How innovation can lower business costs and unlock greater long-term value.
For years, when affordability tightens, our industry’s instinct has been remarkably consistent: reduce square footage, simplify specifications, substitute lower-cost materials, defer upgrades, and eliminate features altogether. There are certainly moments when thoughtful value engineering is necessary, but when cost reduction becomes synonymous with decreasing the value of a home, we eventually reach a point of diminishing returns.
That is why a new white paper from Suffolk and MIT, Construction in the Age of AI, caught my attention. The paper makes a persuasive case that some of the most meaningful opportunities to improve construction economics may lie not in stripping more value from a finished home, but in modernizing the systems that produce it.
Stagnant Productivity
According to the report, construction productivity has stagnated for decades, held back by fragmentation, limited technology investment, siloed data, inconsistent workflows, and the failure to codify institutional knowledge across projects.
Building firms have historically invested less than 1% of revenue in IT, while the automotive industry invests closer to 3%, healthcare invests upwards of 5%, and banking invests nearly 8%. The result is a sector that has remained laborious, fragmented, and inefficient, even as cost pressures, labor constraints, and housing demand are intensifying.
The Suffolk and MIT report identifies six areas in which enabling technologies may have the greatest near-term impact: design automation, offsite manufacturing, permitting, scheduling, skilled labor and subcontracting, and supply chain and procurement. The early findings are directional rather than definitive, but they are compelling: reported efficiency gains range from 15 to 40%, with cost savings in some applications ranging from 8 to 21%.
Time and cost savings across various categories as estimated in the Construction in the Time of AI report.
The authors are clear that these levers are interdependent. Better design information improves procurement. Expedited procurement supports scheduling. Streamlined scheduling reduces risk and financing exposure. More accurate preconstruction decreases rework in the field. Offsite manufacturing benefits from design certainty and digital coordination. Intelligent software platforms allow the entire delivery process to become more integrated, predictive, and precise.
Shift in Thinking
For decades, we have focused intensely on the cost of the house while giving far less scrutiny to the economics of the system surrounding it. We accept layers of inefficiency as though they are simply part of doing business: design revisions, coordination failures, permitting delays, procurement surprises, change orders, idle time, duplicate work, poorly sequenced trades, and financing costs associated with extended schedules—all of which are embedded costs.
Using a sample multifamily project in San Francisco, the paper estimated that the combined application of the six technology levers could produce approximately 17-20% in total cost savings and 22-25% in schedule savings.
Every dollar tied up in an inefficient process is a dollar that cannot be invested elsewhere. With the integration of these innovative technologies, upfront operations can be streamlined, opening up the opportunity to reallocate dollars towards creating a better end-product—a higher quality home, shifting the conversation from lowering cost per square foot to restructuring business processes to optimize front-end cost savings.
Redefining Value Engineering
One of the most obvious examples is design. The paper describes how advanced design tools can now evaluate alternatives quickly, automate technical review, and decrease project costs, augment specification, and enhance performance. These capabilities can compress design cycles and reduce the likelihood that expensive conflicts emerge after construction begins, which is important because errors caught digitally are relatively inexpensive, whereas errors discovered in the field are not.
Similarly, enabling technologies can now improve preconstruction by turning design information into budgets, schedules, procurement plans, bid packages, and trade scopes, while helping teams identify gaps and risks before they reach the jobsite, all of which improve administrative efficiency and certainty around costs and execution.
Permitting represents another meaningful opportunity. The paper notes that the United States has more than 20,000 independent permitting jurisdictions, each with different codes, requirements, review processes, and timelines. Technology-supported compliance review and application preparation could help reduce uncertainty, identify possible issues early in the process, and create standardized workflows between project teams and regulators.
Anyone who has worked in housing knows what delays of this kind can cost. Longer timelines increase carrying costs, financing exposure, escalation risk, and overhead. Compressing those timelines can improve project economics substantially.
The same is true in procurement. Materials represent a significant portion of project cost, yet purchasing decisions are often fragmented across companies, trades, and systems. Predictive tools can help teams forecast demand, manage lead times, compare supplier performance, identify risk, and align procurement more closely with scheduling and field operations.
Two Roads Diverge
Our industry is under extraordinary pressure to reduce the cost of housing, but we often default to solving that problem at the level of the home itself. We debate square footage, appliance packages, insulation and window specifications, mechanical systems, finishes, and other materials because those are visible and easy to quantify.
But, if we’re honest with ourselves, a meaningful portion of the cost problem sits upstream, before dirt is ever moved. If a builder can reduce cycle time, eliminate rework, improve procurement, shorten the permitting process, coordinate trades more effectively, and increase predictability, those savings create financial capacity.
