Could New Ways of Building Make Housing More Affordable?

0:00Access to affordable credit helps me pay my employees, but I don't really need it. Infliction is killing me. But who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill. See? Banks and credit unions help small businesses make payroll. This bill would cut the vital resources they need. While increasing megastore profits. They deserve it, don't they? Tell Congress, stop the Durbin Marshall money grab for corporate megastores. Paid for by the Electronic Payments Coalition. Hey listeners, it's Imani Moise for The Wall Street Journal. Your money briefing is still on a break, but we're diving back into our series on the biggest financial hurdle facing Americans today.

0:42Housing. One reason homeownership has become so expensive is simple. Demand is high, supply is low. To fix America's housing shortage, do we need to throw out the old blueprint? From new designs and new materials to even shifting construction off-site, today we're looking at the outside-of-the-box approaches some developers are turning to to get more homes built. What's News host Luke Vargas spoke with WSJ housing reporter Nicole Friedman about the future of home building and whether cheaper construction will be enough to make housing more affordable. That's right after the break.

1:23Access to affordable credit helps me pay my employees, but I don't really need it. Inflation is killing me. But who cares? Big retailers are making record profits. That's why we support the Durban Marshall credit card bill. See? Banks and credit unions help small businesses make payroll. This bill would cut the vital resources they need. While increasing megastore profits. They deserve it, don't they? Tell Congress, stop the Durban Marshall money grab for corporate megastores. Paid for by the Electronic Payments Coalition.

2:00To tackle the U.S. housing shortage, a Goldman Sachs report last year concluded, start with fixing zoning. We talked about that in the first installment of our housing series. But with the construction industry facing a major shortage of skilled workers, Goldman made it clear that zoning challenges are just the first hurdle facing builders, A trend on full display on both sides of the Atlantic. Labour's a big challenge. Labour shortages in the UK are a concern. Getting skilled labour, like brickies for instance, is really difficult. Touring the UK Construction Week and future build conferences last month, it's clear that the industry is trying to adapt to worker shortages by rethinking how things are built, especially by embracing modular construction.

2:48Imagine assembling everything from concrete floors to wall segments far away from where projects eventually go up in a bid to make the job more attractive. So we have teams of skilled brickies in our factory environment. The controlled temperature, no rain, etc. As opposed to doing it 15 stories up in the driving rain on a building site somewhere in the winter, you know. We can give somebody close to where they live good steady income in a really nice environment consistency of work, not transient, not living away from home, which is a big problem in the construction industry in the UK. Modular homes aren't new, and they can introduce their own quality or aesthetic issues.

3:30But with lengthy building times making many traditional projects more expensive and forcing developers to pass on costs to already strapped consumers, maybe your rethink of what housing looks like and how it's built is in order, both in the UK and beyond. It's 30 stories and we did it in 36 weeks. You might look at being weathertight within eight weeks instead of 20 weeks. So it's a great solution for customers, particularly when building at scale. The overall project itself will probably save at least 40, 50%. You've got all the prelim costs on site. So for instance, toilet facilities, canteen facilities, security, the shorter that life cycle of that site, the cheaper it is for the builder to build.

4:12So could some creativity around what a home looks like or how it's built be what's needed to solve the U.S. housing shortage? Journal reporter Nicole Friedman covers the U.S. housing market and home building industries for us. Nicole, with this flood of new ideas out there, I wanted to ask you sort of which construction-related innovations are actually worth paying attention to. I'm sure your inbox is bombarded with pitches about this all the time.

4:37Nicole Friedman:Yes, I do get a lot of pitches about construction innovation, and there's lots of variations, whether it's building homes entirely in factories and then transporting them or building part of a structure in a factory and then kind of putting it together on the site or different materials or technologies. And I think really it just boils down to, you know, does it save cost both for the builder, the developer, but also for the end user, whether that's the owner or the renter? Does it save them money? And then does it save time? And then how's the quality and how does it compare to traditionally built structures?

5:16Nicole Friedman:And does it hold up, you know, over the long term? I mean, have you found anything that kind of hits that sweet spot? I mean, that's the center of the Venn diagram that pretty much everyone, I guess, whether you're building multifamily or single family homes, would be wanting to unlock. Yeah, there are lots of technologies that people are experimenting with, are using on small scale. I think we have yet to see any new emerging technology really kind of catch on in terms of making a huge change to the industry and being widely adopted. But that's not to say that that couldn't happen in the coming years.

