Construction productivity reset: housing productivity for a post carbon era

The recent Productivity Commission report Housing construction productivity: Can we fix it? repeats many of the industry’s mantras seeking to explain falling productivity, namely, complex approvals, lack of innovation, lack of scale and workforce issues. Predictably perhaps, many of the fixes are familiar – reducing regulatory burdens, expediting approvals, promoting innovation, improving workers’ skills, and increasing their adaptability.

While there are useful ideas here, there is a lacuna in the centre of the logic around productivity in this context.

Defined as the “rate at which outputs, such as goods or services, are produced per unit of input, such as labour, capital or materials”, an increase in productivity would allegedly not only reduce construction time and increase supply, but also lower construction costs. Several problems lie at the heart of this deceptively simple proposition. In this short article, we focus on two.

The first is the implicit assumption that there is a functioning set of perfect market conditions for the various interconnecting components that make up the housing system, if only red tape got out of the way. The second is the explicit (and wrong) assumption that more square meterage of residential space is productive in the broader sense of supplying more dwellings.

Taking the first point, it is important to point out that constraints in housing supply centre on land availability, and this is largely in the hands of private industry, not government. Put simply, developers and speculators sit on their land banks until the price is so high that any housing to be built upon it is going to be largely unaffordable.

Moreover, the cyclical boom-bust nature of housing supply ensures that the most resilient structure of the housing construction industry is one that can rapidly contract so that developers can avoid risk. This subcontractor industry is therefore undercapitalised, and the kinds of industrialisation we see in other sectors is more difficult to establish in housing construction.

In other words, new technology, workforce development and innovation are all very different, and the end product is typically rather expensive, and not very high quality from an air tightness and performance perspective.

Housing productivity should be centred upon providing access to decent, zero-carbon housing that is cheap to live in and is accessible to everyone in society. The current policy and fiscal settings fall well short of this.

Given this current reality in volume homebuilding, where everyone is doing their bit, the product is very much cost-driven down to the lowest common denominator. In this regime, good building codes and compliance are needed to ensure all housing is built for a post carbon world, with low bills to support affordable living today and always. Good regulation reduces risk, prices, and confusion; it provides a simple level playing field so that everyone can get on with building homes for a post-carbon world.

The second issue stems from an overly narrow focus of the term productivity.

There are, in fact, 13 million “spare” bedrooms already in the housing system, but they are not distributed according to need. For instance, the My Home Network is a regional Victorian initiative campaigning to transform the well over 10 per cent local vacant housing into affordable rentals. The group also supports a homeshare program housing a non-family tenant who might for instance assist the existing resident in their everyday living in lieu of rent.

Housing productivity should be centred upon providing access to decent, zero-carbon housing that is cheap to live in and is accessible to everyone in society. The current policy and fiscal settings fall well short of this.

Post carbon inclusion: What might housing productivity look like?

Our recent book Post Carbon Inclusion reveals ways in which contemporary policy making seeking to decarbonise housing is, in many ways, making it less inclusive. For example, the Australian domestic solar PV transition has been technologically successful – many homeowners now have domestic rooftop systems and they generally work well.

However, a key funding mechanism was market based, through an effective levy on energy bills that everyone paid, to support certain homeowners to get these systems. It amounted to a wealth transfer from lower income private renters to well-off homeowners who have a home and an income to provide the matching funds for the installation. We support domestic PV installations; just not the unjust way of getting them.

The book examines both retrofit and new housing, and a variety of urban issues relevant to post carbon inclusion, including pollution and rights to clean air, domestic waste and the exclusionary policies of zero waste around apartment dwellers, and the unjust mechanisms of just transitions away from fossil economies, to name a few. Much of the book focuses on questions of post-carbon housing, and from this, we offer three thoughts towards reframing the housing productivity concept for a post carbon world:

1. Housing productivity is not just about outputs; it is about the lived experience of home, and the access to decent, affordable, comfortable and sustainable housing that performs planetary regeneration rather than ongoing depletion.
2. Since land is a finite resource, detaching housing from land speculation is an essential step towards productive, affordable post carbon housing system. This requires us to rethink housing production and consumption and to start to take seriously the potential productivity benefits of innovative housing tenures, such as cohousing, and indeed of economic models towards degrowth.
3. Poor housing supply is not the fault of housing producers or consumers; it is the result of a blind faith in a system that obliges our participation in a competition for land that cannot be won, while sidelining actual housing productivity goals, namely, giving Australian families a fair go, both intra-generationally, by meeting our current housing needs, and inter-generationally, by leaving the planet in better shape.

In welcoming the Productivity Commission’s focus on housing construction productivity, a more ambitious agenda is required to tackle the problem; one that builds our generational responsibility towards both current and future generations.