Real Estate Industry News

There is no shortage of media coverage on the housing industry right now. Most of it points to rising prices and the lack of affordability. Missing from most of those stories are the escalating costs and ever increasing requirements to build homes.

There are hundreds of inputs into the cost of a home, including land, labor, regulation, and materials. However, in the age of climate crises, there is more focus on finding the perfect, protected land, the right materials, and following the regulations that hopefully are written to keep the home and owner safe in the advent of a climate event.

While all of that sounds incredibly rational, pressure is on for builders to lower costs. The National Association of Home Builders doesn’t have average construction cost increases for housing, but offered average construction values instead.

The group’s chief economist Rob Dietz shared with me that US Census permit data shows that the average construction value, which does not include land, increased 78% since 2015 – going from $166,276 to $295,965 in 2021.

Dietz added that values have been increasing due to rising regulatory costs, rising material costs, limited lot availability, and skilled labor shortages among other factors.

“Moreover, it is an average, so if entry level homes are simply not built, it rises as an average,” he said. “And that has happened.”

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Burning Up

Wildfires are just one climate event adding pressure to the housing industry. USA Today reported that in 2022 there were 65,000 wildfires in the US, adding up to more than 7 million burned acres.

Nonprofit research organization First Street Foundation reports that more than 20 million properties across the US are threatened by at least “moderate” wildfire risk, or have up to a 6% chance of being in a blaze at some point in the life of a 30-year mortgage.

During these fires, homes are destroyed, and at the same time, building codes are revised and become more complicated to navigate. Plus, surrounding land becomes more expensive, all adding to the costs to build again.

PolicyGenius reported on the risks in the most fire-prone states and the meanings of the risk. For instance, Colorado has 2.2 million homes and the number of those at risk sits around 17%. In 2021, the state’s worst year for wildfire losses that were tracked by insurance, it added up to $450 million. At an even higher risk is Idaho, where 26% of homes are at risk.

Even though this data shows the significant risks to homeowners, Colorado’s legislative efforts to require fire-resistant construction materials have not been successful. At the same time, the number of homes being built in the wildfire prone areas is growing, and in Colorado has more than doubled between 1990 and 2020.

There continues to be a snowball effect. The more wildfires that occur, the more land is susceptible to the burning, the more homes are at risk, the more costs increase for finding land and building homes.

The US Fire Administration shows that the amount of the wildland urban interface, or the zone between development and wildlife, is growing by nearly two million acres per year. The group also reports that homes in 70,000 communities worth $1.3 trillion are now within the path of a fire event.

According to the Federal Emergency Management Agency, adopting and carrying out building codes is the most effective mitigation strategy. In 2019, the National Institute of Building Science published a report underlining this finding. The report showed that implementing the International Code Council’s 2015 International Wildland Urban Interface Code saved $4 for every $1 invested and that bringing existing buildings up to that code could provide up to $8 in benefits for each dollar spent.

Blazing Innovative Solutions

Former fire chief and now chief scientific officer at FireGuardia, Oscar Dominguez, is working to commercialize a fireproof plastic he invented in 2002 to bring the 100-year-old fire detection and suppression techniques used today up to date.

“Many insurance carriers are refusing coverage or won’t renew policies when homes are built in fire prone zones,” said Heather Towsley, president and chief executive officer at FireGuardia. “The demand for greater smart home construction technology could accelerate homeowner insurance incentives for using more sophisticated home fire suppression technology – much like water conservation and solar panel rebates.”

She shares that the FireGuardia solution can retrofit without driving up costs. The product can be applied to a number of construction materials to make them fireproof.

The company has a focus on bringing the solution to scale with an incredibly affordable coating product, targeting between $50 to $60 per 5-gallon bucket where other solutions land between $180 to $600, and hopes to be available later this year after an investment round.

The FireGuardia home fire suppression system integrates detection, suppression and a software tool. It also is nontoxic, sustainably sourced, and has low VOC output, taking out the poisonous materials that have historically been used in fire retardants, so there would be no hazardous material to clean up post fire.

Towsley shared an example of the product’s performance. In the first 20 seconds of a piece of Kevlar subjected to fire, it rose to 360 degrees Fahrenheit. A FireGuardia-coated piece of paper only reached 100 degrees in that time.

Another similar solution is from Singapore-based Fire Terminator. Judah Jay is the founder, inventor and scientist behind this plant-based, liquid technology that provides an aerodynamic shield on each molecule of a combustible material, like the wood and drywall used to build homes.

Jay’s technology comes from work on combustion research for aerospace applications that he did in the 1980s with Russian, Bulgarian and other Eastern European scientists.

“Once you introduce heat to our product, free radicals are produced that negate the combustion molecule that fuels the fire,” Jay said. “Without combustion, the fire cannot start or spread. That is how we can prevent and extinguish any fire. The higher the temperature, the more free radicals are produced, therefore, the better the performance of our product. Once the fire is extinguished, it can no longer be reignited.”

Jetfire Xin is the company’s business developer and is working on ways to commercialize the innovation across North America. Fire Terminator’s goal is to provide every homeowner with a home protection product. The product will be sold by the liter, retailing at $20. After mixing, one liter can cover 172 square feet.

In addition, treating wood with Fire Terminator makes it incombustible and protects it against insect infestations and mold. A coating process over the wood can also be done, which would substantially increase its resilience against fire damage.

Finally, Xin points out that homes and buildings that are equipped with sprinkler systems can add Fire Terminator into the water in the system to prevent a fire from spreading, putting it out quickly.

Home Design to Minimize Risk

California builder Connect Homes has been focused on thoughtful design meant to minimize the risk of fire damages. Its homes are designed without eaves, which prevents flying embers from blowing up into the attic and starting a fire. The roofs also have a specific rating to be effective against severe fire exposure.

Plus, the builder also sources non-combustible exterior sheathing and finishes for the most dangerous areas. Connect Homes selects dual-pane glass exterior doors and windows to reduce the chance of breakage that typically occurs due to the extreme heat of a wildfire.

Gordon Stott, co-founder of the home building company, underlines the value of creating defensible space with limited landscaping.

“For me, it’s that balance of knowing that lovely landscaping could turn into a liability,” he said. “Another feature of our prefab system is the extensive use of floor-to-ceiling glass. I’ve been impressed with how floor-to-ceiling glass can sometimes overcome limitations of more limited landscaping. Standing in a modern house, feeling connected to the outdoors often still feels pretty great, even with limited landscaping and if the plant action is far away.”

Bottom line is that building and rebuilding isn’t the answer. Neither can any solution live on an island. There has to be industry-wide collaboration for the right regulations, the most innovative designs and products, along with ways to reduce the costs to bring these solutions to reality.