5:49Nicole Friedman:I think it's just still an era of experimentation and figuring out how to apply these technologies. And the truth is a lot of large builders are super efficient already, even though they're using more traditional techniques. They have the economies of scale. They have the ability to really kind of go from one site to another very quickly and use the same labor force across a large construction site. And so to really beat that level of efficiency, a new technology really has to prove itself over time. You know, this sort of modularity, Nicole, often comes up in the context of multi-family homes, big developments.

6:31And yet, you know, when I was out in the Bay Area recently, there's a number of 3D printing homes, startups that are kind of trying to say, this is the future. We bring on basically a home-sized, car-sized robot that helps fuse all these elements of the home together in a speedy, you know, revolutionary fashion. And yet, could that not introduce its own issues if construction is no longer boards and nails?

6:55Nicole Friedman:Yeah, I think with any of these new technologies, you know, a potential issue is what happens when something goes wrong and how do you fix it? who do I call? Is there even a repair person who knows how to fix this issue when the construction of the house is so innovative and new? And so definitely these technologies, we haven't necessarily seen how they hold up in the coming decades. Ideally, a home you want to be standing in good condition for many, many years to come. All right. Repairability questions, longevity questions. Are there other potential drawbacks of this rethink of how houses are built?

7:29Nicole Friedman:Well, I think it's really just a question of upfront cost, right? If you have to build an entire factory or multiple factories to get these sorts of technologies underway, that's a big investment. And then, again, who's going to work in these factories? What is the kind of cost savings and time savings? And then there are questions of what the end user wants. If these buildings look different than traditional buildings or they operate differently, is that going to appeal to homeowners or to renters. So often we're seeing new technologies be adopted in scenarios like after a natural disaster, where there's a huge need to rebuild in a fast way, all at once, where there's typically a labor shortage and a material shortage because there's been a lot of destruction.

8:19Nicole Friedman:That's when we tend to see a lot of innovation and creativity because there's just such a big need. Nicole, I guess, so just beyond those disaster-ridden environments, though, you know, you have housing consumers that are maybe a bit choosier. And that is where I imagine there's maybe a bit of a rethink going on in the industry, given present economic circumstance for so many people. Well, definitely housing affordability is a huge challenge right now. You know, home prices are near record highs. Mortgage rates have been high for several years now. And so buyers are largely on the sidelines. They're not even willing to buy at this current price and rate level.

8:59Nicole Friedman:And the ones who are in the market are typically being picky. And they're really looking for that perfect home, that dream home. They want a home that is move-in ready, that has very little kind of repair or renovation needs, and they want the home that they can live in for a long time. And so if a developer is offering something that's maybe untested or a more unusual product, that could cause some of these buyers to think twice. Even if, Nicole, you know, losing the formal dining room, for instance, helps get square footage down to a price point where people might actually be able to close a sale.

9:35Nicole Friedman:In this environment where the affordability is really poor, it's very difficult to convince buyers to kind of make that purchase, that big purchase of a home, you know, I think developers are a little bit more willing to, you know, try new things or take chances or find ways to bring that cost down. And we are seeing that builders are building smaller homes. They're trying to take out, you know, features, maybe like a traditional dining room that can kind of keep the home smaller and keep it more affordable for that consumer. And so definitely maybe experimenting, you know, with alternate building techniques or alternate materials is another way that they can hope to appeal to that cost-conscious buyer right now.

10:16I mean, covering single-family homes, Nicole, it seems like you're really kind of at the front line of a really emotional issue for so many people, the kind of collision of a product that has represented truly the American dream with the reality of like what is financially feasible right now.

10:32Nicole Friedman:Yeah, absolutely. You know, a home purchase, it is an investment, but it's so much more than that. You know, it's really, it's your home. It's where you're going to live for many people where they want to raise their families or retire or get married. And so this is much more a lifestyle decision, an emotional decision, and money is a big part of it, but it is definitely not the only consideration. Journal reporter Nicole Friedman covers the U.S. housing market and home building industries for us. Nicole, thank you so much for the time. Thank you for having me. And that's it for this special edition of Your Money Briefing.

11:05This episode was produced by Hattie Moyer with sound design by Michael LaValle. Our supervising producer was Sandra Killhoff and I'm Luke Vargas. Tune in tomorrow as we look at proposals from Washington to alleviate pain points in housing and why the real estate industry is pushing back. That'll be in your feed same time tomorrow.

11:29Access to affordable credit helps me pay my employees, that I don't really need it. Infliction is killing me. But who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill. See? Banks and credit unions help small businesses make payroll. This bill would cut the vital resources they need. While increasing megastore profits. They deserve it, don't they?

11:55Nicole Friedman:Tell Congress, stop the Durbin Marshall money grab for corporate megastores. Paid for by the Electronic Payments Coalition.