Can you think of a more powerful, more poignant, more personal sentence, ever to come out of human vocal cords in so many of our lifetimes?
“Okay, Houston, we’ve had a problem here.”
It was April, 1970, and Apollo 13 lunar Command Module Pilot Jack Swigert’s air-to-ground transmission—adapted for Hollywood to “Houston, we have a problem”—reported an oxygen tank explosion that crippled Apollo 13’s Service Module. And it changed forevermore two basic things that matter so much now to home builders, developers, capital investors, and their partners.
One is that the phrase--or its Hollywood version--lives in English currency today as the best way to express an unforeseen or unexpected existential challenge in any circumstance.
The other has to do with what happened next, 56 hours and 205,000 miles from Earth. The word “we” never meant so much, as it did then. A safe return of Apollo 13’s three crew members—even through six excruciating blackout moments after their module reentered the Earth’s atmosphere on its way to splashdown on April 17—was a herculean feat of engineering, physics, chemistry, collaboration and courage.
And it reset the bar for how partnership can work to solve what is seemingly unsolvable, to rescue people against very steep odds.
Now, consider this. Each day of 2018, three forces have been standing squarely in the way of more than 1,000 homes a day—for-sale or for-rent—that are needed but do not get built, 365 days a year.
Blame interest rates. Blame labor shortages. Blame local officials or NIMBY activists. Blame tariffs. Blame scarce land acquisition capital, or hard-to-qualify mortgage borrowing criteria. Blame code. Blame builder greed or buyer fear.
Blame whom and what you want—there are too many ways to say “no” to new housing.
Take America’s essential workers, people who make places work, make them safe, make them clean, make them functional. Their households—by the tens of millions—take home incomes in the span of 60% to 120% of median household incomes we’ve come to call the “missing middle.”
Missing, because new housing today’s got nothing for them. All that's been done in new single- and multifamily housing over the past eight years has been done for top decile income households. Almost no one else.
Research among builders and developers we did for Hive late last year reveals a profound and pervasive sense that can only conjure Swigert’s flash of reckoning and desperation.
- Three out of four respondents agree “affordability” is a trouble spot in their local markets
- More than 4 out of five respondents equate labor capacity constraint with building affordability issues
- Direct labor costs have risen mid-double digits in the past 24 months
- Materials input costs also have destabilized expense models and driven up costs
- More than 7 of 10 respondents point to over-regulation as a culprit in driving up costs
Our research also peals back insight into builders’ own part in the plight of America’s missing middle of essential workers, priced out of new homes and communities in so many places. They profess to see no big changes in construction methods in the past 40 years. Many believe technology, automation, and data are making inroads to productivity, but not fast.
The uptake is this. Housing is broken. Indiana Senator Todd Young acknowledges as much. California Congresswoman Maxine Waters, likely to be chief of the House Financial Services Committee, says as much. Mayors and County Executives and Governors know as much.
And we, stakeholders, builders, developers, manufacturers, materials suppliers, etc., and—most important of all, essential workers—know housing is broken because, for every five homes to own and rent that have been developed and built during the last eight years of economic recovery, one has not. Prices are outpacing incomes in a self-perpetuating cycle.
That’s 1.5 million homes the recovery should have supplied America’s housing market that there have been reasons enough to say “no.”
Houston, we’ve had a problem.
It's not about a few months of decelerating housing data releases. It's about people--essential workers, mostly--beginning to believe their access to housing is no longer a ladder wrung toward upward social and economic mobility.
It’s up to us—we—to solve it. Languishing productivity. Lacking political will. Daunting and overly conservative lending criteria won’t fix it.
We can. Collaboration can. More than 450 construction, design, investment, manufacturing, and technology game-changers who came to Hive in Austin this past November are a clear sign we intend to.
Now, builders, policy makers, capital finance players need to lock arms on this, of the lessons learned of housing’s late great recovery will be hard to find.