What's Next for Construction Innovation at HUD?

By Tanaya Srini, Senior Advisor for Innovation, Office of Policy Development and Research

For HUD's Office of Policy Development and Research, 2024 was another great year for housing innovation. We continued to demonstrate our commitment to building the evidence base for innovative construction technologies that can boost the affordable housing supply and lower costs for builders, homeowners, and renters nationwide. 

A Brief Year in Review

We published studies on various technologies that can improve a home's livability, from retrofits to increase mobility to the greater optimization of heating, ventilation, and air conditioning systems and household solar. We awarded several new research grants to study innovative approaches to increasing the housing supply, including through office-to-residential conversions, relaxing land use restrictions on accessory dwelling units and manufactured housing, and growing the capital stack available to industrialized and offsite construction firms. We also invested in the future of housing innovators through our annual Innovation in Affordable Housing Student Design and Planning Competition, in which HUD partnered with the Madison Community Development Authority in Madison, Wisconsin, to challenge students to design a sustainable mixed-income community on their site. 

We traveled into the field to understand how practitioners are delivering innovations in their own communities, uplifting affordable housing projects nationwide that benefited from HUD's past or present investments and demonstrated novel approaches to construction, energy efficiency, financing, or resident services. Our travels took us as far afield as Alaska, where PD&R's investment in the world's first mobile expeditionary 3D printer continues to be evaluated for its potential to provide affordable and resilient housing to rural Alaskans, and as close to home as Baltimore and Northern Virginia, where we toured offsite housing construction facilities during an international exchange with global housing construction experts that culminated in a research workshop hosted at HUD Headquarters. 

Of course, nothing could be closer to home than HUD's annual Innovative Housing Showcase on the National Mall, where each year we invite homebuilders, technologists, policymakers, and researchers to highlight innovative and affordable housing designs and technologies that can increase housing supply, lower the cost of construction, increase the energy efficiency and resilience of housing, and reduce housing expenses for all Americans. The 2024 Innovative Housing Showcase was our most successful event yet, featuring more exhibits (including our first duplex manufactured home!) and enjoying more visitors (more than 4,000!) than ever before. We also hosted accompanying educational programming featuring the nation's leading experts, who discussed the latest developments in housing technology and policy, from building codes and decarbonization, to zoning, land use, and resilience. Videos from the educational sessions can be viewed here. 

Looking Ahead to a Federal Innovation Agenda 

This year's many research and field activities helped to answer questions identified in PD&R's 2023 publication "Offsite Construction for Housing: Research Roadmap." In it, the authors (MOD X and the National Institute of Building Sciences) prioritized questions about topics such as capital, insurance, and workforce development that, if answered, could help accelerate the adoption of industrialized construction methods for housing in the United States. Through international case studies of four countries with advanced industrialized housing industries, the authors will present additional insights in a forthcoming publication. 

To preview some of these findings and share some of PD&R's lessons learned from the year's research and activities, I want to close this message with several ideas about how HUD can support an innovation agenda in housing construction. 

First, homebuilders encounter several hurdles when trying to implement innovative methods to reduce the cost and time it takes to deliver new housing. Because these techniques are still considered to be novel and risky, builders face barriers in accessing construction financing and insurance. For example, Federal Housing Administration financing does not permit early draws to pay for factory deposits, and its construction insurance does not cover non-real estate assets, such as prefabricated modular homes before they are assembled onsite. By raising awareness about how existing policies favor site-built construction — through intergovernmental engagement and cross-agency collaboration with the Federal Housing Finance Agency, Department of Treasury, and state housing finance agencies, among others — HUD can drive policy changes that could allow a more seamless uptake of innovative construction methods. 

Second, homebuilders wanting to use innovative construction methods face an outdated regulatory framework that can compound the risk and uncertainty discussed above. For example, our highly prescriptive building codes specify materials and construction methods (often of the traditional site-built variety) that builders must follow to pass inspections. Our nation's patchwork quilt of local building codes means that units built to one localities' specifications might not be approved in a neighborhood in a city or county a few miles away. If we could instead regulate housing in the same way we regulate automobiles — establishing standards for performance, allowing innovation and flexibility in materials and methods, and reviewing the whole product instead of its myriad components — we could unlock massive cost savings, process efficiencies, and economies of scale. Although these changes would constitute a significant shift in the regulatory landscape for housing construction, HUD should explore preliminary actions it can take with existing partners to pilot policy changes for federally funded housing projects that later can be translated into broader policy changes.

Finally, we need more investment in research and development efforts and improved data to ensure that a federal innovation agenda has a strong feedback loop that allows for continuous innovation. To enact any of these proposed policy changes, federal agencies will need to recognize the societal benefits of such changes and agree to incentivize them. These incentives must then be rigorously evaluated, which will require agreement on a clear set of impact metrics that can be applied across geographies to measure success. Coordinated investment incentives, agreement on overarching goals and societal benefits, and data and metrics to measure impact are all critical to successfully implementing an innovation agenda. Although such an agenda would certainly also benefit from new resources, deeper alignment leading to more coordinated investments may prove even more important. 

One common theme emerges: HUD can play a leadership role in convening different governmental players to facilitate greater innovation. Given HUD's history of accelerating housing innovation and the evidence base we continue to grow each year, HUD's experience in identifying and evaluating housing innovations will be critical to executing an innovation agenda at scale. With federal resources aligned behind such a housing innovation agenda, we can take the next, urgent steps toward addressing the housing crisis and providing high-quality and affordable housing for all.