MBA_406_Societal_Shifts_Paper_Neel_Mainthia

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Neel Mainthia 5/4/2022 3D Printing of Climate Friendly Homes: Meeting the Needs of a Growing a Growing and Shifting Population Housing has been a topic of discussion in the United States and elsewhere. The megatrends of demographic change combined with rapid urbanization have produced a demand for affordable housing worldwide. In the backdrop is the megatrend of climate change. Climate change has produced storms of increasing intensity combined with rising temperatures and sea levels. Traditional methods of house construction, particularly in the United States, involve wood framing that is often inadequate in the face of storms and floods. More than 1/3 of the world’s population lives in slums (The Economist 2021). These shanty towns consist of poorly built housing utilizing whatever scrap materials, usually metal, are lying around in junkyards. In the face of an increasing population and mega storm events, millions of people stand to be displaced. To meet the housing needs of the remainder of the 21 st century, new paradigms of construction must be considered. In the United States, the preferred method of framing is wood. Only 8% of all homes constructed in 2017 were framed with concrete, a stronger material with greater weather resistance. A home framed with concrete can cost 15% or more than a home framed with wood under current methods but would offer much greater protection against the increasing storms of climate change (Flavelle 2018). 3D printing applications in construction offer speedy construction of concrete houses and buildings that resilient to climate change and can keep pace with an increasingly urbanized population while addressing demographic shifts. This competitive space will emerge given the large opportunities posed by the interaction of multiple societal shifts. By the year 2050, 75% of the world’s population will live in cities (The Economist 2021). Currently, 10% of the world’s population lives on a coastline that is less than 10 meters above sea level (The Economist 2021). These cities are among the most vulnerable to climate change. The city of Miami, Florida is a prominent example in the United States. To deal with storm surge from hurricanes, the city has more than eighty stormwater pump stations (NewsHour 2018). Though building codes were updated after the devastation of Hurricane Andrew in 1992, the city remains vulnerable due to its foundation on porous “Miami Limestone” (NewsHour 2018). Some climate scenarios have a six-foot rise in sea levels burying much of Miami, Fort Lauderdale, and Broward County underwater with ravines running through them (NewsHour 2018). The state of Florida has experienced rapid growth, seeing its population grow from 18.85 million in 2010 to 21.78 million in 2021 (“Florida - Resident Population 2021 | Statista” 2022). Increased population in cities, combined with the threat of climate change and shifting demographics produces a greater need for affordable, resilient housing. According to real estate analytics firm CoreLogic, more than thirty-two million homes in the Atlantic and Gulf coast regions of the United States are at risk of sustaining hurricane and wind damage. The combined value of the properties is more than $8.5 trillion (Frank 2021). The areas most at risk include the New York metropolitan area, New Orleans, Houston, Virginia 1
Beach, Miami, and other major cities in Florida (Frank 2021). An investigation of category five hurricane resistant housing by the Washington Post revealed that both customized aerodynamic design and concrete construction enabled homes to better resist wind damage while location relative to shore was a greater determinant of water damage risk (Cappucci 2021). In the United States, standards for house construction vary by state. In March 2018, the Insurance Institute for Business and Home Safety (IBHS) released a “Rating the States” report on residential building code systems in eighteen hurricane prone states, including Florida, Texas, and New York. Building codes in Florida were ranked number one with a score of 95 out of 100, and the state was lauded as having learned a great deal from its experiences with Hurricane Andrew in 1992. On the lower end of the spectrum, Texas ranked 15 th with a score of 34, with the report citing a lack of a statewide building code as those responsibilities are distributed to the local municipalities (Williams 2018). According to experts, a home built of concrete can better withstand the increasing storms posed by climate change. However, only 8% of the 800,000 homes built in 2017 were framed with concrete and only 8,126 homes out of that total number were built under IBHS hurricane safety standards (Flavelle 2018). These findings show a gap between the construction industry