Tech can help solve US cities’ affordability crisis
U.S. cities are in the midst of an affordability crisis. Just between May 2020 and May 2021, home prices saw their biggest annual increase in more than two decades and construction material prices increased by 24%. The cost of renting has risen faster than renters’ incomes for 20 years. Construction needs to play a critical role in fixing these pressing issues, but is the industry ready?
Construction is a $10 trillion global industry that employs more than 200 million people worldwide. But despite its size and importance, the industry’s annual labor productivity has only increased by 0.1% per year since 1947.
Since 1947, we’ve witnessed amazing advances in technology and science. Industries like agriculture, manufacturing and retail have achieved quantum leaps in productivity with improved bioengineering increasing yields and the introduction of cutting-edge logistics bringing affordable consumer goods to the mass market. Labor productivity in these industries increased by over 8x between 1947-2010, compared with 1x in construction.
Why, amid all this progress and innovation, do millions of construction workers in the U.S. still have to rely on manual, pen-and-paper processes for critical parts of their work?
We’ve heavily underinvested in the technology that can help save us from the crisis we face. Historically, entrepreneurs, technologists and investors haven’t spent the time to understand the specific needs and workflows of the construction industry.
Today, more than $800 billion a year is spent on commercial construction, but just a tiny fraction of that goes toward construction technology. In recent years, construction ranked lowest of all industries for technology spending as a percentage of revenue — coming in at just 1.5% — far below the all-industry average of 3.3%, let alone industries like banking, which came in at 7.2%.
A massive chunk of that annual spending — more than $250 billion a year — is spent on construction materials. And they’re only getting more expensive. Materials represent roughly a third of a project’s cost, yet most contractors have to rely on manual workarounds created long before the invention of smartphones to order materials.
This results in both workers on the job site and in the office being overburdened and spending far too much valuable time on paperwork, chasing down materials and fixing errors.
Office teams receive hundreds, if not thousands, of materials requests from the field, all in different formats — including requisitions written with a marker on pizza boxes. They have to manually convert handwritten requisitions into purchase orders sent to suppliers via email, spreadsheets and PDFs, retype order information into their accounting systems, and play phone tag with their suppliers and field teams to keep tabs on order statuses.
Unfortunately, all of that chaos often leads to mistakes, missed opportunities to buy at the best price and project delays.
The mayhem continues for accounting teams, who have no easy way to reconcile their invoices or know if they’re paying the right amount, let alone track rebates and payment terms across different vendors.
Meanwhile, foremen — whose time is more valuable than ever in the current labor squeeze — are often spending less than 30% of their time doing what they do best: building. Without an easy way to select the exact materials they need and track them to delivery, cases of the wrong materials showing up at the wrong time are too common, throwing project timelines off track and creating a huge amount of waste.
Technology can make ordering and managing materials much easier, allowing workers on site and in the office to focus on other critical tasks. It can also help contractors catch common errors before they derail a project and help us build in a more environmentally sustainable way.
Buildings are more than bricks and mortar; they’re hospitals, schools, homes and small businesses. The buildings that surround us quite literally shape our lives. Our communities need them — we need places to meet, learn, play and heal. Imagine if the things that we rely on to create vibrant communities were cheaper to fix — or faster to build?
A new generation of workers who grew up with phones in their pockets are now joining the construction industry and expecting change. By fixing the broken supply chain, we can make construction faster, cheaper and more efficient.
We can move forward and solve our most urgent needs as a society — from building affordable housing to fixing our nation’s infrastructure — and make our cities more affordable and accessible to all.
Maria Rioumine Contributor Maria Rioumine is the CEO and co-founder of Agora. U.S. cities are in the midst of an affordability crisis. Just between May 2020 and May 2021, home prices saw their biggest annual increase in more than two decades and construction material prices increased by 24%. The cost…
