How PropTech Can Solve For Affordable Housing
Building homes and apartments the way we have the last 50 years isn’t solving the problem.
Anyone notice housing and apartment prices getting a little steep?
I’m sure we can just build our way out of an affordability crisis, right?
Let’s just keep building homes and apartments like we always have and I’m sure it will all work out.
What rising material costs?
What labor shortage?
What expensive land and onerous zoning laws?
What falling construction margins?
We’ll just keep building stuff the way we always have and boost the supply of homes and that should solve it, right?
Good luck with that, ace.
Me and my peers are going to try the tech route.
I’ve already touched on how I think companies like Katerra are innovating in the space, but I thought it would be useful to get a basic layout of the affordable housing tech landscape here in black-and white.
We’ll start with the basic concepts and definitions and then dive deeper into specifics in future pieces.
First, what types of technology are targeted specifically at affordable housing?
Let’s look at four —
- 3D Printing
We are going to dive into this in depth, but 3D printing has charged into construction in recent years. With companies like ICON, Apis Cor, Cobod, and many others (we’ll detail more companies in a full analysis), there are now homes and commercial buildings being “printed” with some regularity.
The basic concept is remarkably simple: If you can find the right material to print with (instead of a desktop plastic), you can eliminate a significant amount of waste and time in the construction process.
That simple concept turns out to be fairly challenging in practice. More on that later.
Back to affordability, that waste/time saving equates to significant cost savings. Most 3D printed homes cost 50% to 80% less than traditionally-built homes. Cost savings means more affordable housing.
**It’s probably worth noting that the majority of these projects are still in extremely low-income, third world markets. And while that is certainly important and impactful, you shouldn’t get the impression that there are dozens of homes being printed in trendy urban neighborhoods in the U.S. (At least, not as of March 2020). **
2. Pre-fab Building
Another simple idea with nuanced execution.
The idea is — On-site construction is wasteful and prone to weather delays and labor supply and quality issues. Let’s build most of the home in a controlled environment (i.e. a factory) and ship it to the site!
With Pre-fab building, manufacturers and builders can fabricate building components or panels in a controlled environment and make that process highly repeatable (see, efficient).
As with 3D, the execution is actually somewhat tricky. How large of a component/panel can you build and it still be cost effective to send to a site? How far from the factory can you actually build? If it’s on the back of a flatbed truck, how do you keep all your components thin enough to fit into one lane of highway traffic?
One of the main hurdles in this process is the precision necessary to make the process efficient. With typical construction, a skilled GC and project manager can adapt and fix things on the fly. With warehouse-built components, you are forced to have extremely precise measurements and plans so that all that happens on site is connection of components. More on that later.
The takeaway should be — there are still few simple answers here.
But, there are some great minds at companies like Katerra and RadUrban working on the problem and we are going to dig into the players and trends in the space.
3. Modular Building
Similar to pre-fab but slightly different.
You can probably see how that factory building process leads you to build a building in its component parts. For example, you can pre-frame and put all the MEP (Mechanical, Electrical, and Plumbing for those of you who aren’t construction dorks like I am) in a bathroom, put it on a flatbed truck, drive it to the construction site, and then attach it to the foundation.
That bathroom is one “module” of the finished building. Hence, “modular” construction. Bedrooms, kitchens, closest, and laundry rooms are all modules.
Again, this often goes hand-in-hand with pre-fab, but there are entire technology stacks and geometry problems that address the simple idea of breaking a building down into its component rooms. So I think Modular merits its own subcategory.
4. FinTech
A final category that needs consideration is the group of FinTech companies targeting affordable housing.
While the construction companies above may get all the “eye candy” pictures and show up in Architectural Digest/Houzz, there are dozens of interesting companies trying to help owners and renters with down payment alternatives, unlocking equity, non-traditional financing, and a handful of other financial tools to make the burden of home ownership or rentership in the 2020s slightly less cumbersome.
We’ll unpack some of those and their capabilities in a subsequent article.
Those are the four main subcategories we will cover in our dive into affordable housing tech. Most of the companies we will profile use some combination of all four and we’ll dig into use cases.
Big thanks to Mollie at Katerra and Hugo at Situs for helping me co-author this article and the coming series on affordable housing tech. Look for more of their quotes in the deep dives.
For now, if you think we missed anything or want to suggest companies for us to include in our analysis, shoot me a note — MKnight@blkhwk.com
