One of the biggest roadblocks for millennials struggling to become adults is the exploding cost of owning a home, particularly in the places where they want to live: cities.
As of 2016, in my home city of Toronto, Canada, the average price for a new house is now over one million dollars; meanwhile, the average price for a condominium is inching across the $500,000 mark. Similar sticker shocks are being felt by first-time home buyers in cities throughout the world, driven in large part by swelling land prices and the massive urbanization surge discussed in part one of this Future of Cities series.
But let's take a closer look at why housing prices are going bananas and then explore the new technologies that are set to make housing dirt cheap by the late 2030s.
Housing price inflation and why governments do little about it
When it comes to the price of homes, it shouldn't come as a surprise that the majority of the sticker shock comes from the value of the land more so than the actual housing unit. And when it comes to the factors that determine land value, population density, proximity to entertainment, services and amenities, and the level of surrounding infrastructure rank higher than most—factors found at higher concentrations in urban, rather than rural, communities.
But an even bigger factor driving the value of land is the overall demand for housing within a specific area. And it’s this demand that’s causing our housing market to overheat. Keep in mind that by 2050, nearly 70 per cent of the world will live in cities, 90 per cent in North America and Europe. People are flocking to cities, to the urban lifestyle. And not just large families, but single people and couples without children are also hunting for urban homes, ballooning this housing demand all the more.
Of course, none of this would be a problem if cities were able to meet this growing demand. Unfortunately, no city on Earth is today building enough new housing fast enough to do so, thereby causing the basic mechanisms of supply and demand economics to fuel the decades-long growth in housing prices.
Of course, people—voters—don't much like being unable to afford homes. This is why governments around the world have responded with a variety of subsidy schemes to help lower income people secure loans (ahem, 2008-9) or get major tax breaks when purchasing their first home. The thinking goes that people would buy homes if only they had the money or could be approved for loans to buy said homes.
This is BS.
Again, the reason for all this insane growth in housing prices is the dearth of homes (supply) compared to the number of people who want to buy them (demand). Giving people access to loans doesn't address this underlying reality.
Think about it: If everyone gains access to half million dollar mortgage loans and then competes for the same number of limited homes, all that will do is cause a bidding war for the few homes available to purchase. This is why tiny homes in the downtown core of cities can pull in 50 to 200 per cent above their asking price.
Governments know this. But they also know that the larger percentage of voters who do own homes prefer to see their homes rise in value year-over-year. This is a big reason why governments aren't pouring in the billions our housing market needs to build vast numbers of public housing units to both satisfy housing demand and end housing price inflation.
Meanwhile, when it comes to the private sector, they would be more than happy to meet this housing demand with new housing and condominium developments, but current shortages in construction labor and limitations in building technologies makes this a slow process.
Given this current state of affairs, is there hope for the budding millennial looking to move out of their parent’s basement before they enter their 30s?
The Legoization of construction
Luckily, there's hope for millennials aspiring to become adults. A number of new technologies, now in the testing phase, aim to bring down the cost, improve the quality, and reduce the length of time needed to build new homes. Once these innovations become the construction industry standard, they will substantially increase the annual number of new housing developments, thereby leveling out the housing market's supply-demand imbalance and hopefully make homes affordable again for the first time in decades.
(‘Finally! Am I right?’ says the under-35 crowd. Older readers may now be questioning their decision to base their retirement plan on their real estate investments. We’ll touch on this later.)
Let’s begin this overview with the use of three relatively new technologies that aim to transform today’s construction process into a giant Lego build.
Prefabricated building components. A Chinese developer built a 57-story building in 19 days. How? Through the use of prefabricated building components. Watch this timelapse video of the construction process:
Pre-insulated walls, pre-assembled HVAC (air conditioning) systems, pre-finished roofing, entire steel building frames—the movement towards using prefabricated building components is spreading quickly throughout the construction industry. And based on the Chinese example above, it shouldn’t be a mystery why. Using prefab building components shortens construction time and lowers costs.
Prefab components are also environmentally friendly, as they reduce material waste, and they reduce the number of delivery trips to the construction site. In other words, instead of transporting raw materials and basic supplies to the construction site to build a structure from scratch, most of the structure is pre-built in a centralized factory, then shipped to the construction site to simply be assembled together.
