Can new technology solve the global housing crisis?

This blog was originally published in June 2021 in World Bank Blogs, here:

From 3D printing to biomanufactured materialsnew building technologies have been making the headlines as a quicker—and cheaper—way to address the global housing deficit, which is expected to affect 1.6 billion people by 2025.  These new technologies could also present outsized environmental benefits by cutting construction waste, while proving to be carbon neutral or even negative. This enthusiasm has been much welcomed, but do these technologies live up to the hype?

While new housing technologies can help cut waste and reduce GHG emissions, they are unlikely to make a dent in the global housing crisis, unless accompanied by other changes.  In fact, prefabricated houses have existed since the early 1900s in the United States, popularized by Sears, which sold tens of thousands of affordable housing "kits." A century later, prefab housing technology is still considered an innovation that has yet to take off. The reason may lie in the fact that construction is only one piece of the housing puzzle. Here are four elements to remember as we consider adopting new housing tech to solve the global housing crisis:

  1. Focus on the customer by expanding options available to families. By emphasizing new construction and homeownership, the global housing market has become too standardized. Though standardization is often promoted to increase production efficiency and reduce costs, one-size-fits-all may not be the right answer. Case in point: Mexico’s mass production of readymade homes in less-than-desirable locations caused the whole housing market to crash. Many of the units are still empty today. Surely, a market of that size should have more choices. The COVID-19 pandemic has highlighted the importance of adaptability in housing: being able to add or subtract walls, for example, or layouts that could adapt to the needs of remote work. Beyond new housing construction, many families need access to simple repairs or upgrades to their existing units. Estimates show that two-thirds of the buildings that exist today will be around in 2050—presenting both structural and environmental problems, on top of other features affecting quality of life. The good news is that technology is already available to address these issues: 3D scans are mapping informal settlements; machine learning software is being used to support countries’ efforts and on-the-ground inspections to efficiently and cheaply identify buildings at risk of collapse.  Newer technologies, such as light-reflecting paint and low-cost structural retrofit techniques can go a long way toward making homes safer and greener.
  2. Design innovative financing schemesToday, many households in the world cannot access a formal mortgage because they either work in the informal economy or do not have official land titles.  Proof of income and down payment requirements also block access to mortgages. Innovations in fintech will help underwrite informal incomes and enable households working in the informal economy to receive a housing loan. In the meantime, exploring options such as blockchain technology to ensure clean land titles or an innovative use of guarantee funds can provide families with informal and irregular incomes access to credit at reasonable costs and  financial institutions with greater security.
  3. Create innovative housing solutions for those who cannot (or do not want to) immediately purchase a homeThe Economist has branded the quasi-global focus worldwide focus on homeownership a big mistake, which has only created more inequality and inaccessibility in the housing market.  Rent-to-own start-ups are springing up around the world to meet the needs of this large market. Just like Airbnb disrupted the vacation rental market, rental platforms can play a key role in supporting low-income households, refugees and other underserved segments of the population who struggle to find adequate rental housing. In many places, landlords demand exorbitant fees upfront and do not sign a formal contract with their tenants. Disruption in the global rental industry for low-income families can formalize the market, protect the rights and savings of honest renters and benefit from government support through rental subsidy schemes or guarantee funds to reduce or eliminate upfront deposits.
  4. Promote long-term policy changesThe barrier to housing accessibility is often linked to the high costs of urban land, which makes single-family housing expensive.  In emerging markets, the issue can be more complex as urban plans are poorly implemented, infrastructure is stretched and land titles, often unavailable. These issues make serviced, well located, and titled land prohibitively expensive and force households to live in precarious areas without access to safe drinking water or security of tenure. Developers build homes far from city centers where land remains relatively cheap, making commutes longer and stretching infrastructure even further. Urban policies that incentivize strategic land allocation and formalization, transportation, green building, while taking advantage of proven, cost-effective technological solutions can create livable, sustainable cities. Mexico and Colombia learned this lesson and have since revamped its policies to ensure that new housing investments support urban regeneration, sustainable construction, and home improvements. At the end of the day, the greenest home built in suburbia is still more polluting than a classic urban house. To truly cut housing costs and its environmental footprint, construction tech cannot repeat the same housing designs and mistakes that have made our cities unsustainable in the past. 

Technology is always in search of a problem to solve. When it comes to the housing crisis, there are many.  As we embrace innovative construction technologies, let us not forget that housing is more than bricks and mortar. Solving the global housing shortage will also require innovations in policy, finance, urban planning and beyond.