The Housing Crisis Is a Building Crisis

By on March 1, 2017

From CityLab:  There’s at least one thing many urbanists and Donald Trump appear to agree about: America is indeed stuck in a building crisis. Its infrastructure is dilapidated and failing, and housing prices are surging in a superstar economy in part because we don’t build enough of it.

But it is not just sagging federal spending or onerous land use restrictions that are to blame. America’s construction industry face a staggering productivity crisis. And it’s not just a U.S. issue: A report released today by the McKinsey Global Institute concludes that global productivity in the construction industry has stagnated.

In the U.S., industries as varied as agriculture, retail, and manufacturing have increased productivity 10 to 15 times since 1945, but the productivity of the construction industry has barely budged. This is a huge problem both for housing costs and for employment, since the construction industry is one of its most important sources of higher-paying low-skill jobs. The construction industry is responsible for substantial spillover effects in the broader economy, generating $86 of additional economic activity every $100 of construction sector activity, according to figures from the U.S. Bureau of Economic Analysis for 2012.

The United States isn’t alone here: Across the globe, the productivity of the construction industry has grown at a veritable snail’s pace. Today, construction spending adds up to $10 trillion globally—roughly 13 percent of global economic output, a figure which is projected to grow to $14 trillion by 2025. But the industry has generated a meager 1 percent of annual growth over the past 20 years compared to 2.8 percent overall and 3.6 percent for manufacturing.

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