I’ve been thinking about affordability for a long time, and increasingly I’ve come to believe that we’ve been trying to solve the right problem with the wrong equation.
For decades, housing has been organized around first cost. What does the land cost? What does the house cost to build? How much can we shave from the construction budget? How many square feet can we deliver at a target price?
When affordability gets worse, we reach for the same levers: Make the house smaller, simplify it, strip out features, substitute less expensive products, squeeze the margin somewhere else. Eventually, there is nowhere left to squeeze.
That is the problem with a system built almost entirely around lowest upfront cost. It inevitably becomes a relentless race to the bottom, and nobody really wins that race.
The builder is forced into increasingly difficult tradeoffs. The architect loses opportunities to create better spaces. Manufacturers compete primarily on price. Lenders and insurers inherit assets that may be more expensive to operate, maintain, repair, or protect. And the homeowner may get a less expensive house on closing day only to discover that it is anything but inexpensive to own.
Affordability Needs A New Equation
After a decade of tracking consumer purchase drivers, behavioral patterns, preferences, product adoption, and sentiment through COGNITION Smart Data, we now have an overwhelming amount of longitudinal evidence to say something with increasing confidence: Consumers value homes much differently than the industry measures them.
Our latest COGNITION affordability research makes the disconnect difficult to ignore, revealing something the housing industry has been slow to recognize. Buyers are not shopping for square footage anymore. They are shopping for a life they can afford, and a home that helps them live it.
Consumers aren’t demanding cheap housing as much as they are reallocating value. In a recent survey:
But they still want the things that make everyday life work: the right number of bedrooms and bathrooms, lower operating expenses, comfort, efficiency, durability, security, and a home that supports the way they actually live.
In fact, when COGNITION asked buyers which attributes could reduce long-term housing costs, 68 percent selected energy efficiency, 56.7 percent selected an efficient layout and optimized space, and 49.8 percent selected a smaller home to reduce upfront costs.
The translation? Consumers are saying, "Give me less of what I don’t need and more of what improves my life."
We’ve Confused Size With Value
For generations, the housing industry has treated square footage as a convenient proxy for value. More square feet meant more house. More house presumably meant more value. But that relationship has been breaking down for years.
As consumers prioritize optimized space, efficiency, comfort, resilience, energy independence, and long-term operating costs over sheer size, they are becoming much more familiar with technologies like battery storage, heat pumps, high-performance envelopes, smart electrical systems, and all-electric homes—and adoption is moving with that awareness.
That should force us to reconsider what we mean when we talk about a smaller home. A 1,500-square-foot house with optmized space planning, daylight, healthy indoor air, low utility bills, resilient systems, durable materials, useful outdoor space, and virtually no wasted circulation can deliver a richer lived experience than a poorly designed 2,500-square-foot house.
Reallocating the Housing Dollar
Our affordability research shows just how important ongoing operating expenses have become. More than 41 percent of homeowners report that their wages are rising more slowly than their home-related expenses. Large majorities have seen increases in maintenance, taxes, insurance, HOA fees, and utilities.
When asked whether a home with a somewhat higher purchase price could still be considered more affordable if its total monthly costs were lower, only 8.3 percent rejected the idea outright; the remaining 91.7 percent answered yes or maybe.
On the flip side, builders certainly understand that affordability is a crisis: 67.1 percent say home prices are too high, and affordability is their top market constraint. Yet, when asked how they are addressing the problem, the most common answer—at 52.4 percent—is still reducing home size. Another 14.3 percent say they are not pursuing an alternative affordability strategy at all.
Reducing unnecessary square footage can absolutely be part of the solution, but shrinking without rethinking is not innovation. In fact, I’d argue that it’s the very approach that has gotten us into the affordability crisis in the first place. If we take 500 square feet away and leave the underlying economics, systems, materials, performance, and ownership costs essentially unchanged, we have solved only part of the problem.
Let's instead ask:
That is where affordability gets interesting: instead of a relentless exercise in subtraction, it becomes a process of reallocation.
Sell the Life, Not the Floor Plan
There is also a profound messaging opportunity here. Consumers do not wake up in the morning wishing for R-30 insulation, but they want the bedroom to stay comfortable on a freezing night. They don’t dream about a heat pump water heater, but they want plenty of hot water without an eye-watering utility bill. They want the lights to stay on when the grid goes down and rooms that work for the way their family actually lives. These are lifestyle benefits.
Today’s compelling sales stories include information about what a home does for the person who lives there: whether it gives them financial breathing room or reduces uncertainty, makes feel healthier and safer, and allows them to spend less time maintaining the house. Those benefits are difficult to capture with the current valuation metric of price per square foot, but they are very real forms of value.
The Data Has Caught Up
For years, many of us in the high-performance and sustainable housing world have argued that full cost matters more than first cost. We believed it because the building science and the operating economics penciled out. We believed it because we saw what happened in homes and communities designed around performance instead of minimum requirements.
What excites me now is that the consumer data now proves the theory. Buyers are demonstrating a willingness to trade size and location for affordability. They are prioritizing efficient layouts and lower operating costs. They are showing growing sophistication about energy, resilience, and home performance. And they are telling us that a somewhat higher purchase price can still represent better affordability when the monthly economics work.
That gives our industry permission—and, I would argue, an imperative—to think differently. Not cheaper, but better allocated, with more useful value and a stronger financial proposition for the homeowner over time.
We have spent decades asking how much house we can deliver for the money. We’ve now entered into an era of housing that turns that question around: How much life can we deliver within the house?
For comprehensive information about the housing affordability gap between builders and consumers as well as practical solutions to address the crisis, download the new COGNITION Smart Data report, Full Cost, Not First Cost, Will Unlock Future Housing Affordability.
Be sure to check out the newly redesigned COGNITION Smart Data subscriber portal to see where the housing market is heading next. The portal has been designed to provide rigorous intelligence about full cost, total value, sustainability, performance, resilience, consumer behavior, and the lived experience of the home. It tracks homeowner priorities, builder sentiment, product adoption, utilities, incentives, market conditions, emerging technologies, and other signals, then helps users identify what those signals mean and where the opportunities are forming.