BY Bruce Katz
With Ben Preis and Michael Saadine
Oct. 14, 2024
After years of neglect and omission, housing has suddenly become the policy challenge du jour. The recent vice presidential debate featured a spirited back and forth between Governor Tim Walz and Senator J.D. Vance over causes of and solutions to the housing crisis.
This attention and the outsized supply challenges facing the nation naturally raise structural questions of organization and delivery. Which entities — private, public or nonprofit — actually produce housing? What constraints do they currently face, around capital, workers, materials, technologies and supply chains? What innovation is occurring in the sector and by whom? How does the building of homes and multifamily apartments comport with other critical challenges like climate change and the propensity of new manufacturing facilities to locate at the periphery of metropolitan areas, creating a spatial disconnect between home and work?
The housing crisis necessitates that policymakers do something that they haven’t done for decades: Treat housing like an industry. Producing housing at scale requires the nation to invest in an entire ecosystem to bring new homes and apartments to market as quickly and efficiently as possible. This means sparking innovation, bolstering supply chains, and supporting a strong workforce.
In January, the U.S. Department of Defense (“DOD”) released its inaugural National Defense Industrial Strategy (“NDIS”). As the world becomes more dangerous, decades of excessive offshoring and outsourcing have weakened the country’s ability to expand the secure production of essential technologies and systems. To remedy this, the NDIS prioritizes four key areas critical to flexible acquisition, and economic deterrence. For each priority, the NDIS walks through a series of actions, illustrative outcomes and outputs and, chillingly, the risks of not achieving clearly set objectives.
The NDIS goes further by recognizing that addressing national security imperatives requires mobilizing the market energies of cities, metros and states and the networks of public, private and civic entities that make up our decentralized and distributed economic development system. It is intended to catalyze a full national defense strategy, implemented with haste, and DOD is on target to develop an implementation plan by later this month.
The distributed housing industry is obviously quite different from the command-and-control nature of the military industrial complex. Nonetheless, the housing sector is approximately one-sixth of the entire U.S. gross domestic product and increasing shortages of housing necessitate a similarly urgent response. The federated nature of housing requires the federal government to harness the full energies of the nation and help spur a synergistic relationship between all levels of government, sectors of society, technology innovators, and the financial system. In the end, the overarching imperative of delivery — and of meeting national production targets with focus and discipline — has clear echoes.
A true National Housing Industrial Strategy would focus on three logical and linear elements: innovation, supply chains, and workforce. It will require cross-cutting leadership to enable capital and push towards achieving housing production goals.
Innovation: The building of homes is one of the most antiquated industries in the U.S. Efforts to manufacture housing offsite, as in Sweden or Japan, have failed due to the absence of clear norms and standards, the scale of upfront costs, and the lack of aggregated purchasing power. More broadly, efforts to build housing in the places where demand is highest are stymied by local regulations. This artificially restricts many communities from building housing which might provide better access to transportation and employment opportunities.
Supply Chains: Here the nation needs to simplify the stock and flow of housing. Who are the owners of the current inventory of housing? Which entities are adding to the stock? What constraints do they face? How do we unlock their potential? Is the flow of materials efficient? Are there opportunities to bolster the production of needed materials?
Workforce: Firms do not build housing; workers do. Our construction workforce is rapidly aging, and while recent federal investments in infrastructure are welcome, they have also increased demand for many of the same trades that are critical to creating new housing. How can we dramatically expand the pool of workers with the skills necessary to build the next generation of housing — at scale, with quality, at cost?
The federal government has the capacity to catalyze these needed industrial changes across innovation, supply chains, and workforce. The government can start by standing up a Housing Innovation Unit, similar to the existing Defense Innovation Unit (DIU). It would sit within the Office of Policy Research & Development at HUD and should be similarly capitalized to the DIU, which has $1 billion in annual appropriations.
It should be empowered to invest in catalytic and exemplary new housing developments or redevelopments with the aim of testing new technologies and processes. It should provide funding for technological advances that reduce the cost of housing production, like modular and panelized construction, 3-D printing, mass timber, and more. The unit can also augment policy development expertise across the federal government and help scale local policy innovations.
Broadening the use of modular housing construction in the U.S. should be a major area of focus. We know mass modular production is possible, based on our own history with Sears Roebuck and manufactured housing, as well as success cases in Europe, especially in the Nordic countries. However, we have seen limited successes and some high-profile failures of the ambitious American start-ups in the space, largely due to a lack of support.
We propose that the government implement a number of measures to bolster the modular construction industry. First, Congress should authorize and confer sufficient funds to HUD to develop a national performance-based building code for single- and multifamily modular housing. This should address building inspections for partially off-site construction and set energy standards, and HUD’s code should either preempt local codes or incentivize nationwide adoption.
The federal government should also facilitate pooled demand, which is essential to justify the upfront risk-taking associated with launching new modular operations. This program could facilitate regional pools of demand either via shared purchase agreements with local governments, guarantees for developers, or subsidies for manufacturers. It could incentivize innovation and create some solidity at the end of housing’s long, complex supply chain.
The efficiency of the supply chain can also be transformed with a new approach to building code. As a start, HUD should develop an evidence-based model multifamily building code that states and localities can adopt, seeking to reduce unnecessary costs without trading off safety. The National Institute of Standards and Technology can dedicate resources alongside HUD to expand research goals to include an emphasis on housing affordability. A common-sense, cost-conscious building code can streamline processes from the top down, a key step towards a more efficient supply chain.
None of these reforms are possible without a sufficiently large, capable, and diverse workforce. We lost significant company and labor capacity in the construction industry during the Great Recession. Grants should be appropriated to high schools, community colleges, and union trades programs via the Department of Labor to expand technical construction career programs, with the goal of creating 100,000 new skilled tradespeople in the next ten years, with a focus on expanding access to historically underrepresented groups. HUD should also launch a housing fellowship program to recruit 1,000 mid-career housing fellows with diverse backgrounds to work at state and local housing authorities and agencies.
These ideas, and more, can be part of a focused National Housing Industrial Strategy, which can be delivered during the first year of the next Presidency. The urgent need for such a strategy cannot be disputed: the housing crisis has now spread to all regions of the nation and is affecting, directly or indirectly, large segments of the population.
The United States knows how to design and deliver industrial policy, and we are doing it for climate, manufacturing, and defense. We must treat housing in the same way: investing in the future of technology, simplifying every step of supply chains, training more workers to build, and increasing efficiencies to ensure that we continue to innovate in housing production and preservation.
Bruce Katz is the Founding Director of the Nowak Metro Finance Lab at Drexel University. Ben Preis is the Director of the National Housing Crisis Task Force and a Senior Research Fellow at the Nowak Lab. Michael Saadine is a Senior Advisor to the Nowak Lab and Managing Partner at Invisible Group, an interdisciplinary real estate investment platform. This is the third in a series of policy newsletters being produced alongside the National Housing Crisis Task Force, which will release a national policy agenda with recommendations that the federal government can implement to address our housing crisis later this month.
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