3D printed prefab building components. We’ll discuss 3D printers in far greater detail later, but their first use in housing construction will be in the production of prefab building components. Specifically, 3D printers’ ability to build objects layer by layer means they can further reduce the amount of waste involved in the production of building components.
3D printers can produce building components with built-in conduits for plumbing, electrical wires, HVAC channels, and insulation. They can even print entire prefab walls with ready-made compartments to install various electronics (e.g. speakers) and appliances (e.g. microwaves), based on specific customer requests.
Robot construction workers. As more and more building components become prefabricated and standardized, it will become ever more practical to involve robots into the construction process. Consider this: Robots are already responsible for assembling the vast majority of our automobiles—expensive, intricate machines that demand precision assembly. These same assembly line robots can and will soon be used to build and print prefab components en mass. And once this becomes the industry standard, construction prices will begin to drop considerably. But it won't stop there.
We already have robot bricklayers (see below). Soon, we’ll see a variety of specialized robots working alongside human construction workers to assemble large prefab building components on-site. This will both increase the speed of construction, as well as reduce the total number of tradespeople needed on a construction site.
The rise of construction scale 3D printers
Most tower buildings today are built using a process called continuous forming, where each level is constructed by curing poured concrete inside forming boards. 3D printing will take that process to the next level.
3D printing is an additive manufacturing process that takes computer generated models and builds them in a printing machine layer by layer. Currently, most 3D printers are used by companies to build complex plastic models (e.g. wind tunnel models in the aerospace industry), prototypes (e.g. for plastic consumer goods), and components (e.g. complex parts in automobiles). Smaller consumer models have also become popularized for the production of a variety of plastic gadgets and art pieces. Watch this short video below:
Yet as versatile as these 3D printers have proven themselves to be, the next five to 10 years will see them develop substantially more advanced abilities that will have an enormous impact on the construction industry. To start, instead of using plastics to print materials, construction scale 3D printers (printers that are two-to-four stories tall and wide, and growing) will use cement mortar to build life-sized homes layer-by-layer. The short video below presents a Chinese-made 3D printer prototype that built ten houses in 24 hours:
As this technology matures, massive 3D printers will print elaborately designed housing and even entire high-rise buildings either in parts (recall the 3D printed, prefab building components described earlier) or in full, on-site. Some experts predict these giant 3D printers could be temporarily set up inside growing communities where they would be used to build the houses, community centers and other amenities around them.
Overall, there are four key advantages these future 3D printers will introduce to the construction industry:
Combining materials. Today, most 3D printers are only able to print one material at a time. Experts forecast these construction-scale 3D printers will be able to print multiple materials at once. This may include reinforcing plastics with graphene glass fibers to print buildings or building components that are lightweight, corrosion-resistant, and incredibly strong, as well as printing plastics alongside metals to print truly unique structures.
Material strength. Similarly, being able to print more versatile materials will allow these 3D printers to build concrete walls that are substantially stronger than most current forms of construction. For reference, conventional concrete can bear a compressive stress of 7,000 pounds per square inch (psi), with up to 14,500 being considered high strength concrete. An early prototype 3D printer by Contour Crafting was able to print concrete walls at an impressive 10,000 psi.
Cheaper and less wasteful. One of 3D printing's biggest advantages is that it allows developers to substantially cut the amount of waste involved with the construction process. For example, current construction processes involve purchasing raw materials and standardized parts and then cutting out and assembling the finished building components. The excess materials and scraps have traditionally been part of the cost of doing business. Meanwhile, 3D printing allows developers to print finished building components completely to specifications without wasting a drop of concrete in the process.
Some experts predict this could cut construction costs by as much as 30 to 40 per cent. Developers will also find cost savings in reduced material transport costs and in the reduction of total human labor needed to build structures.
Production speed. Finally, as mentioned earlier by the Chinese inventor whose 3D printer built ten houses in 24 hours, these printers can substantially cut the amount of time needed to build new structures. And similar to the point above, any reduction in construction time will mean significant cost savings for any construction project.
Willy Wonky elevators help buildings reach new heights
As groundbreaking as these construction-scale 3D printers will become, they aren't the only groundbreaking innovation set to shake up the construction industry. The coming decade will see the introduction of new elevator technology that will allow buildings to stand taller and with far more elaborate shapes.