in the United States and preparedness for climate change. By some estimates, the US is currently short three million homes from would be potential buyers (Arnold 2022). This shortage is complicated by a lack of skilled construction labor and a supply chain crisis due to the Covid-19 pandemic. Over the last 20 years, construction employment peaked in 2006 and then declined sharply after the great recession (BEA 2021). As of 2020, the labor force had been steadily increasing but has not reached the peak 2006 levels. Many older Americans are deferring the traditional downsizing process, delaying the availability of starter homes and homes suitable for families from entering the market (Davidson 2019). Reasons for this include a desire to avoid mortgage payments, a desire to remain in their existing communities, and a desire for space to support their millennial adult children. Some seniors actively defied the trend of downsizing by “upsizing” their homes, buying larger homes during periods of historically low interest rates (Rosen 2021). In the US, the population of those 65+ and older is expected to surge to 73 million by 2030, with those 80 and over having a population of 28 million (Platsky 2018). With the trend of people in the US living longer and staying in their homes longer, a drastic increase in the supply of homes is necessary to contain rising prices. The problem of affordable housing goes beyond the US. Across the world, tens of millions of people are heading to cities and climate change is expected to exacerbate this trend (The Economist 2021). India, with a population of four times the US, will need twenty-five million housing units more by 2030 to house a population that will be at least 40% urban (Housing News 2019). The confluence of climate change, changing demographics, and rapid urbanization creates a need for affordable housing that is resistant to the effects of climate change, customizable to unique needs, and can be rapidly built to meet increasing demand. How do we meet these challenges? 3D printing of homes offers a solution and a new competitive space to address the intersection of these societal shifts. 3D printing of houses involves utilizing a gantry system or robot to extrude concrete onto a build site, one layer at a time. Using the robotic arm extruder method and a technology known 2
as contour crafting, the robotic arm moves around on rails and prints the house layer by layer using concrete. The overall 3D printing marketing including services across all industries including construction is projected to grow to $49.1 billion in 2025 from $5.9 billion in 2015 (plastemart.com 2016). Major players in the industry include ICON, an Austin based startup company, PERI, and Alquist. It is estimated that the total global 3D printing construction market is currently valued at $11 million USD as of 2021 but is expected to grow at a 100% CAGR through 2030 (Research 2022). Factors influencing this growth are a desire for green buildings alongside a growing need for affordable housing. In total, there are eleven major companies across the globe that are currently in the 3D construction printing business. 3D printing offers benefits over traditional construction. The most common material used in 3D printing is concrete. As established earlier, concrete is a superior material for resisting hurricane force winds. In addition, concrete can withstand temperatures of thousands of degrees making it potentially more resilient to wildfires (ICF 2018). 3D printing also offers the potential for other materials such as cement, clay, and plaster. 3D printing allows prototypes and blueprints to print at the push of a button. These homes can be built in less than 24 hours, can be as cheap as $10,000, and can allow for the formation of complex designs with minimal efforts. Once plumbing and electrical is added, the total home construction cost can be between $140,000 and $160,000. Shorter supply chains as compared to traditional home building makes 3D printing more eco-friendly, due to the reduction of extensive, transportation pollutants (Inc. 2021). When building the world’s largest 3D printed building in Dubai, the Government of the United Arab Emirates estimated that total labor cost savings were 50% as compared to traditional methods (Vihaan 2022). By 2030, the government of Dubai has set a goal for 25% of all buildings to be produced using 3D printing. The first 3D printed building in Dubai was the Dubai Future Foundation Office at 6,900 sq. ft. At the time, this home took only 3 months to build. 