Two months ago, I attended BUILDER’s second annual Housing Innovation Vision & Economics (HIVE) conference in Los Angeles. As its name suggests, HIVE is mostly about how and why the all-too-hidebound housing industry would benefit from more innovation. The focus was on innovation in the use of data, access to capital, business strategy, technology, and design.
Many speakers encouraged the 900-plus attendees to embrace change and to put aside once and for all the notions that innovation involves too much risk and that if something’s not broken, why bother to fix it?
Not that some things in the housing industry aren’t broken. Take, for example, the problems that smaller building firms continue to have securing acquisition, development, and construction financing (see page 58). It used to be that smaller builders could count on community banks for such financing, easily wrapping up a deal on the golf course or over a nice lunch. That’s when there were 50,000 community banks. Today there are only 5,000.
So how to fix it? Eve Picker, a HIVE speaker, thinks smaller builders should take a look at crowdsourcing, which is projected to be a $100 billion business by 2025. Picker should know. She’s the founder of Small Change, a crowdsourcing business that provides financing for small builders and developers. Small Change is off and running, and her first few builder borrowers—who were all turned down by conventional lenders—are doing quite well, thank you.
Another HIVE speaker, Carlo Ratti, looked at the big picture. Ratti, an architect and director of MIT Senseable City Labs, told attendees they could probably foretell the future of development if they could decipher this four-digit code: 2-50-75-80. Nobody could, so he did: Worldwide, cities take up only 2% of all the land but hold 50% of the population, consume 75% of all energy used, and account for 80% of carbon dioxide emissions.
From that I think that you can safely infer that future development will gravitate toward cities, will almost by necessity be denser, and likely will be subject to more stringent energy-related building codes. Are you ready for that?
Then there was the head-spinning presentation by James Chung, whose firm, Reach Advisors, uses analysis of research and data to help businesses spot and take advantage of emerging trends. Chung pointed out that there is 1,000 times more data available today than there was 10 years ago, and that the amount of data now doubles every year, which could mean, he said, that very soon everybody will know everything and nobody will have a competitive advantage.
That means every home building business should have an IO (innovation officer), according to another HIVE speaker. But before you all rush out to find a $350,000-a-year innovation officer, first remember Bill Levitt, who at one time was a smallish builder. Almost every other builder had the same data that he had and knew what he knew: namely, that there were 16 million WWII veterans, and most of them were going to get married and need a place to live. Unlike other builders, Levitt—unknowingly acting as his own innovation officer—took that data, secured a loan, bought land near a big city, and created the housing industry’s first home building empire.
So be your own innovation officer. No promises that you’ll be the next Bill Levitt, but I’m pretty certain you’ll increase your chances for success.