Consider this: On average, conventional steel rope elevators (the ones that can carry 24 passengers) can weigh up to 27,000 kilograms and consume 130,000 kWh per year. These are heavy machines that need to work 24/7 to accommodate the six elevator trips per day the average person uses. As much as we might complain whenever our building's elevator occasionally goes on the fritz, it's actually amazing that they don't go out of service more often than they do.
To address the demanding workload these elevators struggle through on their daily grind, companies, like Kone, have developed new, ultra-light elevator cables that double elevator lifespan, reduce friction by 60 per cent and energy consumption by 15 per cent. Innovations like these will allow elevators to rise up to 1,000 meters (one kilometre), double what's possible today. It will also allow architects to design ever higher future buildings.
But even more impressive is the new elevator design by German company, ThyssenKrupp. Their elevator doesn't use cables at all. Instead, they use magnetic levitation (maglev) to glide their elevator cabins up or down, similar to Japan's levitating high-speed trains. This innovation allows for some exciting advantages, such as:
- No more height restrictions on buildings—we can start constructing buildings at sci-fi heights;
- Faster service since maglev elevators produce no friction and have far fewer moving parts;
- Elevator cabins that can move horizontally, as well as vertically, Willy Wonka-style;
- The ability to connect two adjoining elevator shafts permitting an elevator cabin to ride up the left shaft, transfer over to the right shaft, travel down the right shaft, and transfer back to the left shaft to begin the next rotation;
- The ability for multiple cabins (dozens in high-rises) to travel around in this rotation together, increasing elevator transport capacity by at least 50 per cent, while also reducing elevator wait times to less than 30 seconds.
Watch ThyssenKrupp’s brief video below for an illustration of these maglev elevators in action:
Architecture in the future
Robotic construction workers, 3D printed buildings, elevators that can travel horizontally—by the late 2030s, these innovations will tear down virtually all technical roadblocks currently limiting architects' imaginations. 3D printers will allow the construction of buildings with unheard of geometric complexity. Design trends will become more freeform and organic. New shapes and new combinations of materials will allow for entirely new postmodern building aesthetics to emerge by the early 2030s.
Meanwhile, new maglev elevators will remove all height limitations, as well as introduce a new mode of building-to-building transportation, since horizontal elevator shafts can be built into neighboring buildings. Likewise, just as traditional elevators allowed for the invention of towering high-rises, horizontal elevators could also prompt the development of tall and wide buildings. In other words, single high-rise buildings that cover an entire city block will become more common since horizontal elevators will make it easier to move around them.
Finally, the robots and prefab building components will bring construction costs down so low that architects will be afforded far more creative leeway with their designs from previously penny-pinching developers.
Social impact of cheap housing
When used together, the innovations described above will substantially reduce the cost and the time needed to build new homes. But as always, new technologies bring both positive and negative side effects.
The negative perspective sees that the glut of new housing made possible by these technologies will quickly correct the supply-demand imbalance in the housing market. This will begin lowering housing prices across the board in most cities, negatively impacting current homeowners who are depending on the rising market value of their homes for their eventual retirement. (To be fair, housing in popular or high-income districts will retain more of their value compared to the mean.)
As housing price inflation begins to flatline by the mid-2030s, and perhaps even deflate, speculative homeowners will begin selling their surplus properties en masse. The unintended effect of all these individual selloffs will be the even sharper decline in housing prices, as the overall housing market will become a buyers market for the first time in decades. This event will cause a momentary recession at the regional or even the global level, the extent of which cannot be forecasted at this time.
Ultimately, housing will eventually become so plentiful by the 2040s that its market will become commoditized. Owning a home will no longer command the investment appeal of generations past. And with the coming introduction of the Basic Income, described in our Future of Work series, societal preferences will transition towards renting than owning a home.
Now, the positive perspective is a little more obvious. Younger generations priced out of the housing market will finally be able to own their own homes, allowing them a new level of independence at an earlier age. Homelessness will become a thing of that past. And future refugees forced out of their homes from war or climate change will be housed with dignity.
On the whole, Quantumrun feels the societal benefits of the positive perspective outweighs the temporary financial pain of the negative perspective.
Our Future of Cities series is only just beginning. Read the next chapters below.