That capacity can be used in several ways. Some of it ca—and should—protect margin, because builders and developers need healthy businesses in order to produce housing at all. But some of it can also be redirected toward improving performance, wellness, resilience, and value for the homeowner, which all contribute to long-term affordability.
Imagine if front-end cost savings enabled builders to invest in more efficient building envelope systems, high-performance windows, heat pumps, improved ventilation, durable materials, water technologies, solar + storage, resilience products, and better controls—the very upgrades that today’s homebuyers want to lower operating costs, improve comfort and health, reduce risk, and augment equity.
In other words, technology can help shift the housing affordability conversation away from pure subtraction and toward smarter allocation.
We can no longer deny that the first-cost model has limits. If we continue to address affordability primarily by making homes smaller, cheaper, and more minimally specified, we risk delivering a product that costs less to buy but more to own.
The more sophisticated approach is to improve the efficiency of the entire housing ecosystem so that we can preserve or enhance the performance of the home without eroding the builder’s economics.
Updating the Math
Our sector has traditionally been very good at measuring the visible inputs: labor, materials, land, square footage, and sales price. We have been much less disciplined about quantifying the hidden costs of inefficiency or the long-term value created by better performance.
The math should account not only for the cost of the physical product, but also for the efficiency of the process that creates it and the operating performance of the asset that results.
If enabling technologies help to reduce design time, permitting delays, rework, procurement inefficiencies, financing costs, and schedule risk, those savings should become part of the affordability equation. If better building systems reduce energy bills, maintenance costs, insurance exposure, and replacement cycles, those benefits should become part of the value equation. This is where systems improvement and Value Per Square Footnaturally converge.
The goal is not to build the cheapest possible home. It is to build the most valuable home within a viable economic model.
If innovation simply helps us produce the same mediocre product a little faster, we will have missed the point. If, however, it helps us remove systemic waste and redirect that value toward higher quality homes, then we have materially improved the housing proposition.
As cofounder and CEO of Green Builder Media, Sara is a visionary thought leader and passionate advocate for sustainability. A former venture capitalist, she has participated in the life cycle (from funding to exit) of over 20 companies, with an emphasis on combining sustainability and profitability. She lives in Lake City, Colo., with her husband, where she is an avid long-distance runner, snowboarder, and Crossfit trainer. She is also on the Board of Directors at Dvele, runs the Rural Segment for Energize Colorado, and is a former County Commissioner.
Improving Housing Economics
How innovation can lower business costs and unlock greater long-term value.
For years, when affordability tightens, our industry’s instinct has been remarkably consistent: reduce square footage, simplify specifications, substitute lower-cost materials, defer upgrades, and eliminate features altogether. There are certainly moments when thoughtful value engineering is necessary, but when cost reduction becomes synonymous with decreasing the value of a home, we eventually reach a point of diminishing returns.
That is why a new white paper from Suffolk and MIT, Construction in the Age of AI, caught my attention. The paper makes a persuasive case that some of the most meaningful opportunities to improve construction economics may lie not in stripping more value from a finished home, but in modernizing the systems that produce it.
Stagnant Productivity
According to the report, construction productivity has stagnated for decades, held back by fragmentation, limited technology investment, siloed data, inconsistent workflows, and the failure to codify institutional knowledge across projects.
Building firms have historically invested less than 1% of revenue in IT, while the automotive industry invests closer to 3%, healthcare invests upwards of 5%, and banking invests nearly 8%. The result is a sector that has remained laborious, fragmented, and inefficient, even as cost pressures, labor constraints, and housing demand are intensifying.
The Suffolk and MIT report identifies six areas in which enabling technologies may have the greatest near-term impact: design automation, offsite manufacturing, permitting, scheduling, skilled labor and subcontracting, and supply chain and procurement. The early findings are directional rather than definitive, but they are compelling: reported efficiency gains range from 15 to 40%, with cost savings in some applications ranging from 8 to 21%.
Time and cost savings across various categories as estimated in the Construction in the Time of AI report.
The authors are clear that these levers are interdependent. Better design information improves procurement. Expedited procurement supports scheduling. Streamlined scheduling reduces risk and financing exposure. More accurate preconstruction decreases rework in the field. Offsite manufacturing benefits from design certainty and digital coordination. Intelligent software platforms allow the entire delivery process to become more integrated, predictive, and precise.
Shift in Thinking
For decades, we have focused intensely on the cost of the house while giving far less scrutiny to the economics of the system surrounding it. We accept layers of inefficiency as though they are simply part of doing business: design revisions, coordination failures, permitting delays, procurement surprises, change orders, idle time, duplicate work, poorly sequenced trades, and financing costs associated with extended schedules—all of which are embedded costs.
Using a sample multifamily project in San Francisco, the paper estimated that the combined application of the six technology levers could produce approximately 17-20% in total cost savings and 22-25% in schedule savings.
