July 15, 2019

A Home Builder Perspective on Housing Affordability and Construction Innovation

Kent Colton, Gopal Ahluwalia

The backdrop for the HIVE (Housing Innovation Vision Economics) Home Builder Survey was a shortage of housing and a serious housing affordability challenge – some would call it a crisis – in many parts of the nation. By surveying top single-family and multifamily builders around the United States, it was possible to identify key issues of interest to the homebuilding industry. Labor cost and availability is the number one issue related to housing affordability for both single-family and multifamily builders. The cost and availability of building materials (especially lumber and plywood) is also a serious problem, and it is complicated by trade issues related to Canadian lumber. Regulatory barriers clearly add to the cost of a home; the two most significant regulatory barriers identified in the survey are the permitting/development approval process and land use zoning.

Based on the home builder survey, there has been relatively little change in the construction methods of building homes over the last forty years. However, the survey also provides an indication that change is coming – albeit slowly. A number of builders plan to increase the use of innovative construction methods over the next five years, and they recognize that more factory-built/modular housing is coming. However, how fast will this actually happen? Also, as innovation occurs, will it bring greater productivity and improve affordability?

Category: Working Papers

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