Transcript
Danny Crichton:
Well, Stephen, thank you so much for joining us. I, like most listeners, ran into your work through the New York Times. You had published this report, which was of more than a hundred pages on the intricacies of constructing an elevator, one of those in-depth pieces that no one ever thinks about. But then you realize we should all know way more about elevators that convey us from point A to point B than we really do. And then you converted that into a very viral New York Times op-ed that I think was read by hundreds of thousands of people, and certainly my entire friend network in New York City and San Francisco all were talking about it. First and foremost, what got you into elevators and building this center for buildings?
Stephen Smith:
I was involved in the YIMBY movement, yes, in my backyard and the movement to reform land use rules, zoning, broad rules about what you can build and where. And I saw a lot of success in reforming zoning on the west coast especially and moving east. But I was hearing from architects and developers and just seeing it as I was reading the news that there are still really deep unresolved issues about the actual construction process. You can legalize apartments, but when it comes to actually building them, America really does fall behind in a lot of ways. One of the biggest ways is cost. America does build single-family houses pretty cheaply, but to build apartment buildings can be very expensive. The US and Canada are the only places I can find where as the density increases, the cost per square foot to build increases. And then the quality often leaves a lot to be desired.
Even Europeans have no interest in construction and housing. Notice from TV series that characters punch holes in walls and tornadoes will take a house away. We build in this light wood frame structural material. There's a lot of differences in it. And so I noticed my mother lives in Romania. She's Romanian. I was traveling a lot back and forth and noticing, wow, these buildings are built very differently. I was trying to figure out why and I could not. I didn't find anything written about it, so I figured be the change you want to see in the world. I founded this organization. The goal was to go through the building system by system, whether it's elevators, heat pumps, stairs, and examine what's the same, what's different between the US and abroad, especially Europe. And if there's differences, what could be done to bring us a little closer in line to places that are much more used to building apartment buildings, in particular Europe and Asia.
The elevator, why did I start with the elevator? I bought a really, really expensive, very expensive, very bare bones condo in Brooklyn in New York. It's on the third floor. And one of the reasons why I was attracted to it actually was it did not have an elevator. The maintenance fees, what you call the HOA fees in most of America were really low.
Danny Crichton:
Mm-hmm.
Stephen Smith:
And then a couple months into living here, I came down with a pretty serious post-viral illness called POTS Postural Orthostatic Tachycardia Syndrome. I didn't get it from COVID, but it is a common post-COVID complication. And climbing the stairs became difficult. And more importantly, I saw how if the condition deteriorated, it could become even more difficult. And I realized that I could really trap myself in this building. And I was visiting my mother in Romania and she lives in a building that I think has roughly the same height, a little bigger horizontally, but the value of the building is roughly the same as mine here in Brooklyn and has an elevator. And I thought, that's strange. Romania is a little less wealthy than New York City.
Why is it that she has an elevator and mine's not. That's how it got started. I asked an architect in Italy, I said, "How much does an elevator cost?" I asked a developer in the US how much does an elevator cost, and there was a very big difference, and I thought there's something here. That's how I got started on my journey to understand the elevator.
Danny Crichton:
And when you think about the cost of the elevator, I mean it's a lot of different functions, but it adds up in aggregate in the United States to be significantly higher than pretty much anywhere else in the industrialized world. What are some of those cost drivers that make it so much more expensive comparative to Europe, Asia and everywhere else?
Stephen Smith:
Yeah. It's like maybe three, four, sometimes five times as expensive as what you find in other countries. I've divided into three main things, and you find these all over the construction industry. The number one is the cabin size. Like everything in America, they're huge compared to other countries. The second is labor practices in the United States are extremely inefficient, often by design. And then number three, there's been a movement to what's called in construction harmonize the regulations across the entire world since you can sell the same elevator in Malaysia or Italy or everywhere in between. And the US and Canada have stood outside of that global movement. With the cabin size, it's often called in construction over dimensioning. There's lots of reasons why you'd want a larger cabin, but it does have real trade offs and people who write the building codes in the US do not grapple well with trade offs. All else equal.
It's nice for someone who's using a wheelchair to be able to turn so that they can enter the cabin facing forward and leave the cabin facing forward. All else equal. If you go into cardiac arrest and you happen to still be vaguely alive by the time the paramedics get there, it's nice to be able to have a fully extended stretcher. Maybe you are a basketball player and you're six foot nine and you need the full seven feet of the structure. These things are all nice in isolation, but they come with real trade offs, they come with real costs. And often the cost is so high that you don't get the elevator at all. Americans tend to live in buildings that don't have elevators, whether they're townhouses instead of condos, whether they're single family houses instead of apartments. The buildings in the United States are much more likely to be walk-ups.
