Building materials, labor, land, and capital—all essential resources for new residential development and construction–are now altogether straining builders’ ability to develop homes affordably. Each is separately undergoing volatility amid global trade disputes, capacity constraint, local land use conflicts, and the negative consequences, in some of housing’s more pricey markets, of tax reform. Matching home, apartment, and community offerings households’ pocketbooks has been a game of backsliding and pushback.
So, here are the half-dozen key reasons homes construction is ripe for disruptive innovation right now:
- Money talks. Investment capital in need of yield is pouring into construction tech and home builder operations at a rate of 60% increase, year-on-year through the first three quarters of 2018, to over $5 billion. Investors range from Softbank and Foxconn to Berkshire Hathaway BRK.B +0% to Japan-based conglomerates like Sekisui House and Sumitomo to endemic channel players like LP Building Products.
- Labor Capacity Constraint. Job openings in construction have trended upward, immigration laws are getting tighter, and the current skilled labor force among building trades “ain’t getting no younger,” with workers aging out faster than they’re coming in. Builders are delaying and even declining projects, losing money, because they can’t count on a predictable pipeline of workers. What’s more expectations of a return to plentiful cheap labor are gone. Something’s got to give.
- A Millennial make-over: As young adult buyers come into their own in their careers, and shed college debt, they’re not bringing with them pre-conceptions that new houses should be large in terms of square footage. Connectivity—to neighborhoods, outdoors, food, health, and social networks—is the new square footage.