566. Why Is It So Hard (and Expensive) to Build Anything in America?
Nov 23, 2023
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Chad Syverson, an economics professor at the University of Chicago, Ed Glaeser from Harvard, and Vaughan Buckley, CEO of Volumetric Building Companies, dive into the perplexing inefficiencies of the U.S. construction sector. They discuss why construction productivity has stagnated since the 1970s, explore the potential of modular and prefabricated solutions, and share insights on the impact of regulations and labor dynamics. The conversation challenges preconceived notions about modular designs and highlights innovative approaches to address housing shortages.
Productivity in the US construction sector has been declining for over 50 years due to factors such as regulations, stagnant innovation, and inefficiencies, leading to increased prices for housing and infrastructure.
Modular construction, where building components are manufactured in a factory and assembled on-site, has the potential to increase efficiency and reduce costs, but faces challenges including the dominance of small construction firms, lack of investment in research and development, and regulatory barriers.
Modular construction offers advantages such as faster construction timelines, reduced waste and pollution, improved safety, and increased labor accessibility, and can address housing shortages and support urban regeneration if incentivized and promoted by governments and industry leaders.
Deep dives
The Decline of Productivity in the US Construction Sector
Productivity in the US construction sector has been declining for over 50 years, unlike most other industries. A report from the Johnson Administration in 1968 warned of the potential impact of this decline. A recent paper reveals that the value added by a construction worker today is about 40% less than in 1970. This drop in productivity leads to increased prices for housing, infrastructure, and other construction-related projects. While the causes of this decline are complex and debated, factors such as regulations, stagnant innovation, and inefficiencies contribute to the problem. Modular construction has emerged as a potential solution, with examples of successful projects in countries like Japan and Sweden.
The Challenges of Implementing Modular Construction in the US
Modular construction, where building components are manufactured in a factory and assembled on-site, has the potential to increase efficiency and reduce costs in the construction industry. However, it currently only accounts for around 6% of construction in the US. The challenges to wider adoption include the dominance of small construction firms, lack of investment in research and development, and regulatory barriers. Countries like Canada and Ireland have used incentives and regulations to encourage modular construction. Significant changes to regulations and industry practices, as well as greater investment and innovation, are needed to boost the modular construction industry in the US.
The Potential Benefits of Modular Construction
Modular construction offers several advantages, including faster construction timelines, reduced waste and pollution, improved safety, and increased labor accessibility. The use of factories for construction can allow for streamlined processes and automation, leading to higher productivity. Modular construction also has the potential to address housing shortages, provide affordable housing options, and support urban regeneration. Governments and industry leaders can incentivize the adoption of modular construction by providing financial support, easing regulations, and promoting collaboration between different stakeholders.
The Need for Policy Changes and Industry Collaboration
To overcome the productivity challenges in the US construction sector, a combination of policy changes and industry collaboration is necessary. Governments should consider implementing incentives and regulations that promote modular construction and streamline the building process. This requires overcoming resistance from homeowners and local communities who may be resistant to changes that could impact property values. Increased investment in research and development is needed to drive technological innovation and improve the efficiency and sustainability of construction practices. Additionally, industry collaboration and partnerships between modular construction companies, builders, designers, and regulators can help accelerate the adoption of modular construction and drive positive change in the industry.
The Future of Construction: Automation and Innovation
The future of the construction industry lies in embracing automation, innovation, and new technologies. Offsite construction methods, such as modular construction, are poised to play a significant role in transforming the industry. By shifting towards mass production and adopting advanced manufacturing techniques, the construction sector can overcome productivity challenges, reduce costs, and enhance sustainability. Governments, industry leaders, and researchers must work together to drive innovation, remove barriers, and create an environment conducive to the widespread adoption of modular construction and other transformative practices.
Most industries have become more productive over time. But not construction! We identify the causes — and possible solutions. (Can you say ... “prefab”?)
