The pain is quantifiable. According to the U.S. Census Bureau, housing starts in August were at a seasonally-adjusted annual rate of 895,000, marking a year-over-year decline of 33.1 percent. The Bureau of Labor Statistics reports that construction has lost 564,000 jobs since its peak in September 2006—and over half of that decline occurred in the first eight months of 2008.
Are we hurting enough yet to set aside our entrepreneurial, isolationist thinking to embrace something that depends on us working together to recover together?
I believe creating a big builder consortium to buy green materials can help jump-start recovery in home building, related industries, and, eventually, the rest of the U.S. economy.
The general consensus is that it will take years for us to recover naturally from this low point in the cycle. I don't think we can afford to wait for that to happen or for the government to provide enough tax incentives to make installing green products in our homes a profitable option.
The consortium would become a vehicle for us to pool all our volume buying power to purchase green, energy-efficient products. We would then be able to leverage our total spending with the fewest possible suppliers to achieve the goal of buying at a cost equal to, or lower than, what we are currently paying for traditional, non-green, non-energy efficient products.
This is possible because I think these suppliers' costs are still artificially high due to the high cost of their capital and the low volume of product that they are producing. Suppliers would willingly participate when they see the potential of creating a long-term connection to such a large buying entity and the opportunity to become a leader in their industries. Home builders would buy into the concept as well, out of fear that they couldn't afford to be left behind.
Here's how building green homes would spark more sales and benefit builders:
Again, building this consortium would require us to work together honestly and with trust. And, yes, it means forgoing some of that competitive advantage all of us think we have over one another today. But that's a small price to pay for becoming profitable and a major contributor to economic recovery sooner rather than later.
I have built successful consortia in tough markets before, both domestically and abroad, and I think the timing is perfect for this industry. As a start, this consortium would require every participating builder to supply a list of green and energy conserving products they are interested in buying. Then a team, built from representatives of all the participating builders, would develop a plan to determine which products, suppliers, and programs to pursue, as well as to negotiate with providers. In the end, we would all have the same pricing for these products.
We need this hook.
Dana Barton is a consultant to the home building industry and other manufacturing operations. He may be reached via e-mail at email@example.com.