It's important to note that the goal of most (all?) municipalities in America is to decrease the productivity of construction projects so that fewer of them would happen. Local governments everywhere are captured by statist nimbys who don't want anything in the built environment to ever change. It would be surprising to me if construction productivity wasn't declining given that its decline is an explicit goal of the governments responsible for regulating the market.
I ran a framing crew in the '80's in AZ, custom and small commercial - highly competitive and demanding work. Many crews I observe today do not measure up. it's no wonder the costs have escalated and productivity has suffered.
I foresee that slack productivity about to change with mass timber construction techniques , CLT's and so forth. The infrastructure is not quite in place (in the US) but certainly on the way.
Precut panels will replace all those sticks and CMUs, structures will go up in days or weeks instead of months and years. I can well imagine a time when a dwelling unit can be assembled on site, tight to the weather, in a day or less.
No one needs to believe me, it's just my prediction based on an experienced construction background.
Construction is very labor intensive so Baumol's cost disease is a huge factor. Also, there has been a huge increase in concern over safety which results in taking longer to do tasks than older unsafe methods. So work injuries and fatalities need to be factored into any analysis of productivity.
Not covered is the sales price increases in the final product.
Could it be that the profit margins in supply-constrained single family homes is such that there's less incentive to increase productivity?
I'd also think that the systemic "short-term extraction" business model holds down productivity. Focusing on short-term extraction takes attention away from long-term growth.
Similar to discussions of solar vs fossil fuel could this in part be a competition of learning function vs increases in difficulty of each new unit since easy places to build already done. Drillers get better is masked by needing to drill further. Homes built near me require serious blasting because the flat lots were built an the 1980s.
Construction Physics has so much information and analysis on this topic it is difficult to summarize. The experience of reading it is basically a slow unwinding of all my intuitions about construction costs and productivity.
The next big infrastructure bill had better include funding construction economics newsletters and blogs. If not that's a dealbreaker for me and I won't support it. :P
With demand outpacing supply, builders are forced to get creative and build in places they wouldn’t have in the past. It’s easy to gain economies of scale when there’s a massive tract of land and you can build hundreds on homes in a single development, but these days they build on any little infill parcel they can find within an already populated municipality, and building on an odd shaped lot or a hillside is more expensive than churning out 100+ homes that all look the same.
It seems to me that the introduction of OSHA rules into the workplace between 1970-1980 reduced productivity greatly. Also important was the 1974 oil embargo; before 1974 windows were single thickness glass and there was no insulation to speak of. It took almost a generation from 1974-1995 to understand how to insulate buildings. Even high quality construction, museums and the like, were realtively cheap, perhaps 300% more than ordinary construction; whereas today they are likely to be 1,400% more. In the 2000's we have through LEED made buildings much more complicated and are now reducing the carbon footprint of new construction from 90 tons down to under 50 tons. By 2030 this may be close to 10 tons. These betterments all effect cost and productivity. But, the results are enormous reductions in the amount of energy, gigawatts of power, consumed which should be included in life-cycle analysis.
When I observe construction at my house, my workplace, the new office building downtown, I see a bunch of guys doing manual labor using tools that don't seem particularly advanced. There isn't much about the jobsite that would seem out of place 50 years ago. The contractor uses a spreadsheet and has a cell phone, maybe, and sure there are a handful of 2x improvements but not that many and mostly in parallel not in serial.
So I'm not sure what the mystery is. If you just looked at construction sites today and 50 years ago, you can see that productivity can't really be much higher, if at all.
This is a topic of great interest to me. It finally motivatedme to stop free riding. My father was a Resident Engineer. That is to say, he worked for a consultancy which designed construction projects, mostly water and sewer. His function was to insure the contractors built to design specification and prepare monthly summaries of their activity so that they could receive progress payments. Consequently, I grew up around contract construction.
That experience permits me to compare then (mid 1960s to early 70s) and now, which suggests some reasons for sluggish productivity growth. Today, when a construction project involves clearing off surface vegetation, the first thing a contractor does is erect a silt barrier around the site. That way, rain does not wash loose soil into adjacent watercourses. Of course, this requires time and money but doesn't truly advance the construction. In the earlier era, the silting adjacent to construction repesented an unpriced externality. Environemntal impact statements have a similar effect in terms of costs and delay. They similarly are intended to reduce externalities related to building.
Another factor consists of contractual restrictions placed on contractors. Some years ago my development was hooked into the municipal sewer system. I oberved that every night the contractor backfilled their excavation completely. This seemed ridiculous, so I asked the construction boss why they did it. He explained that they had two contractual options. The other was leaving the hole open with warning lights (not unreasonable) and a watchman. Backfilling nightly was the less expensive option. Once, again, preventing avoidable accidents and injury is a resonable goal. Either of these options raises costs and reduces output per worker hour.
