Top 10 Issues That Will Impact the Building Industry in 2024
The building industry is transforming quickly. Here are the important topics you should pay attention to this year.
The housing sector is expected to see modest growth in 2024. Interest rates are projected to drop from a peak of 7.9 percent in October 2023 to 6.5 percent by the end of 2024, offering homebuyers a modicum of financial relief.
While the mortgage rate “lock-in effect” is likely to keep existing home inventory low, housing prices are expected to decrease by 1.7 percent, and nationwide sales are forecasted to grow.
Beyond the economic projections, the housing sector will continue to experience transformative change this year. Here are a few sustainability related trends to watch in 2024 and beyond.
Net Zero Carbon
Dare I say that Net Zero Carbon homes are becoming all the rage? In my decades of experience in the green building industry, never before have I witnessed as robust of a conversation among builders, developers, architects, manufacturers, lenders, investors, and consumers about decarbonizing the built environment.
Green Builder Media’s COGNITION Smart Data shows a remarkable surge in consumer demand for decarbonization across all sectors of our economy. The data reveals that early adopter consumers—particularly Millennials and Gen Zs—have a positive sentiment about decarbonization and will pay more for net zero carbon packaging, vehicles, apparel, and even homes. In order to decarbonize their lifestyles, these consumers are driving electric cars, increasing the energy efficiency of their homes, and turning their homes all-electric.
A recent COGNITION Smart Data survey shows that consumers believe that decarbonization strategies help companies generate positive brand equity, result in enhanced innovation, create loyal employees and customers, and mitigate risk.
COGNITION Smart Data reveals that consumers will pay more for decarbonized packaging, vehicles, apparel, and homes.
In order to decarbonize their lifestyles, these consumers are driving electric cars, increasing energy efficiency of their homes, and turning their homes all-electric.
According to COGNITION Smart Data, consumers are decarbonizing their lifestyles by driving EVs, increasing the energy efficiency of their homes, reducing waste, and electrifying their homes.
Fortunately, some builders are answering the call. COGNITION data shows that over 75 percent of green builders are optimistic about the long-term prospects of the housing market, largely because they believe that Inflation Reduction Act (IRA) funding will have a positive impact on their business by pulling through energy efficiency upgrades and decarbonization technologies. These builders are also looking for products that have Environmental Product Declarations (EPDs) to reduce the embodied carbon of their projects.
A recent COGNITION Smart Data survey shows 60% of builders are using IRA funding to adopt more energy efficient practices and renewable energy.
Furthermore, codes, regulations, and policy will propel the decarbonization of the built environment. California’s 2025 code will likely favor heat pump technology over central air conditioning systems; ASHRAE is drafting a zero-net-carbon emissions code; and Michigan passed a major legislative package that makes the state a national leader in energy efficiency, electrification, and emissions reductions for homes and buildings.
Lead by the heat pump revolution and tumbling battery storage costs, the building and transportation sectors are electrifying at light speed. The primary drivers: reduced carbon emissions, enhanced resiliency, and cost savings.
Electric vehicles can already outcompete their gas-guzzling counterparts on a lifetime-cost basis in most markets. More than 1 million EVs were purchased in the U.S. in 2023, and we can expect to see 30 million of the on the roads by 2030. Inflation Reduction Act incentives, which offer as much as $7,500 in rebates for new EVs and $4,000 for used EVs, will spur this growth.
The uptick in EV sales means higher demand for home chargers, and vehicle-to-grid charging will fundamentally alter the way that we power our homes, optimizing demand-side-energy-management, increasing self-sufficiency, saving money, and reducing grid stress.
Heat pumps, which are becoming more affordable thanks to federal tax credits of up to $2,000, are up to four times more efficient than conventional solutions, making them a highly cost-effective method of heating and cooling. In the U.S., heat pumps are now outselling gas furnaces, even in cold climates like Maine, which has the highest per-capita adoption in the country.
Demand for heat pumps will continue to soar in 2024 and beyond: 20 state governors have committed to quadruple heat pump projects, with the goal of reaching 20 million installations by 2030.
Climate Responsive Design
2023 was the hottest year on record. El Niño promises to make this year another scorcher, triggering extreme temperatures, drought, storms, floods, and wildfire. For the built environment, these climate impacts will likely lead to ratcheted regulation and increased demand for climate-responsive design.
As temperatures rise, cities that suffer from the heat island effect—resulting from oceans of impermeable asphalt, concrete, steel, and other heat-absorbing materials—are becoming intolerable, impacting the health, wellness, and quality of life for inhabitants. Many cities are responding by adopting climate-responsive design practices to manage the intense heat, while simultaneously reducing carbon emissions and enhancing resiliency.