3D home printing projects are becoming ubiquitous across the globe. In 2018, researchers at the University of Nantes in France constructed a full-size 3D printed home at a cost of $232,000, which was 20% cheaper than the cost to build a similar home using traditional methods. COBOD, a Denmark based 3D printing construction company, estimates costs for a single bedroom home at $15,000, for a two-bedroom home at $20,000 - $25,000 and for four-bedroom home at $50,000. The estimated cost to build an average home in the United States runs from $95 to $150 per square foot, resulting in a three- bedroom home costing between $250,000 to $320,000. Building the same home with 3D printing technology can cost between 20% to 40% less based on current projections. 3D printing cannot build foundations, nor can it build roofs. Plumbing and electrical work would still be done by licensed professionals. However, labor costs can drop down to the daily wages of two or three construction workers for an overall shorter period (Vihaan 2022). At the lower end of the spectrum, some 3D printed houses have been built for pennies on the dollar. Austin, TX based company ICON and company New Story built multiple five hundred square foot houses in El Salvador at a cost of $5,000 each (Vihaan 2022). However, overall project cost savings for a 3D printing project are at least partly driven by a reduction of time necessary for construction. Europe’s first 3D printed office, “The BOD”, only took 22 days (Vihaan 2022). 3
When recreating the building as an experiment, improvements in the process reduced this time to 3 days (Vihaan 2022). Normally, home construction can take several months prior to move in. However, challenges remain for 3D printing to become a more common method for home building. 3D printers for construction can run from $39,000 for basic models to upwards for $100,000 for larger models and even up to $1,000,000 (Vihaan 2022). As of this writing, few permits have been issued for 3D printed houses. The most notable is Austin based startup ICON’s permit to build a community of one hundred homes in the Austin area. The growth of 3D printed construction will depend on the trajectory of the societal shifts supporting this space. Under the status quo, global temperatures are expected to increase steadily and the number of major weather events during one’s lifetime will increase. Rapid urbanization, which was partly disrupted by Covid-19 in the United States and developed economies, will continue, particularly in developing economies such as India, China, Nigeria, etc. In rapidly urbanizing, developing countries, the average age has been skewing younger, while in developed economies, the average age has been skewing older. As such, developing economies will need an ever-increasing supply of affordable housing to keep pace with demand. The status quo scenario is slightly positive for the burgeoning 3D printed construction industry. The industry is expected to grow at a 100% CAGR through 2030 and will continue to do so given the affordability and supply challenges of homes in both the United States and the world. Under a scenario where the trends of climate change, changing demographics, and rapid urbanization accelerate, the 3D printing construction industry can expect to also grow rapidly, which is an incredibly positive development for the technology. As the confluence of the above societal shifts accelerates, the need for climate friendly and rapidly built housing will only increase. The existing supply of homes would be strained by climate change loss of property while a growing youthful population would need larger homes and a growing elderly population may need smaller homes or greater flexibility with leaving their homes. Cities, being the epicenter of economic activity, would feel the strain of increasing populations and potential homelessness. All these factors would drive a greater investment into 3D printing technology, which has been proven to deliver more affordable homes on a faster timeline with a less complex supply chain. Finally, under a scenario where the above trends slow, lessen, or shift, the 3D printing construction industry would likely face diminished growth. Under this scenario, climate change would be less of an existential threat and the number of storms would level off or potentially decrease, indicating a shift in the trends from the last 40 years. Rapid urbanization would slow or decline, as more people choose to stay in their rural or suburban homes, or as more economic opportunities become available in non-urban areas. Changing demographics would be altered as people in developing countries may have fewer children, due to increased economic prosperity, and therefore the median age in more youthful nations such as Nigeria would climb. Under these circumstances, the need for housing overall would decline. Furthermore, one of the competitive advantages of 3D printed concrete houses over wood framing, namely its resistance to storms, would become less of a value proposition to potential homeowners. Emissions from extended supply chains may also be viewed as less of a significant issue. Under these circumstances, the 4