Every dollar tied up in an inefficient process is a dollar that cannot be invested elsewhere. With the integration of these innovative technologies, upfront operations can be streamlined, opening up the opportunity to reallocate dollars towards creating a better end-product—a higher quality home, shifting the conversation from lowering cost per square foot to restructuring business processes to optimize front-end cost savings.
Redefining Value Engineering
One of the most obvious examples is design. The paper describes how advanced design tools can now evaluate alternatives quickly, automate technical review, and decrease project costs, augment specification, and enhance performance. These capabilities can compress design cycles and reduce the likelihood that expensive conflicts emerge after construction begins, which is important because errors caught digitally are relatively inexpensive, whereas errors discovered in the field are not.
Similarly, enabling technologies can now improve preconstruction by turning design information into budgets, schedules, procurement plans, bid packages, and trade scopes, while helping teams identify gaps and risks before they reach the jobsite, all of which improve administrative efficiency and certainty around costs and execution.
Permitting represents another meaningful opportunity. The paper notes that the United States has more than 20,000 independent permitting jurisdictions, each with different codes, requirements, review processes, and timelines. Technology-supported compliance review and application preparation could help reduce uncertainty, identify possible issues early in the process, and create standardized workflows between project teams and regulators.
Anyone who has worked in housing knows what delays of this kind can cost. Longer timelines increase carrying costs, financing exposure, escalation risk, and overhead. Compressing those timelines can improve project economics substantially.
The same is true in procurement. Materials represent a significant portion of project cost, yet purchasing decisions are often fragmented across companies, trades, and systems. Predictive tools can help teams forecast demand, manage lead times, compare supplier performance, identify risk, and align procurement more closely with scheduling and field operations.
Two Roads Diverge
Our industry is under extraordinary pressure to reduce the cost of housing, but we often default to solving that problem at the level of the home itself. We debate square footage, appliance packages, insulation and window specifications, mechanical systems, finishes, and other materials because those are visible and easy to quantify.
But, if we’re honest with ourselves, a meaningful portion of the cost problem sits upstream, before dirt is ever moved. If a builder can reduce cycle time, eliminate rework, improve procurement, shorten the permitting process, coordinate trades more effectively, and increase predictability, those savings create financial capacity.
That capacity can be used in several ways. Some of it ca—and should—protect margin, because builders and developers need healthy businesses in order to produce housing at all. But some of it can also be redirected toward improving performance, wellness, resilience, and value for the homeowner, which all contribute to long-term affordability.
Imagine if front-end cost savings enabled builders to invest in more efficient building envelope systems, high-performance windows, heat pumps, improved ventilation, durable materials, water technologies, solar + storage, resilience products, and better controls—the very upgrades that today’s homebuyers want to lower operating costs, improve comfort and health, reduce risk, and augment equity.
In other words, technology can help shift the housing affordability conversation away from pure subtraction and toward smarter allocation.
We can no longer deny that the first-cost model has limits. If we continue to address affordability primarily by making homes smaller, cheaper, and more minimally specified, we risk delivering a product that costs less to buy but more to own.
The more sophisticated approach is to improve the efficiency of the entire housing ecosystem so that we can preserve or enhance the performance of the home without eroding the builder’s economics.
Updating the Math
Our sector has traditionally been very good at measuring the visible inputs: labor, materials, land, square footage, and sales price. We have been much less disciplined about quantifying the hidden costs of inefficiency or the long-term value created by better performance.
The math should account not only for the cost of the physical product, but also for the efficiency of the process that creates it and the operating performance of the asset that results.
If enabling technologies help to reduce design time, permitting delays, rework, procurement inefficiencies, financing costs, and schedule risk, those savings should become part of the affordability equation. If better building systems reduce energy bills, maintenance costs, insurance exposure, and replacement cycles, those benefits should become part of the value equation. This is where systems improvement and Value Per Square Foot naturally converge.
The goal is not to build the cheapest possible home. It is to build the most valuable home within a viable economic model.
If innovation simply helps us produce the same mediocre product a little faster, we will have missed the point. If, however, it helps us remove systemic waste and redirect that value toward higher quality homes, then we have materially improved the housing proposition.
By Sara Gutterman
As cofounder and CEO of Green Builder Media, Sara is a visionary thought leader and passionate advocate for sustainability. A former venture capitalist, she has participated in the life cycle (from funding to exit) of over 20 companies, with an emphasis on combining sustainability and profitability. She lives in Lake City, Colo., with her husband, where she is an avid long-distance runner, snowboarder, and Crossfit trainer. She is also on the Board of Directors at Dvele, runs the Rural Segment for Energize Colorado, and is a former County Commissioner.Also Read