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Decreasing Construction Costs and New Public Opinion Pave the Way for More Affordable Housing

It’s no secret that America has an affordable housing problem, and economic strains from the pandemic have only made it worse. For example, many of the country’s eviction moratoriums set in place from the COVID-19 outbreak end in August, leaving a huge part of the population scrambling to find affordable housing. In New York City, finding affordable housing literally means winning the lottery—the New York City affordable housing lottery, which since its online inception in 2013, has seen over 25 million applications, all of which are vying for the 40,000 available units. This massive undersupply is why a randomized lottery system picks the winners. For the losers, it can mean living in bad neighborhoods and undesirable apartments, or worse.

And New York is just one example of places throughout the country (and the world) that have little to no affordable housing options. According to the Urban Institute’s interactive affordable housing development cost feature, created in conjunction with the National Housing Conference, only 29 affordable rental units exist for every 100 households in need. This means that not even two thirds of households in need of affordable housing will not be able to find it. So, if there is such a vast demand for affordable housing, why aren’t developers jumping to meet it?

There has long been the notion that developments of any kind can taint a neighborhood through gentrification. There is an assumed fear that new developments somehow eradicate the character or charm of an area, buying out mom and pop businesses and replacing them with chains, eventually causing long-standing residents to move away due to a higher cost of living. The reason this notion exists is because it has happened in the past, but many developers are now seeking residents’ input, listening to their concerns, and working with them to ensure their needs are met along with the needs of the project. 

Residents also fear that affordable housing developments, specifically, will bring down their property value by inviting lower income families into the neighborhood. Stereotyping and racial discrimination have long played roles in these assumptions about affordable housing developments, but neighborhoods actually benefit from cultural diversification because it provides a mixture of businesses that attract foot traffic. Moreover, new research actually shows that the attitude towards new developments has drastically shifted towards a more positive viewpoint. 

CoUrbanize, a online community engagement platform for real estate professionals, recently conducted a survey of over 1,000 people across the U.S. to determine what their attitudes were concerning new developments. Perhaps surprisingly, they found that about 82 percent of respondents felt that developments provided benefits for their communities, including economic growth, new housing stock, job creation, and new public amenity offerings. About 55 percent of respondents felt that affordable housing was the most valued aspect of new developments. So while there may still be some stigmas associated with new developments, the viewpoint is changing as more and more people see a need to fill in affordable housing and understand how it benefits communities.  

While residents’ views on affordable housing may be changing for the better, there are other impediments that prevent developments from happening. The Harvard Joint Center for Housing Studies published a report last year that examines housing affordability and construction innovation in both single and multifamily dwellings from a builder’s perspective. Rising construction costs, including labor and materials, make it difficult for developers to achieve profitability on affordable housing projects. Depending on where the project is located, land acquisition costs can also be high, especially due to shortages of developable land in densely populated metropolises where many people need to live to be close to work. While subsidies like tax credits and grants can help developers close financing gaps, they are not always enough to cover costs, let alone to see real returns. In order for affordable housing developments to make sense as a profitable investment, construction costs need to be reduced. 

The solution to lowering construction costs lies in technology and innovation. When people hear the term modular housing, they often assume the quality suffers, but thanks to new technologies, modular housing, or factory built houses, offer affordable, quality housing on a larger scale. Construction companies like Boxabl, Blokable, and Skender are finding ways to automate parts of the construction process without sacrificing quality and using modular designs to create affordable housing options. Galiano Tiramani is the head of business development at Boxabl, a construction technology startup that is researching and experimenting with different ways of engineering to create a new building construction system. “Housing is pre-industrial, pre-factory. Why not make houses the same way we make everything else? Our goal is to build houses the way we build cars, which is manufactured on an assembly line in a factory, essentially mass production,” said Tiramani.

While Boxabl’s goal is to create an automated factory model that can be replicated to meet global housing needs, they needed to start smaller before expanding. “Our very first model is the Casita,” said Tiramani, which is a twenty foot by twenty foot unit with a full kitchen, bathroom, and combined bedroom/living space. The Casita is currently priced at $50,000, completely furnished, and Tiramani anticipates costs will continue to go down as they upgrade to an automated factory that enables mass production and buying in bulk. “We designed our units to be portable to cut down on shipping costs and restrictions, so the Casita packs up to be 8.5 by 8.5 feet. This makes it highway legal and complies with all shipping standards, which is one of the ways we lower costs,” said Tiramani. They also lower costs by using efficient materials, including steel and concrete, that are still sturdy enough to withstand a variety of climates and weather conditions, including high winds, heavy rains and even earthquakes.

Shipping, delivery, and installation often drive up costs for modulars. The Casita was designed to reduce labor costs through its portability. By creating foldable walls and roofs that extend on tracks, a unit can be set up in as little as an hour with just a few people. Unloading the unit doesn’t require the use of a crane either. The driver is able to do it himself using a jack system. The Casita is currently targeted for backyard use in places like CA and NV as a rental unit or pool house where those additional dwellings are legal. All utilities connect to the same corner, on a wall rather than through the floor to make set up easier. Eventually, Tiramani said Boxabl’s goal is to expand upon the Casita with different sized floor plans that easily connect and stack to create customized structures of any size. “We’re trying to make a universal building box that is architecturally indifferent, meaning it works for any type of building. It’s like legos. You can make anything—from single family homes to offices,” said Tiramani.

The affordable housing crisis is a multifaceted problem. Socioeconomic disparities and the wage gap rising slower than housing prices are also contributing issues that need to be addressed from multiple angles. Lowering construction costs that impede new developments is just one of the solutions needed to address the overarching issue of affordable housing. Technology startups are also working to expand co-living options, provide market transparency, give renters bargaining power, and give homeowners access to equity. These solutions are equally important in order to approach affordable housing in a holistic way, but it still may not be enough, especially when economic support from the COVID-19 crisis runs out. 

Without the inventory new developments provide, renters and buyers will be stuck in a constant struggle of trying to find a place that simply doesn’t exist. But it could exist if construction costs can be lowered enough to incentivize developers to pursue affordable housing. Tiramani envisions a future where that struggle disappears: “We are trying to change the industry by automating building construction, and through automation we can drive costs down without sacrificing quality.” 

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