Buildings and cityscapes are being covered with trees, vegetation, and shade structures to protect sidewalks and streets. Reflective glass is being used to block the sun, and “urban canyons” are being designed to align buildings with sunlight and wind direction in order to provide shade, increase airflow, and keep pedestrian areas cool.
For homes, climate resilient design elements include window films, awnings, overhangs, and shade structures to reduce solar gain, as well as passive cooling systems that make use of pressure differences within a building to increase natural ventilation and circulate cool air. Reflective surfaces on roofs, walls, and hardscapes are also being deployed to keep interior spaces and pavements cool.
Watch for phase change materials—substances that are designed to melt at specific temperatures, absorb heat, and cool down the surrounding area—like paraffinic waxes and salt hydrates that, when injected into walls, floors, and roofs, can lower temperatures by up to 7 degrees Fahrenheit.
Resiliency and Insurance Conundrum
According to COGNITION Smart Data, resiliency is top of mind for Millennials and Gen Zs, namely because their homes are being impacted directly by hurricanes, tornadoes, extreme temperatures, wildfires, drought and flooding.
Approximately 60% of Gen Zs Millennials report that they have considered moving due to climate change, and 62% indicate that they are concerned about the climate change impacting the value of their homes.
According to COGNITION Smart Data, the majority of younger generations are considering moving due to climate change and are concerned about the impact of climate change on the value of their homes.
Perhaps the acute interest in resiliency is due to the fact that 77% of Gen Zs and 66% of Millennials report that climate events have impacted their ability to get insurance for their homes.
A recent COGNITION Smart Data indicates that younger generations report that climate events are impacting their ability to get insurance for their homes.
Climate change is systematically destabilizing the insurance market. As extreme weather intensifies and claims pile up, homeowners in disaster prone locations have seen their premiums increase by a staggering 20 percent or more in the last few years—that is, if their insurance company hasn’t backed out of the market entirely.
Some of the states that are most prone to disasters, like California, Texas and Florida, also happen to have the most active housing markets, along with astronomical insurance rates. Due to soaring costs, more homeowners are being forced to forgo coverage, leaving them vulnerable and ill-equipped to handle a disaster should—or, realistically, when—one occurs.
In 2023, investments in solar outpaced oil investments for the first time ever—a trend that will likely continue in 2024. Solar is the workhorse of the clean energy transition . Since the early 2000’s, the cost for solar modules has plummeted from $4 per watt to an astoundingly low $.10 per watt, and global solar installations grew from 1 gigawatt in 2004 to 413 gigawatts in 2023 (driven largely by China’s massive deployment of the technology.) Soon, both annual global installations and manufacturing capacity will reach into terawatt territory.
Battery storage is also surging. The third quarter of 2023 boasted more grid storage installations than ever before. Grid storage capacity in states like California and Texas has grown tenfold since 2020.
As lithium-ion battery costs hit record lows, we can expect continued adoption of this technology, leading to decreased energy costs and enhanced grid resiliency—both of which are crucial as global temperatures soar and natural disasters proliferate.
Moreover, solar recycling programs are popping up across the country to reclaim photovoltaics and batteries that have reached the end of their useful life. States like Washington are now passing laws that require companies to take back solar photovoltaics and recycle them.
Green Concrete and Steel
Concrete is the second-most consumed material in the world after water and the most widely used building material. On a global scale, concrete’s ton for ton usage is twice that of steel, wood, plastics, and aluminum combined. Over ten billion tons of concrete is produced each year globally, with 500 million tons produced in the U.S. annually.
Approximately 50 percent of the emissions from concrete production come from the chemical process and 40 percent from the burning of fossil fuels. Furthermore, concrete production requires large amounts of water, accounting for nearly 10 percent of global water use.
Stakeholders throughout the cement and concrete industry are not turning a blind eye to the sector’s environmental impact. Some companies within the sector are replacing minerals used in the cement mix with alternatives that can be processed at lower temperatures.
Alternatives like fly ash, bottom ash, and slag—by-products of other industries that would otherwise go into the landfill—are also gaining in popularity as additives. Not only do these alternatives decrease the carbon footprint of concrete, they also can increase strength, decrease density, prolong durability, and enhance carbon sequestration capability.
Additionally, more renewables are being used in the concrete production process as well as direct-air capture technologies to grab carbon at its source rather than emitting it into the atmosphere.
Steel is also one of the most consumptive industries in our entire economy, pumping out nearly 7% of annual global carbon emissions and guzzling approximately 8% of total global energy.
The massive amount of carbon emissions from the steel sector isn’t only attributable to a highly intensive production process, exponential demand has also played a role. China’s mammoth buildout over the past three decades of vast cities and massive infrastructure projects like high-speed rail systems and hydroelectric projects have driven up demand for steel by an order of magnitude.
