Every major US city is rifling and crying out over one common concern — Affordable Housing! From the “gated communities” of Palo Alto to the deregulating unit epidemic of New York City, the breaking point is palpable (former planning commission Kate Vershov Downing, penned this letter of resignation back in August). Every city recognizes the issue and has put forth varying sized efforts to solve the problem but the problems persist and there does not seem to be an end in sight. While there are programs like 421A in NYC (although that’s a clustered mess in to itself) that incentivize developers to build affordable in exchange for tax abatements, the supply can’t keep up with the demand and they can’t be built fast enough.
More developers would build affordable if the financial incentives worked in their favor. Unfortunately the economics don’t make sense in most areas as the cost of construction, the time costs of development and the opportunity to profit from market rate and luxury development far outweigh the opportunity to build affordable. It begs the question, what levers must be pulled to build affordable housing in a manner that’s win-win-win (tenants-city-developer).
One part of the value chain that I’m increasingly curious about is the construction process and the rising cost of labor and materials in our local economies. Cost of construction in The Bay Area and New York City are astronomical. The human capital required for a single project is exorbitant and delivery times for projects have to be taken as “a grain of salt” with the unpredictable nature of the general contractor business. Manufacturing is going full robotic, why isn’t construction following the trend as quickly?
Pre-fab construction (off-site assemblage of units) was a concept drummed up in sci-fi movies that alluded to a future of cities shrouded in shadow-casting skyscrapers. While Pre-fab construction is a thing of today, it’s still expensive to perform, logistically difficult to execute due to transportation costs and it comes with zoning and architectural design constraints. Pre-fab also requires an immense amount of manufacturing space and human capital — all huge concerns of economic viability. New York City has seen it’s own test case come to a rapid demise for Pre-fab as the complexities to build modular have hit a breaking point with two shuttering companies. We still have a ways to go in the construction technology industry. Other countries like China are beating us at this game and innovating faster to meet their huge demands.
So how do we create a future where modular pre-fab makes sense logistically and economically to the point where it can rapidly address the affordability crisis? How do we as a country invest in urban density technologies such as robotic construction units that can build pre-fab faster and cheaper while requiring less space (Sidewalk Labs?)? Tesla is well on it’s way to going full robotic for the construction of it’s (car) units, maybe they’ll be the ones who will develop your kitchen, bathroom, and living room some day.
While we are still far off from answering these technological questions, it is the problem of local administrations to address and work with developers in the form of policy and financial incentives. The city of New York, the city of San Francisco, etc. need to continue to find creative ways to incentivize developers to build affordable units that make sense within their pro-formas. Tax abatements, future development and zoning rights are all levers in the arsenal. Whatever happens, we have to continue to push forward to make the numbers work to solve our affordability problems.