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Numerous factors have contributed to America’s affordable housing crisis. On the West Coast, tech companies have generated such unprecedented wealth that entire communities have become gentrified and unaffordable. Nationally, the Fed has kept interest rates at historic lows for nearly a decade. These two forces have created a perfect storm: a crisis of unaffordable housing in urban America.
A recent McKinsey report concluded that California must build 3.5 million more homes by the year 2025 — which translates to 350,000 units per year in each of the next seven years. Given current zoning laws, land scarcity in urban areas and the myriad of factors making that a seemingly insurmountable task, it’s time we embrace innovation and look toward some new ideas.
Here are the three areas where private sector innovation could make a meaningful impact on solving this housing crisis.
1. Construction
The way we build has not radically changed over the past 100 years. Wood and steel are our primary building materials, and human labor puts it together. The average cost per square foot of new residential construction is typically estimated to be around $150. So, if you didn’t have to pay for land, and you built a 2,000-square-foot home, it would still cost $300,000.
Shelter is among the most fundamental of human needs. For thousands of years we have had to build shelters for ourselves, and now, in the 21st century, we have reached the point in which we can’t even do so for under a quarter of a million dollars.
There is a great deal of room for innovation in the area of construction. One hundred years ago, Frank Lloyd Wright envisioned a modular block system. Today, artisans are repurposing shipping containers while tech companies are 3-D printing structures. However, despite these pockets of innovation, construction remains generally unchanged.
As I see it, until construction methods modernize, we will not escape this crisis. Across the spectrum of industry, the pieces needed to modernize construction are developing, and some yet-to-exist company needs to put it all together. Composite materials and resins are being produced from hemp, while 3-D printers are printing structures (with concrete at the moment), and robots are moving through Amazon warehouses shuffling packages around.
When you put these things together — new materials, 3-D printing and robots — perhaps therein lies a solution. It seems to me that housing is ripe for innovation, and I look forward to the entrepreneurs who meet the need and give the world a $30,000 home.
2. Co-living
With the constraints we face in urban environments around land scarcity, building permits and zoning, even if we could build a $30,000 home, we would have no place to put it. We must get creative with how we utilize space, and co-living provides a logical remedy.
Co-living is thriving right now, with companies like Haven (my company), Common, Ollie, Quarters and Startcity paving a pathway forward. Co-living not only addresses affordable housing and gives people a cost-effective alternative to apartments, but for many, it is actually an improved social structure. Co-living may be the antidote to loneliness and burnout, and if well executed, it may give people a turnkey community they can fit right into.
We have plenty of buildings in urban areas that can be repurposed to accommodate communities of people. If we can’t build 350,000 new homes per year, perhaps we can repurpose 10,000 spaces to accommodate 350,000 people per year.
For those who are unfamiliar, co-living is exactly what it sounds like: people who live together and share common spaces. In a co-living environment, living areas, kitchens, dens, patios, etc. are shared, while bedrooms can be private or shared. This arrangement enables a home or apartment that otherwise might accommodate four people to accommodate 10 or more.
But, beyond just accommodating more people, it actually enables people to pool resources to achieve a higher standard of living. If 10 people split the cost of a given area, they can have a nicer living room, better amenities and a more welcoming kitchen than they might otherwise have on their own. By pooling resources, a home gym, theatre and garden become a lot more attainable.
Co-living is the “easiest” way out of this crisis, in that it doesn’t involve massive new infrastructure — just creativity and mindful management.
3. Transportation
This is a lot easier said than done, but modernizing our transportation systems is the most impactful thing we could do to end this crisis. For example, if Elon Musk’s Hyperloop were a reality, one could live 100 miles from downtown Los Angeles yet only be a 15-minute Hyperloop ride away. A modern and fast transportation system solves the housing crisis by making remote suburban and rural areas feasible places to live, even if you work in a city.
Until the Hyperloop becomes a reality, trains are a great place to start. Today, many people live in Downtown Los Angeles yet work in Santa Monica because of the ease of commuting via the Metro line. If transportation is efficient, you don’t need to live near where you work, and hence you “solve” the urban housing crisis.
Solving the long commute from suburb to downtown is only one part of the problem. Micro-mobility startups like Bird and Lime also play a part. If you get off your train and have to drive 20 blocks in congestion, then the system doesn’t work. You need convenient last-mile transportation systems, and the investments cities make in accommodating scooters, bikes and any new form of last-mile transport are dollars well spent.
Housing is currently the most expensive of human needs, representing almost everyone’s single largest expenditure. Freeing people from this burden means that we have an opportunity to unleash the human potential. Solving the affordable housing crisis is one of the most important causes of our time, and successfully doing so will require entrepreneurs, leaders, designers, builders and people from all walks of life to come together.