How the Housing Shortage Can Kickstart Innovations in Design and Construction

Barry LePatner

The current housing shortage throughout the nation has been long in coming. The factors range from the continuing pandemic-induced supply chain problems, a multigenerational preference of rent-by-choice as well as rent-by-demand for multifamily rental units, an inadequate supply of new construction due to skilled worker shortages, upturns in pricing for single-family homes, and the Federal Reserve’s policy to raise interest rates to restrain inflation.

With all these obstacles confronting the housing industry, it would be easy to understand the pessimism confronting design professionals and the construction industry for prospects of new business over the next few years. But a close study of other critical factors reveals that it may be the housing industry that kickstarts these two fields into finally reinventing themselves into more efficient 21st Century versions. These critical reinventions will leave behind all vestiges of the largely antediluvian practices that continue to limit designers and contractors from seeking greater efficiencies and, in turn, increased profitability that has long evaded them.

Most importantly, the bright spot for the housing industry and a renewed construction uptick rests with the fact that global investors see these real estate asset classes as a cornerstone of their portfolios. These realities, according to a recent report from PWC, act as “the rocket fuel of a global capital rotation toward de-risked assets (i.e., the safe haven of U.S. residential real estate.)”

These investment classes will support and catalyze new growth to more modernized manufacturing of all critical modular housing, and greater use of advanced technology and robotics, which will, in turn, support needed housing to meet the increasing demographic growth over the next decade and beyond. In addition, we cannot ignore the fact that a staggering number of “baby boomers” (85 million) are actively pursuing senior housing as they turn 83, the average age this generation enters senior citizen housing across the U.S. It should not be difficult to understand that the demand for and the opportunity to supply new seniors housing is right now.

Housing as Economic Driver

By the end of 2022, according to a recent report in The Economist, the U.S. economy accounted for about 25 percent of global G.D. While the prospects for a recession remain, few economists anticipate it will be either severe or lengthy. Most experts believe the Federal Reserve will slow increases or begin to reduce interest rates by the end of 2023, reducing investor uncertainty when valuing assets and underwriting new development projects. As a result, home ownership—the most underserved real estate market—and the need for multi-family housing will attract private capital to meet the massive needs identified above.

Developers and institutional investors will be seeking out architects, engineers, and construction firms that have invested in the latest technology to ensure their projects are designed efficiently, i.e., using Building Information Modeling that includes specifications for materials and equipment sourced from markets no longer subject to supply chain issues. Yes, that means they will expect their design teams to be responsible for the products they specify to ensure they no longer will automatically come from overseas sources that still face shipping and transportation delays from across the globe.

They will be seeking design teams with experience in modular design, which, according to a recent ULI publication, ensures that factory-built homes can be delivered to the site ready for installation, as the new technologies can “dramatically reduce the need for labor and shrink production times at more affordable costs.”

The next decade will provide numerous opportunities for the design and construction industry to re-invent itself, with its leaders in prime position to shed the outdated ways we have been designing and constructing our built environment for the past century, both pushing and pulling the rest of the industry along with them. The housing market is the rocket fuel that will stimulate substantial growth over the next decade. Architects, engineers, and contractors must recognize these times as singular opportunities to rise to the moment, shed their archaic shells to handle the massive needs of our nation in the years ahead. Those who heed this call will become the clear winners, while those holding onto outdated and inefficient practice models will get left behind.

Barry B. LePatner is founder of New York-based LePatner Associates LLP, a law firm specializing in the real estate, construction and design fields.