintenance costs for owners. Studying other nations’ practices in these areas, she said, can offer guidance for improving the U.S. housing stock.
To help bring needed housing innovations to scale, Parker described his organization’s efforts to identify and support emerging technologies, financing tools, and other innovations in housing development. Support of this nature matters, said Parker, because of increased risk aversion in the housing construction industry since the housing market collapse in 2008 that helped set off the Great Recession. Innovation is needed at all points in the development process; for example, adapting building inspection practices to structures that are being built in new ways, or using training programs to unleash available technologies, such as heat pumps, that lack people trained to install them.
Following these discussions, HUD Secretary Marcia Fudge concluded the event by underscoring the stakes to families nationwide. With housing affordability challenging communities everywhere, bringing new technological and policy innovations to bear on reducing housing costs is an issue that affects everyone, said Fudge.