Affordability Will Start With Luxury Buildings

Fed Novikov
Jan 3, 2017 · 5 min read

What will buildings of the future look like? Will they have a bent Zaha Hadid-inspired shape? Will they be 3D-printed? We would argue that both luxury and affordable buildings of the future will be modular and reusable. In fact, an affordable and a luxury structure could be the same building, though perhaps a decade or two apart.

Upgrade Cycles & Secondary Markets

Most products evolve in cycles: new car models are introduced about every 7 years; a new generation of cell phones — every 2 years.

These cycles create a positive loop: as new technologies are frequently introduced to the market, recent models become much more affordable. On average, cars become 75% cheaper after 10 years in use. That means the most affordable cars are not new affordable models, but rather used cars. In developing economies, used cars (or refurbished phones) play a crucial role. For example, 25 years ago, after the break-up of the Soviet Union, very few people had the resources to buy a new affordable car, but a growing number of people could afford to buy a used car imported from Europe or Japan.

Car Price Depreciation, adopted from Car-Buy-Rater

Finally, with a growing number of internal recycling programs, these frequent consumer cycles no longer come with negative waste externalities.

Conversely, buildings are rare kinds of products that don’t evolve in cycles and are stuck within legacy standards. Buildings are permanent, are demolished at the end of their life, and cannot be resold and shipped to secondary markets. These create major constraints for both building tech evolution and affordability.

Reusable buildings are a prerequisite for a more sustainable and affordably built environment, one where buildings are not demolished but disassembled, or where an older building from the U.S. could be resold and reassembled into different smaller buildings in other countries. Therefore, buildings and their parts could become movable products that evolve in cycles just like cars. In the U.S., a couple of startups are already working on building kits and movable buildings (Blokable, ACRE, Kasita).

Construction Costs

In congested markets, the major constraints for building affordability could be land and zoning requirements rather than technology; however, hard construction costs and building quality remain a major problem.

There are multiple ways in which companies could try to reduce hard construction costs: from vertical integration of the supply chain (Katerra, Project Frog), to prefabrication (Panoramic Interests, Stack Modular), to construction automation (Sekisui House, Toyota Housing). These approaches are essential pieces of a future construction ecosystem, but they still exist within the legacy permanent building framework.

Permanent structures are differentiated by costs of materials and building designs. With reusable buildings, affordability becomes a function of time, not just materials and labor costs.

In emerging economies, especially in places with rapid spontaneous urbanization (and in “slums”), construction with the use of new materials may be prohibitively expensive. Consequently, architects around the world have been tackling this challenge for decades. Some proposals focus on building less and smaller structures, or even resort to 3D printing from mud. And, of course, there are the repurposed shipping containers, because who wouldn’t want to live in a metal box in the desert?

Some of these approaches seem somewhat desperate: why propose living in conditions that we wouldn’t normally tolerate ourselves? These proposals are the inevitable results of permanent building constraints. Reusability has the potential to break free of such limitations by making better quality materials that will become affordable over time and in different locations.

The Prius Problem

Starting by developing affordable reusable buildings might not be the best approach. Cheaper materials used in affordable construction are often less durable and may reduce the potential for reuse. Instead, going up-market may pay for R&D and lead to higher quality of materials and design.

Luxury modular building sounds like an oxymoron, but should it? Before we optimize for affordability, we should imagine truly desirable and future-proof modular and reusable buildings, the ones that people would want to upgrade time and time again. This is not an easy task as reusable buildings are synonymous with being cheap.

Modular buildings face the same public image problem as hybrid and electric cars a decade ago — they are promoted mostly for their economy. In turn, price points limit their quality.

By now, it’s common knowledge that Tesla managed to upset the market by starting with cool expensive electric cars and then gradually moving down market. This strategy led to a major cultural shift in the perception of electric cars. Making reusable buildings highly desirable would likely require a similar approach.

The New Building Standard

Creating a new universal building standard for reusable elements is a challenge comparable to the creation of ubiquitous IoT communication standards. There’re simply too many industry players with competing incentives.

Unlike the automotive and electronics industries, construction is highly fragmented. There aren’t any major players that could single-handedly define new standards for the industry, like Apple and Google have been doing in computing.

Breakdown of Companies In Residential Construction And Automotive Manufacturing In The U.S. By Relative Market Share of Companies With Different Number of Employees (Adopted from Census 2013 SUSB and Annual Survey of Manufacturers)

In construction, where most standards are decades if not centuries old, the job of introducing new standards and making them universal is especially challenging. Stanford researcher Dana Alice Sheffer found that implementation odds for innovations that require significant changes in existing standards and interfaces are 84% lower than those for innovations within existing standards. As a result, the construction industry has one of the lowest R&D reinvestment rates of all industries: 0.5% of annual construction value, according to CERF & the National Science Foundation.

Working on high-end reusable buildings as the first step towards an affordable building ecosystem is an unusual and seemingly contradictory move, but it’s likely the right one. Going upmarket could pay for R&D, more durable reusable materials, and launch the global affordability cycle.


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Fed Novikov

Written by

Co-founder Apt Buildings, Inc., previously Airbnb Samara and Asmbld

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