Housing 2.0 creator and former DOE chief architect Sam Rashkin argues that converging affordability, trades, and productivity crises are disrupting homebuilding, and that sustainability alone is not enough without optimizing the entire homeowner user experience.
00:00:05:05 - 00:00:28:25
Mike Collignon: In this final session of the day, features a familiar friend. Sam Raskin is the former chief architect at Doe and considered to be the father of the Energy Star certified home and the Zero Energy Ready Home programs. But he's also the creator and teacher of the housing 2.0 content. Sam's here to present Breaking the Build. Now, market disruption is rewriting the future of housing.
00:00:28:25 - 00:00:43:28
Mike Collignon: And if you like his presentation, well, consider registering for the housing 2.0 program. Sam and I talk a lot about optimization and community and design and a whole lot of other fun, innovative topics. So, Sam, glad you could join us.
00:00:44:01 - 00:01:08:05
Sam Rashkin: Hey, thank you, Mike, and welcome everyone. And today's this this is a, I think, a fairly unique program of talking about actually focusing on user experience as a solution to getting sustainability to the market. Dear saying sustainability is not enough, and all in the context of where market disruption is taking the industry in the very near future. And so let's look at a few things.
00:01:08:06 - 00:01:32:26
Sam Rashkin: And first start with the realization that housing is the ultimate consumer product. And the reason is based this one data point, which is where do we spend time? And if you look at where we are during the day at work, dining, outdoors, in our cars and home, we are in our house nearly 70% of the time. And I would suggest post Covid, we're in there about 75% of the time.
00:01:32:28 - 00:02:02:17
Sam Rashkin: Home is where life happens, and that is such an important context of what we're doing, the sustainability movement. And so I want to talk about why disruption happens to housing now at this juncture, and has to do with the convergence of three crises driving pain in the industry, its lack of affordability, trades and productivity, and moving into the first portability crisis.
00:02:02:20 - 00:02:31:09
Sam Rashkin: The most significant content I can bring forward at this point is just the price. Income disconnect is just unprecedented. If you look at median household income compared to median home price in blue, and look at over time how big the gap is getting, this is where you should get concerned, because we're at a point where 77% of households can afford a median price home.
00:02:31:11 - 00:02:59:29
Sam Rashkin: And historically, what happens is housing normally goes up very steeply and then hits a recession, maybe is a factor in the recession, and then it drops and then it proceeds to go back up steeply again. So here we are one more time, going up steeply again. And I won't comment whether or not this will be the first time in 100 years when housing takes a deep rise or experiences a deep rise, that the economy doesn't go into recession.
00:02:59:29 - 00:03:34:27
Sam Rashkin: But I will say is this increasing gap is unsustainable. At some point, the buyer, the consumer, has to be able to afford the product. And when you're pushing 80%, that can't, this is a crisis. Next point about this is that all the indicators in the market are telling you Americans are house poor. If you need any further evidence that the housing cost issue is not having profound impacts yearly, 30% of households have jobs, but are one emergency away from poverty.
00:03:34:29 - 00:04:01:25
Sam Rashkin: They have no resources to manage their home because it costs so much. Nearly two thirds of Americans living paycheck to paycheck. And the related indicators, like Americans falling behind on car payments at the highest rate in decades, all suggests, again, that housing prices cannot sustain increases the way they've been doing. So that's crisis number one. Number two is trade crisis.
00:04:01:26 - 00:04:20:29
Sam Rashkin: And all you need to know here is that the average construction worker ages over 42 years old at the same time, for every five workers that retire, there are only two in the pipeline to replace them and is, according to the study, by the.
00:04:21:01 - 00:04:54:00
Sam Rashkin: Home building, its institute. And and this is also like the fact that they project we needed over 700,000 new workers to to provide the labor to build over 1.5 million new homes each year needed to meet the growing demand. So this trade crisis everyone's aware of is profoundly impacting the industry. And the lastly, the productivity crisis. And what I like to hear talk about is just start looking at other industries.
00:04:54:00 - 00:05:23:29
Sam Rashkin: And it's shocking how little innovations been employed in the housing industry. Here's how cars were made in 1903, about 120 years ago. And you look at how cars are made today, and it's just so impressive how much productivity has been just embedded in the manufacturing of that product in comparison. Here's how housing was made 150 years ago, and compare that to how we built enclosures today 150 years later.
00:05:23:29 - 00:05:56:06
Sam Rashkin: And, you know, it's the amount of innovation is shockingly small. You know, we went from dimensional lumber to engineer lumber. We have some better connectors and power tools, Western platform framing instead of balloon framing. But you see the same lumber and products strewn around the site, inefficient methods, and explains why in the past 50 years, there's been a 50% decline in homebuilding productivity, while every other industry has had like 2 or 3 times more growth.