time and cost advantage of 3D printing would remain but a lack of investment in the technology may prevent costs from driving down further. 3D printing of homes and office buildings could become a niche industry for homeowners seeking unique designs that are difficult to produce using wood or stucco. Alternately, 3D printing could be used only for homes the most prone to storms, such as those sitting on multimillion dollar islands in The Bahamas. The industry may continue to grow but at a lessened pace and would need further disruption for it to become even more economically and practically viable over traditional methods. In the United States and across the world, a shortage of housing persists. Rapidly urbanizing and more youthful populations are creating sources of enormous potential demand for affordable houses and office buildings. At the same time, the threat of climate change persists despite global efforts to cut emissions. Rising sea levels and increased hurricanes threaten coastal properties. Most coastal properties in the US are not designed to withstand the strongest winds and storms. As Covid-19 disrupted global supply chains, prices of raw materials and time to build both increased for new construction homes. In the US and abroad, a shortage of housing to meet the demand of would-be buyers exists. 3D printing for construction is still in its infancy as a technology. However, the market has few major players and forecasted for triple digit annual growth over the 2020s. This competitive space has been blown open through the confluence of climate change, rapid urbanization, and changing demographics as the technology offers the potential to build homes that are affordable, quick to build, and resilient to climate change. I foresee continued opportunities in this space as the scenarios of the status quo or accelerated megatrends are both favorable this industry. 5
Research Sources Citations 1) Morning, Sunday. 3D-Printed Homes for Sale . YouTube, 23 May 2021, https://www.youtube.com/watch?v=A7-PATZNZYY. 2) Coogan, John. 2021. “How Cover Is Building The House Of The Future.” YouTube. November 1, 2021. https://www.youtube.com/watch?v=AFup7oO-fSY. 3) Church, Shelby. 2022. “Inside A 3D Printed House You’ll ACTUALLY Want To Live In.” YouTube. April 9, 2022. https://www.youtube.com/watch?v=qV4RCAU7KL8. 4) “Cover.” n.d. Cover. Accessed May 1, 2022. https://buildcover.com/pricing. 5) BEA. "Number of production workers within the U.S. construction industry from 1998 to 2020 (in millions)." Chart. July 30, 2021. Statista. Accessed May 01, 2022. https://www- statista-com.ezproxy.lib.lehigh.edu/statistics/193094/employment-in-production-within- us-construction-since-1996/ 6) McCluskey, Megan. 2022. “3D-Printed Homes Could Help Solve Affordable Housing Crisis | Time.” Time. Time. April 4, 2022. https://time.com/6162775/tiktok-3d-printed- houses/. 7) Hub, Singularity. 2022. “3D Printed Homes Will Be the Teslas of Housing, Says ICON CEO.” Singularity Hub. http://www.facebook.com/singularityhub. April 5, 2022. https://singularityhub.com/2022/04/05/3d-printed-homes-will-be-the-teslas-of-housing- says-icon-ceo/. 8) Hernandez, Melissa. 2022. “Technology Helps Offer 3D-Printed Homes as an Option for Ownership - Los Angeles Times.” Los Angeles Times. Los Angeles Times. January 29, 2022. https://www.latimes.com/world-nation/story/2022-01-29/housing-options-states- 3d-printed-homes. 9) Arnold, Chris. 2022. “There’s Never Been Such a Severe Shortage of Homes in the U.S. Here’s Why.” NPR.Org. NPR. March 29, 2022. https://www.npr.org/2022/03/29/1089174630/housing-shortage-new-home-construction- supply-chain#:~:text=By%20one%20estimate%2C%20the%20U.S.,chain%20problems %20aren’t%20helping. 10) Nechayev, Gleb. 2021. “Where Is the U.S. Housing Shortage? - Counselors of Real Estate.” Counselors of Real Estate. https://www.facebook.com/counselorsofrealestate/. November 22, 2021. https://cre.org/real-estate-issues/where-is-the-u-s-housing-shortage/. 11) “Housing Supply: A Growing Deficit - Freddie Mac.” 2021. Freddie Mac - We Make Home Possible - Freddie Mac. Freddie Mac. May 7, 2021. https://www.freddiemac.com/research/insight/20210507-housing-supply. 12) Long, Evelyn. “The Impact of Climate Change on Building Design.” construction21.org, September 15, 2021. https://www.construction21.org/articles/h/the-impact-of-climate- change-on-building-design.html#:~:text=The%20climate's%20alteration%20causes %20severe,their%20stability%20against%20climate%20change. 13) Boland, Brodie, Cindy Levy, Rob Palter, and Daniel Stephens. 2022. “Climate Change Impact on Real Estate | McKinsey.” McKinsey & Company. McKinsey & Company. February 4, 2022. https://www.mckinsey.com/industries/real-estate/our-insights/climate- risk-and-the-opportunity-for-real-estate. 6
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