1. Consumer demand can affect measured productivity. If everybody decides they want unique hand-forged kitchen knives, improvements in the productivity of standard steak knives won't affect the overall numbers. The observed pattern in Seattle metro is that people very badly WANT single family free standing houses. They are not forced into wanting these by zoning or the like, they are forced into long commutes to get them - but what people most appear to want is the product where productivity growth is the most difficult.
2. Selection pressures - "evolutionary forces" - will favor high prices, which will favor building high-end product. At least in states like WA which depend heavily on property taxes, it is NOT IN THE INTEREST OF GOVERNMENT for dwellings to be cheaper. Blaming it on NIMBY etc may have some factual support - but there is a deep "evolutionary selection" at work here. Likewise, to make good *margins* developers will tend to focus on high end products. And as noted in #1, that's what people appear to want anyway.
Factories and warehouses face very different selection pressures.
I suggest one useful exercise is to compare productivity of building single family dwellings in non-urban places with restrained property taxes and permitting rules - you may find that a pleasent ranch house in some places can in fact be built more productively. But most of them are being built in expensive/difficult/demanding markets, and hence productivity is poor.
2021 3 bedroom 2 1/2 bath, 2 car garage, laundry room, central heating and Air conditioning, master bedroom with walk in closet and 2 sink bath, smaller lot, 2 story.
$500,000
All three in same town, same school district. The 2022 house is about 2 miles from the other 2
>>In other words, simply moving out to the ‘burbs lowered both our construction productivity and our construction productivity growth, because building single-family homes is a relatively simple, lower-skilled task, while building apartment buildings, factories, and offices is a higher-skilled task that is more amenable to technological innovation.
I think this is the most salient point from a Strong Towns perspective. The 'burbs aren't unsustainable *only* because they can't pay for the infrastructure liabilities they accrue, but also because they stylistically crowd out high-productivity construction.
It's important to note that the goal of most (all?) municipalities in America is to decrease the productivity of construction projects so that fewer of them would happen. Local governments everywhere are captured by statist nimbys who don't want anything in the built environment to ever change. It would be surprising to me if construction productivity wasn't declining given that its decline is an explicit goal of the governments responsible for regulating the market.
I ran a framing crew in the '80's in AZ, custom and small commercial - highly competitive and demanding work. Many crews I observe today do not measure up. it's no wonder the costs have escalated and productivity has suffered.
I foresee that slack productivity about to change with mass timber construction techniques , CLT's and so forth. The infrastructure is not quite in place (in the US) but certainly on the way.
Precut panels will replace all those sticks and CMUs, structures will go up in days or weeks instead of months and years. I can well imagine a time when a dwelling unit can be assembled on site, tight to the weather, in a day or less.
No one needs to believe me, it's just my prediction based on an experienced construction background.
Construction is very labor intensive so Baumol's cost disease is a huge factor. Also, there has been a huge increase in concern over safety which results in taking longer to do tasks than older unsafe methods. So work injuries and fatalities need to be factored into any analysis of productivity.
Not covered is the sales price increases in the final product.
Could it be that the profit margins in supply-constrained single family homes is such that there's less incentive to increase productivity?
I'd also think that the systemic "short-term extraction" business model holds down productivity. Focusing on short-term extraction takes attention away from long-term growth.
1947 2 bedroom 1 bath, new ,poorly paved street,no sidewalks, no sewer system (cess pool). $9000
1957 3 bedroom 1 1/2 bath, new, central heating, well paved street, sewer system. $15000
About a half mile apart.
Similar to discussions of solar vs fossil fuel could this in part be a competition of learning function vs increases in difficulty of each new unit since easy places to build already done. Drillers get better is masked by needing to drill further. Homes built near me require serious blasting because the flat lots were built an the 1980s.
Agriculture doing well on productivity, construction doing poorly. So turning to agricultural construction --
How would you build a towering grain silo without any cranes?
It's actually pretty mesmerizing:
https://www.youtube.com/watch?v=tBAweJABIS4&t=98s
Separately, here's a great discussion of obstacles to home construction efficiency:
https://austinvernon.site/blog/construction.html
Honestly a lot of it is pulled from the Construction Physics substack, that's the firehose version:
https://constructionphysics.substack.com/
Construction Physics has so much information and analysis on this topic it is difficult to summarize. The experience of reading it is basically a slow unwinding of all my intuitions about construction costs and productivity.
The next big infrastructure bill had better include funding construction economics newsletters and blogs. If not that's a dealbreaker for me and I won't support it. :P
With demand outpacing supply, builders are forced to get creative and build in places they wouldn’t have in the past. It’s easy to gain economies of scale when there’s a massive tract of land and you can build hundreds on homes in a single development, but these days they build on any little infill parcel they can find within an already populated municipality, and building on an odd shaped lot or a hillside is more expensive than churning out 100+ homes that all look the same.
