Rebuilding Opportunity

Since President Trump first proposed a “trillion-dollar infrastructure plan” on the campaign trail, it has featured prominently on Congress and the White House’s to-do list. After the failure of the repeal-and-replace bill for the Affordable Care Act, its importance has only increased. There has been a great deal of discussion as to how much of the actual infrastructure should be private and how much should be public, whether it will include high speed rail and upgrades to ports, and how to pay for it all. What has not been mentioned is that this bill is a golden opportunity to rejuvenate and reform America’s construction sector for the benefit of all, especially low-income families.

Construction is among the world’s least efficient industries. According to The Economist, over the last seventy years productivity in the U.S. has grown by 800% in manufacturing, an incredible 1,600% in agriculture, and almost 400% overall. In construction, it has not budged.This lack of efficiency is hurting our nation’s most vulnerable, as builders and developers have increasingly found it unprofitable to build low-income housing since the cost is too high. As a result, lower-income individuals and families are forced into crowded, often unsafe buildings for which they pay high rents, as the demand for low income housing far outstrips supply. According to the National Low-Income Housing Coalition, in no state were there more than 56 units of cheap housing available for every 100 low-income households.

[pullquote]According to the National Low-Income Housing Coalition, in no state was there more than 56 units of low-income housing available for every 100 low-income households.[/pullquote]

In the past, we have tried to build our way out of this problem. The failure of Pruitt-Igoe in north St. Louis dramatically illustrates the limits of this approach. The buildings were poorly designed and underfunded and quickly declined in safety and quality of life until they were torn down in the mid-1970s. The lack of low-income housing in the United States ultimately comes down to the fact that new units are not being built. A lack of productivity growth is keeping costs high and hurting those in most need.

What has held productivity growth back in the construction sector? Increasing regulation is partially responsible, but The Economist notes that it only accounts for about one-eighth of lost growth since the 1980s. The biggest problem is that the industry is reliant on manual labor and small firms. My family owns a small homebuilding business, and as I grew up working on jobsites I saw firsthand how the vast amount of construction is still done by hand, with laborers employed by small firms. But why? Wouldn’t it be cheaper for business to consolidate and invest in capital, as they have in other industries?

The answer lies in the deeply cyclical nature of construction. When the economy is doing well, few industries rise as far as housing, and when the economy collapses, few industries fall as far. The high cost of investing in labor-saving technology makes little sense if you know your business will go through a crisis in a few years. Workers can be laid off, but the costs of capital are set. As a result, construction firms have not invested in labor-saving technology, the cost of building has remained stagnant, and the poor suffer from a lack of affordable housing.

[pullquote]If the infrastructure bill produces even a fraction of the proposed trillion-dollar investment, it will be one of the biggest boosts to the construction sector in decades.[/pullquote]

This is where the infrastructure bill comes in. If it produces even a fraction of the proposed trillion-dollar investment, it will one of the biggest boosts to the construction sector in decades. Even if most of the actual building will be done by private firms, the federal government has enormous power over the process. They should use that power to push firms to invest in labor-saving technology. Congress should commit to spending a set amount of money over an extended timeframe. This will provide enough stability in the construction sector that firms will have an incentive to invest in devices such as self-driving bulldozers and cranes, as well as introduce technology already available, such as computer-aided drafting. The government should favor firms that do so in the bidding process, prompting modernization. Relevant regulatory agencies should look with favor on firms who try to merge. These measures will spur industry consolidation and investment in labor-saving technologies, helping the construction industry to increase its productivity and lower the cost of building. Once the cost of building new units is lower, private companies and developers will have an incentive to build low-income housing, giving families more options and making them less beholden to predatory landlords.

[pullquote]The infrastructure bill is a golden opportunity for Congress to encourage long-term, sustainable change in the construction sector.[/pullquote]

Will this alone solve the lack of affordable housing in America? No. But it would be a bipartisan step in the right direction. The only way to truly get the number of affordable housing units we need in this country is to make it cheaper and easier to build them. This bill is a golden opportunity for Congress to encourage long-term, sustainable change in the construction sector, boosting the fortunes of lower-income families as they build infrastructure for the twenty-first century.

Christopher Hall ‘18 studies in the College of Arts & Sciences. He can be reached at c.a.hall@wustl.edu.