Monday: Solving the housing crisis

Morning Change Makers,

For the last 100 years, the biggest source of wealth creation for most people has been owning a home. 

But it is getting harder, a lot harder. I wanted to tell a story about housing and one company looking to help fix this sclerotic industry. 

Read on,
Jack 

A few years ago, my grandparents were looking to downsize. They had planned to build a bungalow next to their old house and went through all the necessary paperwork.

When you want to build anything in the UK, the entire country has to permit you, even on land you own. This list includes and is not limited to neighbours, other village folk, local council members, environmental agencies, county councils, local interest groups, God, the Virgin Mary, and the closest gypsy encampment. 

In my grandparents' case, they came up against a titan of bureaucracy, a person we all fear, who haunts our dreams and ruins kids’ birthdays: a middle-aged, middle-class white woman who managed the environment for the local council. Let’s call her Karen. 

Karen was there to foil the plans of my 80-year-old grandparents and prevented them from building what they wanted. She cost my grandparents thousands of pounds and precious time. 

Everything about homes and housing is costly. It costs you time going through planning, and money for building the home that will inevitably be delayed and over budget.

Houses cost too much

Building new homes is also costly. 

The cost of home construction is up almost 200% from 1998 to 2023, which is roughly 120% adjusted for inflation. That’s insane. Raw materials, labor, and planning regulations have all contributed to the increased costs. 

This is a feature of a system designed to increase costs. House prices are going up because of restricted supply. Supply is restricted because of over-regulated markets and increased costs of production.

Not all hope is lost. The Avengers are assembling around low-cost prefab housing, and whilst they might not be able to help my grandparents with their planning issues, they do have the ability to give future generations affordable homes and that is awesome.  

Cover

Prefabricated housing is meant to decrease the cost of building a house by reducing the impact of uncontrolled variables. 

Weather, equipment, and supply chains can all impact cost. You can reduce the impact of these variables by centralizing the construction warehouse. The problem is that you need to slap it on an enormous truck and then transport the house to the location. 

What Cover figured out was that you can build houses more efficiently by standardizing the manufacturing and assembly process. They manufacture panels that can then be assembled like Lego blocks into a house.

Think of it like IKEA for houses. 

The panels can be built in a factory and then assembled on-site.

Cover homes range from $93k to $450k and their go-to-market focus is backyard homes and offices because of simple housing regulations. Cover’s buildings aren’t cheap and they aren’t building big family homes so what makes Cover special?

As John Coogan puts it in the video below, Cover is the perfect middle ground between customizable and standardized. Cover lets you customize the parts for the house you care about and standardizes everything else. Whilst that sounds simple, it results in beautiful-looking factory-produced homes. 

A lot of change making companies are absolutists. They position themselves as revolutionising an industry by going to extremes. Alexis Rivas, the founder of Cover, has intentionally operated in the nuance and spent time understanding what he should change and what he should keep.

This means the first versions of what they are doing aren't perfect, but that is not new.

The analogy here is the Tesla Roadster. It was Tesla's first car and cost $150,000 but it was crucial to funding the next part of their mission and gain crucial learnings. Cover is doing the same, focusing on a niche and driving engineering innovation in the manufacturing process to bring the house price down. 

People can’t get on the housing ladder because of the limited supply of new houses. Cover can solve this by enabling houses to be built cheaply, reliably and where they are needed, all on a short timeline.