I've been noticing a lot of folks working in the world of BIM and construction technology startups lately. With the recent backlash against Autodesk and the increasing costs of architectural software, I see that there are lot of new players (and venture capital) moving into the world of construction tech, trying to find new ways to "disrupt" traditional construction and reduce costs. There have been major players in this field over the past decade, from Katerra to WeWork, but many smaller companies have emerged most recently. Many are pitching home renovations (Block Renovation), prefab backyard studios, new BIM/parametric platforms (BlenderBIM , Hypar), and new Construction Technology tools (Join). These startups are working towards the demystification of the construction and design industry, which has been marred by stagnant productivity, entrenched incumbents, and increasing costs (See McKinsey Report and 5D BIM). They are trying to move the industry towards greater digital adoption, more standardization, transitioning from service to products, and more vertical integration in the supply/value chain.
While these developments are great for a very old industry, I am questioning if they are enough. Industry digitization will help foster more transparency across disciplines and reduce construction time, but there still seems to be major structural issues in the economy that reduce product quality and increase costs. Until these structural issues can be addressed, digital tools will just seem more like band aids/stop-gaps to long-term problems, rather than clear, viable solutions in and of itself. For instance, an open-source BIM platform is great. This reduces overhead technology costs for everyone (architects, engineers, developers, contractors). On the other hand, do we really think that a better rendering engine in the documentation program, (that is 10% better than the current market) will help improve construction quality and reduce costs THAT much? What are we really solving here?
My hypothesis is that inefficiencies in construction and construction quality are not the fault of the architect, but of the economy in general. Incentives are not aligned for the industry to make better quality products, due to market and political factors. Until there is political reform in these areas, it would be difficult to change the overarching realities of construction and real estate.
HOWEVER, if this is the reality we live in, and operate in, and these are the major serious problems facing the industry, then we can work with it and find solutions. After all, you can't find solutions if you don't even know what the problem is.
Why is construction expensive and product quality poor?
- Cost of Land: Rising cost of land, due to land and RE as an attractive investment vehicle during uncertainty, and just time and speculation
- Solution: Can there be more regulations against exorbitant RE speculation?
- Solution: How can we expand land and RE supply (this is a pipe dream)?
- Cost of Labor: Rising labor costs due to less skilled labor pool (more retirement, less newcomers), more stringent government protections (unionized work on public projects, major cities), more employment insecurity pushing prices per job (when will I get my next gig?) for independent contractors
- Solution: Can the government incentivize more trades skill training? (immigration?)
- Solution: Can we develop robotics to reduce reliance on a shrinking labor pool?
- Cost of Materials: Rising costs of materials, due to shrinking competition (M&A of large manufacturers, supply chains), higher company investments in technology per product (embedded costs), more embedded technology, more stringent codes, trade wars, brittle supply chains (overseas factories, increased logistics), more "optimized" products (break faster, planned obsolescence)
- Solution: Can we increase material and supplier competition? (Break up monopolies, or have less protectionism)
- Solution: Can we incentivize long-term material life versus short-term optimization?
- Solution: We need more home-grown, local suppliers and supply chains to reduce costs; reduce the "brittleness" of just-in-time global supply chains
- Government Approvals: More uncertainty and drawn out processes for government permitting, due to aging populations (growing NIMBY and anti-progress), shrinking local government budgets (allocations to building and planning departments, less people for more projects), outdated zoning codes (more time spent on "special circumstances/permits"), more hostile political atmosphere in general
- Solution: More Youth Voter and Civic Participation (Fight the negative aspects of NIMBYISM)
- Solution: Increase local government budgets, after decades of tax cuts (Incentivize public good over private interests)
- Solution: Update zoning codes to reflect demographic, economic, and political realities
- Solution: Invest in stronger parties (Ian Shapiro Lectures) that support moderate long-term development, but development in general
- Sustainability and Codes: More energy and environmental requirements force new buildings to adopt new and often expensive components, which haven't reached economies of scale (and which suppliers charge more for); old renovations must meet updated code requirements; costs of sustainability requirements are embedded into project, b/c public/users doesn't have a good understand of its benefits and longer-term savings (lack of public education and short-term mindset)
- Solution: Improve public education on sustainability; help them understand the long-term costs and benefits, b/c right now the education is very poor and full of holes
- Solution: Make more tax credits available for sustainable development to offset the cost of new technology adoption that hasn't yet reached scale; make those competitive with legacy products that are much cheaper
- Developer Incentives: Increased costs across all these fields (see above) incentivize developers to focus on the high end of the market, to retain profit margins respective to the amount of risk they undertake (this means that new development is focused on upper classes, global investor class); affordable housing lotteries, or components, still don’t solve the central problems listed above, and affordable housing costs are spread across the market-rate ones
- Solution: Solve the problems above (rising material, labor costs) to incentivize projects at the lower ends of the market
- Solution: Properly reform affordable housing requirements; or, just expand and incentivize public housing developments to reduce the predatory forces of the market (so that private markets have more price competition versus public housing)
- Solution: (Magic) Raise middle class wages to incentivize developments for middle class (higher purchasing power, bigger market); This seems like a pipe dream, though.