Is the World Ready for a Radical, Low-Cost Housing Boom?
The next housing boom will be far more radical than the last housing boom. Instead of moving middle-class families into McMansions they can’t possibly afford, this next housing boom will be radical because it will take low-income families from developing markets and move them into affordable, modular housing at a price point close to $2,000 per home. (Yes, that's the total cost of the house, not the monthly mortgage nut). Imagine every family in the world – even those making less than $2 per day – suddenly having potential access to sturdy, affordable housing. Oh, and did I mention that this housing will be powered by the sun? Eventually, these innovations from developing markets will find their way into developed markets, and that will lead to a radical re-think of what’s possible for the lowest strata of American society.
In other words, if you thought "affordable housing" was a code word for welfare, then think again.
Technology visionary Bill Gross, who created the legendary Internet incubator IdeaLab, is now the chairman of WorldHaus, which wants to house the world's poor. As he outlined in his presentation at the United Nations’ Social Innovation Conference last month in New York City, his audacious vision is to create an affordable housing boom in places like India – 200 new houses by the end of this year; 2,000 new houses by the end of 2013; 20,000 new houses in 2014; and 1,000,000 new houses by the end of the decade. Talk about the power of exponential thinking. In January 2012, WorldHaus created the first prototype home in Chennai, India and the plan is to roll them out to low-income areas across India before taking them to other emerging markets.
This idea of low-cost innovations making their way from emerging markets into developed markets is one that has already disrupted the laptop market and the automotive industries. Nicholas Negroponte, with his vision for One Laptop Per Child, gave us the idea that a world-class computer could be made available for under $100. The Tata Nano inspired us to think that a world-class automobile could be made for a fraction of the cost of Western autos. Now, how about a house for under $2,000? It’s classic Bottom of the Pyramid-type thinking, and it’s already yielding results in industries that matter deeply to the developed world, from healthcare to technology.
The mission of WorldHaus is all the more fascinating, given that Bill Gross does not intend to compromise on home quality. This is not the case of replacing sticks and muds with better sticks and better mud, it's about coming up with something radically different. His own experiences in India, where he was leading a solar power initiative, humbled him. He saw that his workers were returning home to the equivalent of shanty towns and realized that nations like the U.S. could do better when it came to housing the world's poor. What Gross wanted was a no-compromise solution that would be safe, efficient and cheap – cheap enough that it would be perceived as within the budgetary constraints of the world’s Rising Billion. In other words, it had to be available at a cost of $10 per month. To get to that magic price point, there was a lot of thinking about materials, about shipping costs, and about how technology could come up with innovative new solutions - such as solar panels for the home's energy needs.
What remains to be seen is if and when these housing innovations will make their way into developed markets. IKEA, which popularized the idea of low-cost modular furniture has inspired its own version of a low-cost modular house (the Aktiv), now available for less than $100,000. We are also seeing the arrival of affordable "shipping container homes" made from recycled freight containers. Who knows? Maybe instead of plunking down a cool half-mill for a place in the suburbs during the next housing boom, we’ll be plunking down the equivalent of a month’s salary for a place that will last a lifetime. That truly is a radical idea.
It's estimated that $68 trillion will pass down from Boomers to millennials. Here's how ultra-rich families can do the most amount of good with what they inherit.