00:05:56:06 - 00:06:26:19
Sam Rashkin: And so the numbers bear this out. Another study by McKinsey and company show that this lack of productivity for construction, compared to manufacturing, is about a $200 billion labor productivity gap that can be addressed by adopting 21st century manufacturing methods. Now we just the cost that's being imposed at the same time you have this incredible crisis is just not acceptable.
00:06:26:20 - 00:06:38:03
Sam Rashkin: We have to, at least from mainstream housing for consumers that are suffering so much from the ability issues, we need a better solution.
00:06:38:06 - 00:06:58:27
Sam Rashkin: So here we are. We have the problem. We have these three crisis driving pain. So we need a solution innovation to relieve the pain. I'm going to suggest that where we need to go is we we almost need a new business model for the industry. We need to optimize the user experience as the foundation for how we built our product.
00:06:59:00 - 00:07:28:16
Sam Rashkin: And so we can compare the current business model, which is often dominated by lowest first cost to where we need to go. And the best way I like to look at the lowest first cost build a business model is by just looking at the term in the definition of it. For builder grade, it's defined as inexpensive products, made some low grade materials as opposed to quality grade or custom grade materials that are more durable.
00:07:28:17 - 00:08:01:14
Sam Rashkin: And I'm trying to figure out where the ultimate consumer product, the industry, thought that this definition of builder grade would be the most effective for the industry to be successful. And so I want to suggest the optimized user experience business model has impressive examples where it has been driven, tremendous industry financial benefits and better customer satisfaction. So this quote says it all from Steve Jobs.
00:08:01:15 - 00:08:52:20
Sam Rashkin: If you keep your eye on the profit, you're going to skimp on the product. But if you circus on making really great products, then the profits will follow and all the data backs us up. This is a study by Watermark Consulting, which tracked stock performance over 11 years across all industries. And what they found was when you compared the user experience leader companies to the user experience laggards, there was a three times greater financial performance in terms of returning to investors, about 184% to 63%, and even compared to the S&P 500, the user experience leaders were about 50% greater financial return, just a direct correlation between leading the industry and user experience and getting greater
00:08:52:20 - 00:09:21:17
Sam Rashkin: financial outcomes. But it's not just tied to the stock. Performance is also tied to resilience of companies. Here's another study by McKinsey and company. And when they track user experience leaders, which they are also called this consumer experience leaders with laggards, the ability to recover from the sessions with shallower troughs and quicker recovery was again three times greater advantage for the user.
00:09:21:17 - 00:09:53:15
Sam Rashkin: Experience leaders versus laggards in every way. This demonstrates in all other industries that you want to optimize customer experience, user experience. And I again I'll submit that housing. Can that be the loan industry. This doesn't apply. So why do we do user experience optimization? If we're making the ultimate consumer experience where people spend their lives, it's better business to do homes or life happens better.
00:09:53:18 - 00:10:23:25
Sam Rashkin: If we all the data we've seen, this is what we're learning. So what do we do to get there? And what we attempted to do is curate a lot of information and decades and decades of experience into five experiences that really frame the entire way people get to live in their homes. And a lot of us who are here in this symposium are focused on sustainability, also known as home performance.
00:10:23:29 - 00:10:46:10
Sam Rashkin: And when it comes to sustainability, I could not agree more. It's a must have. The industry has to figure out how to get here, and fortunately, the codes are already so much better and leading us in many ways to even at the latest codes are what I would call zero energy gradient closure. They are the baseline for the zero and ready home program.
00:10:46:10 - 00:11:09:24
Sam Rashkin: So this is a great critical leg of the of a stool, but it will not hold the stool up. User experience is in fact a five legged stool. And in addition to sustainability or high performance, you need great community experience. You need a great design experience. You need a great quality experience and needed great sales and service experience.
00:11:09:26 - 00:11:35:17
Sam Rashkin: Now you have a balanced, strong stool that will hold up and you will consistently deliver sustainable homes with a better user experience for lower cost. If you do it right. And that's where the hell comes in. And so how we optimize user experience is absolutely critical. So again, to have contrasting business models and the left we have first cost.
00:11:35:18 - 00:12:07:14
Sam Rashkin: On the right we have housing 2.0 or user optimization business model. And so with a normal again lowest first cost model we minimize our cost for user experience experts and special features. But in a in a in a product focused company, we're going to when we have sure thing in terms of the user experience, we know the customer wants make investments in the experts and special features that will ensure we deliver that experience.