If there is any silver lining in the hockey stick growth trajectory of steel, it’s that there is a lot of it out there that can be reused: there are hundreds of billions of tons of scrap steel that can be repurposed using electrified, renewable energy-powered mills.
The processes for making new steel are improving through the use of electric arc furnaces and direct reduction of iron ore, both of which have much lower carbon emissions than conventional processes.
If we’re going to meet our climate goals, it will be necessary to remove hundreds of gigatons of carbon dioxide from the atmosphere. While progress is undoubtedly being made in direct-air capture technologies, they are still fairly nascent and quite expensive.
Many states are turning to natural solutions, like planting trees and restoring wetlands, for sequestration. As two examples, Seattle has pledged to plant 8,000 trees and 40,000 seedlings to create a tree canopy that will counterbalance the urban heat island effect and improve air quality, and Louisiana launched a $3 billion project to restore 21 square miles of wetlands along the coast to serve as a carbon sink and reduce the impacts of climate change.
Efforts to preserve habitats for the purpose of carbon sequestration are changing the way that developments are planned and constructed. Rather than allowing developers to bulldoze large areas of land and plop down communities, municipalities are starting to require enhanced ecological sensitivity, ensuring that critical ecosystems are protected.
Climate Disclosure Requirements
While U.S. Securities and Exchange Commission (SEC) deliberates its long-awaited rules for climate disclosure, California passed its own climate disclosure law , requiring companies that make over $1 billion annually reveal their scope 1, 2 and 3 emissions and the content of the carbon offsets they purchase.
These climate disclosure requirements will impact large and small companies alike, because anyone in the value chain doing business with companies that have to report will need to be in compliance, which may force companies that don’t emit a substantial amount of their own emissions but engage with vendors, clients, other stakeholders who do—like architects, designers, banks, investors, law firms, and other professional service firms—to make hard decisions about customers and partners they remain aligned with.
To prepare for California’s new climate disclosure laws, it’s important for companies of all sizes—not just the ones that meet the $1 billion revenue threshold, but also the ones that sell to, interact with, and service them—to start thinking about the measures needed to comply with the ultimately inevitable shift in climate disclosure requirements.
Escalation of ESG
Sustainability has been deemed by many business leaders as a moral imperative, and the pace at which companies are committing to comprehensive ESG strategies is accelerating at a remarkable rate.
ESG strategies help companies minimize risk, enhance long-term performance, and improve resiliency against market volatility and idiosyncratic events.
A growing body of evidence shows market-rate (or better) returns for ESG investments, meaning that we can expect increased demand for ESG commitments from lenders, venture capitalists, private equity funds, pension funds and other stakeholders that prioritize a triple bottom line.
While investor push has been a critical factor in the meteoric rise of ESG, consumer demand is also a prevailing force. COGNITION Smart Data shows that 70 percent of early adopter consumers believe that companies with a strong ESG focus are more likely to achieve long-term financial success than those without. 71 percent have stopped purchasing from a company due to inadequate ESG commitments, and 85 percent are more likely to do business with a company that has a strong ESG focus compared to one that does not.
According to COGNITION Smart Data, over 70% of consumers have stopped purchasing from companies due to concerns about sustainability practices.
Moreover, consumers are tying ESG to quality: 50 percent believe that a company’s ESG practices has a significant impact on the quality of its products and services.
A recent COGNITION Smart Data survey shows that over 50% of consumers believe that a company’s ESG practices impact the quality of its products and services.
If you haven’t already, check out the ESG for Building Defining Principles that Green Builder Media crafted with over 65 of the building industry’s brightest minds.
Persistent Labor Challenges
As homes electrify, there has been a surge in demand for skilled contractors, and the dramatic shortfall of qualified workers is throttling progress in many markets. Ongoing labor shortages—especially for the installation of advanced technologies like heat pumps, smart electrical panels, and geothermal—will continue to plague the industry.
In California, as one example, there is only certified electrician for every 478 housing units in the state, according to the U.S. Census, California Department of Industrial Relations. A recent survey conducted by the Associated General Contractors of America shows that 72 percent of contactor firms reported having open salaried positions that they couldn’t fill because “available candidates weren’t qualified to work in the industry.”
The aging of the building industry workforce will only exacerbate the labor problems, as younger generations get lured away into the tech industry with the promise of big salaries and cushy office jobs.
Even with the labor shortage, 2024 is going to be a year of opportunity and advancement. Climate solutions like solar and battery storage, electric vehicles, and heat pump technology are reaching price parity with their conventional counterparts, clearing a pathway for greater adoption and eliminating any remaining institutional resistance. Sustainability is now both smart and profitable.
Publisher’s Note: This content is made possible by our Today’s Homeowner Campaign Sponsors, Whirlpool. Whirlpool takes sustainability seriously, in both their products and their operations. Learn more about building and buying homes that are more affordable and less resource intensive.