The blog of the Urban Institute
June 5, 2019

Driving Innovation in Homebuilding to Address Housing’s Biggest Challenges

June 5, 2019

When people think of innovative industries, homebuilding might not be the first industry to come to mind. But even though housing construction can be slower to change than big tech or retail companies, builders and inventors are finding new ways to improve materials, technologies, and processes.

“This is an industry that is durable and resilient,” said Carlos Martín, a senior fellow in the Urban Institute’s Metropolitan Housing and Communities Policy Center. “It continues to try to innovate itself.”

These innovations aren’t contained to the private sector. The federal government, especially the US Department of Housing and Urban Development (HUD), has a long history of investing in a more innovative and productive homebuilding industry.

HUD asked the Urban Institute and the Virginia Tech Center for Housing Research to update a 2003 RAND Corporation report, Building Better Homes: Government Strategies for Promoting Innovation in Housing, which explored the contributors and barriers to housing innovation. The new report, released last week, offers insights into what a housing innovation program could do, how it could accomplish its goals, and how to measure success.

To accompany the report’s release, HUD hosted a panel this week at its Innovative Housing Showcase, where researchers, academics, and practitioners discussed the state of innovation within the homebuilding industry and ways different sectors can work together to enable innovation in housing.

Barriers to innovation in the homebuilding industry

One of the biggest barriers to greater innovation in homebuilding is the industry’s segmentation—by region, by price, by market factors, and by buyer preferences, Martín said. Aside from a few dozen large homebuilding companies, the industry comprises tens of thousands of small builders.

Implementing innovations into this kind of fragmented space can be challenging for inventors and for innovative builders. Martín offered the example of an inventor who creates a widget. They might go into one market where 50 small trade companies may purchase it. And then they might go into another market where one large supplier dominates the space. Understanding how to sell in these varying markets could be a challenge for inventors trying to get a foot in the door.

If inventors and builders can overcome these barriers, new innovations could improve the construction process and the finished product for the consumer. But having confidence that the innovation will perform as expected is key, and that takes testing, relationship building, and a strong understanding of the market, Martín said.

The federal government’s role in encouraging innovation

The public sector has been involved with efforts to improve housing technologies for decades, including Operation Breakthrough in the early 1970s and the Partnership for Advancing Technology in Housing in the late 1990s and early 2000s. Even though these programs saw both successes and failures, homebuilding innovation has received bipartisan support under several presidential administrations.

HUD and the federal government in general should determine the best ways to encourage innovation in the industry, whether that includes providing better market data for all stakeholders, serving as a neutral convener, or simply getting out of the way to allow innovators to get to market, Martín said.

Innovation is the mother of necessity, and homebuilding is no different. New technologies and processes can help the industry address some of its most immediate and pressing challenges—including affordability and climate resilience.

“If you want disruptive technology and a larger innovation, look at where there’s already a dislocation starting to occur,” said Dr. Theresa Weston, research fellow at DuPont Building Innovations. “Right now we have an affordability crisis in many regions of the country. And our new and existing buildings have to withstand the threat of fires, floods, and storms.”

Weston’s advice was targeted to inventors in the private sector looking for a breakthrough, but Martín noted that these larger challenges (during previous large-scale programs and currently) have also led the federal government to ramp up its efforts to promote innovation in housing. “These trends continue to push us and the federal government to act,” he said.

Carlos Martín (second from left) speaks at the Innovative Housing Showcase on June 4, 2019. Photo by Rhiannon Newman for the Urban Institute.

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