00:12:07:16 - 00:12:38:26
Sam Rashkin: Now there are some investments we can make. I should mention that don't cost any more, that also improve the user experience. And those are absolutely insane to leave out of the process. So that's the first part. Then comes a critical second part. And here what we have are seven pillars for optimizing cost. Now with the first class lowest first cost model will have excessive space that we build because there's way, way too much wasted space in optimized cost model.
00:12:38:26 - 00:13:05:16
Sam Rashkin: We have right sizing. Again, in first model we have excessive complexity and user experience optimization. We go for simple. We have non integrated systems. We go to integrated systems. We have excessive waste. We go to lean design and build. We have excessive excessive quality assurance expenses and customer service calls. We optimize quality assurance. And then we have excessive customization that we just can't afford.
00:13:05:22 - 00:13:41:16
Sam Rashkin: We have to go to mass customization, which delivers near the same choice or perceived choice without tremendous cost involved in the amount of customization we do, and we go from a lack of productive to enhance productivity. So the secret sauce to use experience optimization is to use these seven pillars to substantially reduce the cost. After you've made the investments in user experience for a net cost savings, along with all the added value for that better experience wellness, better living, and lower ownership cost.
00:13:41:16 - 00:14:09:09
Sam Rashkin: And the net is that you now have your third step in the process. Just translate all that value. We find it's about 30 to 70% combination of savings and better experiences that create this greater value. And the purpose in some of the empirical results we get. Here's one early example I cite that's an actual project, the 124th and Math Ash by Walsh Construction.
00:14:09:15 - 00:14:38:24
Sam Rashkin: They built their first building on a site and it's time for the second building. All the optimize was a design user experience, comprehensive detailed optimization. And the reason I cite this project is because Walsh Construction did a detailed analysis of the two buildings, one before design optimization and the second with design optimization and the net just cost to get the improved layout and benefits and experience of the unit.
00:14:38:24 - 00:15:09:26
Sam Rashkin: Just the cost savings, hard cost savings for 24%, just for one of the five user experiences that we talked about. So we see great evidence that this is a superior business model and kind of a sum it up. And what I want to suggest today is that, again, we all know sustainability is such a powerful, important new approach to how we do buildings, how we do housing.
00:15:09:26 - 00:15:44:05
Sam Rashkin: But it's so important within that context, really understand it's not enough. We want sustainable homes, we want to optimize wellness. But there's so many other experiences we want in the place where we spend 75% of our lives. You want open spaces around us daylight pressure, outdoor living, storage, smart convenience, work at home and Vance lighting color. I can put like another 20, 30, 40 tiles of experiences that we want along with sustainability.
00:15:44:07 - 00:16:26:00
Sam Rashkin: So the key for me is that we have to make sure that the sustainability professionals expand their view and their approach to housing to also be user experience leaders, because then they can lead the industry. So my only message here today is just to tee up this concept, because this is so unique. Too often when we go to a conference like a sustainability sustainability conference or energy efficient conference conference, we're so focused on optimizing health or energy or solar, but we have to be more expensive than our gear.
00:16:26:01 - 00:17:06:02
Sam Rashkin: We have to realize that there's a comprehensive user experience that we have to integrate into. Just so how the Hong's a system that comes to building science. The houses a system when it comes to the user experience. So the goal here is to optimize sustainable housing professionals success via helping them become the leaders in the industry. And so I encourage a lot of you to join green Builders Housing 2.0 program starts with this book, which is the main reference of the former pages of with 160 best practices for how we approach being industry leaders.
00:17:06:02 - 00:17:11:09
Sam Rashkin: We have our workshops. We have our in-person.
00:17:11:12 - 00:17:37:03
Sam Rashkin: Training courses. We do. So please do check this out, because I so much want the sustainability professionals that I'm so familiar with around the country to just be able to also provide a great consumer product. I hope this makes sense and if there are any questions, happy to answer.
00:17:37:05 - 00:18:03:15
Sara Gutterman: Ma'am, thank you so much for that brief overview of what is an incredibly comprehensive program. I think we're going to wrap it up for the day. The good news is that we get to do this all the time. Sam. We have usually at least one webinar a month as well as live events. And for those of you in attendance, I really, really encourage you to go to the link that is on Sam's slide.
00:18:03:15 - 00:18:25:10
Sara Gutterman: I also put it in the chat box for everyone to see and check out the housing 2.0 program. Please join us. Sam is just such a wealth of information. If you like what he said today. Again, he provides insight and wisdom as well as the opportunity to talk with other thought leaders and luminaries and visionaries in the industry pretty much every month.
00:18:25:12 - 00:18:41:16
Sara Gutterman: So you can go on to that website, check out his book, check out upcoming events, virtual events. We also do live events. So if you'd like to see a live event in your market, feel free to reach out to Sam or to me and let one of us know.