Five Things You Didn’t Know About Millennials and Affordable Housing
By Human Capital Group
29th February 2021
In our latest webinar in the Housebuilder Business Resilience Hub Series, our Managing Director got an insightful lesson into affordable housing, consolidation of resources, modular building and the effect that millennials are having on all of this.
Gerard spoke to Wade McGuinn, the owner and founder of McGuinn homes which has been operating for 35 years in South Carolina in the US and has built thousands of homes in that time. He is also a regular speaker and contributor to the National Association of House Builders (NAHB).
Wade soon got down to business, discussing affordable housing and the commoditisation of the housebuilding industry in the US. He states that so-called “identikit” houses are the future, but that consolidation and quick construction isn’t to be feared, but change should be embraced.
He said that demand from millennials with high expectations and COVID-19 forcing more people to spend time at home are the key reasons why ‘cookie-cutter’ homes cannot – and shouldn’t – be avoided.
Read on to find out the five things you didn’t know about millennials and affordable housing!
1. How has demand from Millennials and COVID-19 accelerated the need for affordable housing?
COVID-19 means that over the last 12 months, our homes have become our offices, schools, playgrounds, restaurants and staycations. This has made the ‘millennial’ generation in the US truly realise the importance of owning a great home for the first time. They haven’t been able to travel around or move freely so they have realised the value of creating a ‘sanctuary’ at home. All of a sudden, owning a home makes sense for many more reasons rather than it just being viewed as an ‘investment’.
Just like the recession, which created a lot of consolidation in the housebuilding market, the COVID-19 pandemic is going to change everything. Sometimes terrible things create great change.
2. As a housebuilder, how do you create appealing affordable housing?
The biggest challenge for housebuilders in creating affordable housing is the costs. In the US, the cost of land, legislation and the costs associated with developing land have gone up exponentially so that’s really your first hurdle.
Once this is done you have to turn to the design of the homes themselves. Interestingly, although it feels like we have more choice these days, the reality is that consumers have far less.
As an example, big companies formulate design schemes, buy them in bulk and then people choose from those collections. Although the choice seems endless it is actually much more prescribed. This is because regardless of the store you choose – Target, Crate & Barrell etc – you’re going to find a very similar choice of items and a very similar colour palette.
It is the same thing in regard to house design. Everyone wants the same colours, same backyard with fencing, same stainless steel appliances and privacy even though they are living in high density areas. These features are no longer seen as ‘luxury’ but are now basic necessities for millennials. A housebuilder is not going to sell a house without these features that today’s house buyers feel like they are entitled to them.
3. Historically, modular building has become fairly stigmatised in US and UK. How will this affect the demand?
Probably a panel of people could discuss this question for hours!
The reality is that this is simply a state of mind that people will soon forget. People previously said they didn’t want big box stores but these days these stores are full of people. There is a discrepancy between what people say they want and how they actually behave. The big box stores have created pricing structures that simply can’t be argued with or beaten – it will be the same with modular housing.
What the consumer really wants is value. House builders need to find the right ‘value proposition’ to narrow down between what a buyer’s wants and needs to find the ‘sweet spot’ in the middle.
In the future, everything from hospitals, to schools, apartments and houses will be built in a modular way. Creating buildings in factories is a much more controllable environment which makes the whole process much easier, and thus cheaper.
Ultimately, people embrace change and get on with it – otherwise we’d all still be driving horse and carts!
4. How can SMEs compete in this type of market?
Hope is not a business plan – you can’t just hope that something will go a certain way. If a company doesn’t become an early adopter of a trend, then you won’t last very long. In terms of consolidation, if they don’t get on-board with the way the market is going then they will either be bought out or priced out of the market.
In order to survive, you need to welcome change, research it, understand it, accept it, learn it and adopt it early. You need to answer the question of ‘How does your business fit into the future?’
5. Within our recruitment business we’re pretty obsessed with technology and ensuring it is part of our strategy. As a housebuilder, should technology and evolution be a key part of your business strategy and a dedicated area of the business?
At McGuinn Homes, we’ve already started. We’ve toured across US and viewed factories building modular units to work out how it’s happening.
You’ve got to invest now and make big sacrifices in order to be an early adopter of a trend. You will pay a lot to adopt early technology, but in the long term, the savings that will be made from economies of scale will pay you back big time. This will allow you to lead the way and ultimately will mean your business will survive and thrive.
Learning something new will cause a downturn in productivity for the short-term but you need to change in order to progress what you are doing.
Three key takeaways:
- Consolidation does not create less choices, it creates better ones.
- Change, no matter how painful, can bring great brings. So, make sure you are willing to go through the initial downturn in order to reap the rewards for your business, your employees and all your families
- Wade’s prediction is that the housebuilding industry in the US will become predominantly modular in the next 10 years.