Why Elon Musk is Right About the Housing Market

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In a recent interview with Yahoo Finance, Elon Musk expressed his concerns about the housing market and its potential impact on future affordability. The Tesla CEO believes the current housing market is unsustainable, and he’s not the only one who feels that way. With home prices soaring above their historical average, many prospective homebuyers are being priced out of the market. According to real estate website Redfin, there were almost 80 million U.S. households in 2018–a record high for this statistic. However, despite this high demand for housing (both rented and owned), the number of homes listed for sale as well as new construction has reached record lows. With so many people unable to afford homes in affordable areas, “cramped” apartments have become increasingly popular among renters looking to live in dense urban centers where housing is more expensive than in suburbs or rural communities. In fact, nearly half of Americans now live in an apartment or a condo—up from 40% just 10 years ago.

Why is the Housing Market Unsustainable?

While the housing market has been growing steadily since 2010, new construction has remained stagnant. Part of this is due to the slow economic recovery after the 2008 financial crisis, but much of this stems from zoning regulations that make new construction expensive—which, in turn, makes new housing less affordable. Additionally, growth in the population and demand for housing has been outpacing new construction for several years now. Because of this, housing costs have been increasing at a much faster rate than income. On average, real home prices have increased by more than 50% since the beginning of 2010. This doesn’t include the potential impact of the trade war, which could potentially drive prices even higher.

Musk’s Vision for Affordable Housing

Musk’s vision for the future of affordable housing is quite radical; he doesn’t believe that we should build more houses, but rather, we should build less. In fact, he thinks we should “go backward” in terms of construction—which may sound counterintuitive, but the idea is that by creating shared living spaces, we can drastically reduce the cost of housing. Musk references New York City as an example of this concept in practice. Despite having the fifth-highest median rent in the country, New York’s median home price is actually lower than the national average. This is largely because people are willing to live in smaller spaces in exchange for living in a desirable city center, while people in many suburbs are forced to buy large houses with yards at a much higher cost. Musk believes that by building more communal housing in city centers, we can make housing more affordable while also encouraging people to live in the types of places they want to live.

How Could We Achieve Elon’s Vision?

So, how do we make Musk’s vision of communal living a reality? Well, luckily for us, Musk has already developed a solution. Known as “Tesla for architects” or “Boring Company” (BC), the platform is designed to help developers create high-density buildings at a fraction of the cost of conventional construction. The platform uses bricks made of recycled concrete, steel reinforcement made by Tesla, and a specialized concrete pump created by the BC. The pump uses a continuous pour method that is up to 50% faster than conventional construction. In fact, the pump can produce a full-size house in just one day—which is likely much faster than you could build one using traditional construction methods. Musk also envisions BC being used to build affordable housing in rural communities, as well as low-cost shelters in disaster-stricken areas—making this technology capable of making a significant impact on many people’s lives.

Musk’s Solution to Unsustainable Housing?

Beyond the technology itself, many experts are also calling for regulatory reform to make new construction more sustainable. For example, the report “Rethinking Construction in the United States” suggests that we should adopt policies similar to those implemented in other countries in order to make U.S. construction more sustainable. One such policy is requiring a minimum percentage of recycled materials in new construction. This would make construction more environmentally friendly and also help lower the cost of new buildings. The report also suggests reforming zoning in order to encourage more high-density construction in desirable areas. By doing so, we can make our cities more affordable while also protecting the quality of life in suburban and rural communities.

Could an AI Help Create More Affordable Housing?

As mentioned above, Musk is also working with a company called OpenAI on technology that can create building designs using machine learning. This technology is designed to help architects create more efficient designs that also meet clients’ needs, while also lowering the cost of construction. Through this partnership, OpenAI will create a platform that lets users create and edit 3D building designs by drawing in the air with their hands. These designs can then be automatically turned into construction blueprints with the push of a button. The technology is still in its early stages, but it has the potential to revolutionize the construction industry. Beyond the technology itself, though, the construction industry may need to shift its culture to make room for AI. In order to realize the full potential of AI in construction, AI and machine learning engineers will likely need to play an active role in the design process. This will likely require a shift in how construction is managed, which may be difficult given the hierarchical nature of the industry.

Conclusion

Ultimately, the solution to unsustainable housing is to build more sustainable buildings while also making room for innovative technologies like AI. Doing so will likely require significant cultural changes in the construction industry, but it might be necessary if we want to make sustainable housing a reality.

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