Housing Industry Needs Some Creative Disruption
Forty years ago, when I was a 29-year-old editor, I wrote my first column for BUILDER. Now, as the retired vice chairman emeritus of Hanley Wood, BUILDER’s parent company, I’m writing my last.
Predictably, perhaps, I’ve decided to write about how housing has changed as well as how it hasn’t over those 40 years.
Today, the owner of a home building firm is more likely to have an MBA on his resume than a 10-year stint as a carpenter. In other words, housing is now more a business than a trade.
Forty years ago, a $1 million home was, well, about one in a million. Now the median price of a new house in the nation’s most expensive markets is more than that. In 1979, inner city neighborhoods were considered war zones. Today, those same neighborhoods are now meccas for millennials and multifamily builders.
In the past four decades, the median size of a single-family house has increased—by almost 60%—from 1,600 square feet to 2,500 square feet. Speaking of size, consider the 1979 bathroom, which typically was a 5-foot-by-7-foot space, just big enough for a tub, toilet, and sink. Now a Roman emperor would be satisfied with the bathrooms in most move-up homes.
Also at that time, kitchen floors were sheet vinyl and countertops laminate. Those utilitarian products have been replaced with wood, tile, and stone. (And don’t forget the restaurant-sized refrigerators and ovens.)
S&Ls, the mainstay of the mortgage markets for almost a century, have disappeared, and, thanks to financial deregulation and the emergence of secondary mortgage markets, so have the tight mortgage markets that caused every housing recession in the post-WWII 20th century.
Forty years ago, the Fortune 500 didn’t include a single pure-play home building firm. Now more than a dozen of the nation’s mega-builders are on the list.
Of course, not everything has changed. The housing industry is still subject to brutal ups and downs. The majority of new single-family housing is still being built in the suburbs. Builders and buyers still prefer faux-vernacular design to even the most modest forms of modern design. And builders still rail against regulation.
To all of that, I say, “so it goes.”
There are, however, two examples of inertia that I do hope are overcome. First, housing—as soon as possible—should shed its old boys’ reputation. It has to be the least diverse major industry in the U.S. Its ranks include few women and even fewer minorities. That has to change.
Second, the housing industry does not have a single builder with a nationally known, nationally respected brand. A brand that sets a high standard for the rest of the industry. A brand that consumers trust. A brand like Starbucks.
Starbucks raised the bar (and the price) on coffee. It’s given coffee drinkers almost everywhere a fail-safe choice. And it spawned the emergence of a new breed of cool, comfortable coffee shops in almost every American city.
It used to be hard, hit or miss, to get a good cup of coffee. Now it’s pretty easy.
I think the housing industry is ripe for this kind of, as they say, creative disruption. Howard Schultz, Starbucks’ founder, wasn’t a coffee guy. And I’m guessing the home building firm that emerges to disrupt things in the much more important housing industry likewise will be started by an industry outsider. Who knows where she’ll come from. But she’s coming.
And don’t you think it should be just as easy for Americans to buy a really good house as it is to buy a really good cup of coffee?
I do. And goodbye.