It seems to me that the introduction of OSHA rules into the workplace between 1970-1980 reduced productivity greatly. Also important was the 1974 oil embargo; before 1974 windows were single thickness glass and there was no insulation to speak of. It took almost a generation from 1974-1995 to understand how to insulate buildings. Even high quality construction, museums and the like, were realtively cheap, perhaps 300% more than ordinary construction; whereas today they are likely to be 1,400% more. In the 2000's we have through LEED made buildings much more complicated and are now reducing the carbon footprint of new construction from 90 tons down to under 50 tons. By 2030 this may be close to 10 tons. These betterments all effect cost and productivity. But, the results are enormous reductions in the amount of energy, gigawatts of power, consumed which should be included in life-cycle analysis.
Baumol?
When I observe construction at my house, my workplace, the new office building downtown, I see a bunch of guys doing manual labor using tools that don't seem particularly advanced. There isn't much about the jobsite that would seem out of place 50 years ago. The contractor uses a spreadsheet and has a cell phone, maybe, and sure there are a handful of 2x improvements but not that many and mostly in parallel not in serial.
So I'm not sure what the mystery is. If you just looked at construction sites today and 50 years ago, you can see that productivity can't really be much higher, if at all.
Are you a subscriber to https://constructionphysics.substack.com ? I think you’d like it
This is a topic of great interest to me. It finally motivatedme to stop free riding. My father was a Resident Engineer. That is to say, he worked for a consultancy which designed construction projects, mostly water and sewer. His function was to insure the contractors built to design specification and prepare monthly summaries of their activity so that they could receive progress payments. Consequently, I grew up around contract construction.
That experience permits me to compare then (mid 1960s to early 70s) and now, which suggests some reasons for sluggish productivity growth. Today, when a construction project involves clearing off surface vegetation, the first thing a contractor does is erect a silt barrier around the site. That way, rain does not wash loose soil into adjacent watercourses. Of course, this requires time and money but doesn't truly advance the construction. In the earlier era, the silting adjacent to construction repesented an unpriced externality. Environemntal impact statements have a similar effect in terms of costs and delay. They similarly are intended to reduce externalities related to building.
Another factor consists of contractual restrictions placed on contractors. Some years ago my development was hooked into the municipal sewer system. I oberved that every night the contractor backfilled their excavation completely. This seemed ridiculous, so I asked the construction boss why they did it. He explained that they had two contractual options. The other was leaving the hole open with warning lights (not unreasonable) and a watchman. Backfilling nightly was the less expensive option. Once, again, preventing avoidable accidents and injury is a resonable goal. Either of these options raises costs and reduces output per worker hour.
Two thoughts:
1. Consumer demand can affect measured productivity. If everybody decides they want unique hand-forged kitchen knives, improvements in the productivity of standard steak knives won't affect the overall numbers. The observed pattern in Seattle metro is that people very badly WANT single family free standing houses. They are not forced into wanting these by zoning or the like, they are forced into long commutes to get them - but what people most appear to want is the product where productivity growth is the most difficult.
2. Selection pressures - "evolutionary forces" - will favor high prices, which will favor building high-end product. At least in states like WA which depend heavily on property taxes, it is NOT IN THE INTEREST OF GOVERNMENT for dwellings to be cheaper. Blaming it on NIMBY etc may have some factual support - but there is a deep "evolutionary selection" at work here. Likewise, to make good *margins* developers will tend to focus on high end products. And as noted in #1, that's what people appear to want anyway.
Factories and warehouses face very different selection pressures.
I suggest one useful exercise is to compare productivity of building single family dwellings in non-urban places with restrained property taxes and permitting rules - you may find that a pleasent ranch house in some places can in fact be built more productively. But most of them are being built in expensive/difficult/demanding markets, and hence productivity is poor.
Follow up to earlier comment:
Forgot:
1947 1 car garage
1957 2 car garage
2021 3 bedroom 2 1/2 bath, 2 car garage, laundry room, central heating and Air conditioning, master bedroom with walk in closet and 2 sink bath, smaller lot, 2 story.
$500,000
All three in same town, same school district. The 2022 house is about 2 miles from the other 2
On Fri, Oct 1, 2021, 08:04 Luka <reaction@mg1.substack.com> wrote:
>>In other words, simply moving out to the ‘burbs lowered both our construction productivity and our construction productivity growth, because building single-family homes is a relatively simple, lower-skilled task, while building apartment buildings, factories, and offices is a higher-skilled task that is more amenable to technological innovation.
I think this is the most salient point from a Strong Towns perspective. The 'burbs aren't unsustainable *only* because they can't pay for the infrastructure liabilities they accrue, but also because they stylistically crowd out high-productivity construction.