You don't get the elevator at all. If we look at the labor situation, the main union that handles elevators in the United States called the International Union of Elevator Constructors, they're active in the US and Canada. They've negotiated some contract provisions that create a lot of work for them. It takes about twice as long in the US to install an elevator in a new building as in Europe and similar amount of time to modernize an elevator. Every generation or so, they essentially need to be replaced in part or in whole. And this takes a long time because they do a lot of drilling of holes and things that their contract entitles them to do that you don't find in the rest of the world where the elevator manufacturers have really made an effort to move production into the factory. It's called pre-assembly, pre-fabrication. They're cheaper to build in factories.
You can get greater precision in factories. They also tend to be safer. It's easier to do in a factory than to do it on a construction site where you might have to contort your body to get into weird positions. You can't lift things as easily mechanically.
Danny Crichton:
Mm-hmm, mm-hmm.
Stephen Smith:
And this is fundamentally an agreement between two private parties, the elevator manufacturers and the union. However, there's a lot of government policies that strengthen the union's hand at the bargaining table, one of which is we'll get into the third issue, which is the lack of harmonization. There's effectively one code or standard that's used in the vast majority of the world that determines how an elevator must be designed and then installed. You can pretty much sell the same elevator all around the world. And this leads to a lot of competition. It makes it easy for firms to enter new markets and the United States and Canada have stood outside of this system, and we do not allow parts that are certified to the global market in, you have to certify them specifically to the US market. In some cases, the parts aren't different at all, but there is a different certification process, which can be quite expensive.
It can be quite a barrier to entry, and then in some cases you have to make minor modifications to it, which adds further costs. There's lots of companies that you see in Europe that have been expanding outside of Europe. There's one called Orona, which is a mid-sized firm. It's based in the Basque Country in Spain, I think it's actually a worker-owned co-op. And you see them, they've got a presence almost everywhere in the world, all throughout Latin America, Africa, Asia, Europe, and there's a big hole in their map online, and that's the United States and Canada. The lack of harmonization makes it difficult to enter the market for foreign firms, and often those happen to be the ones that haven't signed contracts with this union. It strengthens the hand of the union as well.
Danny Crichton:
One of the things you really emphasize in the report is this historical dynamism that a hundred years ago, none of this was required. Elevators had operators, there were human operators who were required to be in the elevator. We removed the human operators. And then there's a slow expansion, particularly in North America, particularly in New York and a couple of large cities where slowly but surely we just kept requiring more and more either the increase in size or this customization. Why was there this pressure? What created that dynamic from basically elevators are roughly equivalent to European scale, from what I can tell to today, where just massively larger in terms of cabin size and complexity versus anything else on the market.
Stephen Smith:
Yeah. In some cases, these requirements were added. In some cases they were simply never removed. I would say in the rest of the world there's often more of a push and a pull between the special interests, the entrenched interests, whether it's the union or a firefighter who wants to be able to fit their stretcher into the cabin and then the actual users of the elevator. In United States, we do see this push and pull for single-family houses, for example. The National Association of Home Builders is a very powerful entity. When somebody wants to, for example, force single-family home developers to add sprinklers, they push back against that. The sprinkler industry and the firefighters really like sprinklers and they would like them in all single-family houses and the National Association of Home Builders push back. In the multifamily sector in the United States, there is not a very organized lobby. There is not often a strong counterweight to specific interests that want things.
The special interests often win, and the size thing has been a slow drip, drip, drip over the years. In the beginning, there were no rules about how large they had to be. And they actually tended to be a little larger in America because the buildings tended to be larger. They were often commercial buildings, like a garment factory in New York. You wanted room to fit your bolts of garment or machines or whatever you were lifting. They started off a little bigger, and then often the buttons were behind you when you'd enter. They thought, okay, well someone in a wheelchair needs to be able to turn, let's add that requirement. And that was a small increase in size. Whereas in Europe, they just put the buttons on the side, so you don't have to turn it all.
And then at some point, I'd imagine someone said they should fit a stretcher, they added that requirement. And then more recently, and this is when we start to enter historians talk of history and prehistory, a lot of building codes are really prehistoric in that the code was written down, the logic behind them was not. And frankly, a lot in the code wasn't really written down either. But as we enter from elevator prehistory to history, we can see that in the 2000s, the stretcher requirement was raised from six foot four length stretcher to a seven-foot stretcher. You can see in the historical record, it was a firefighter in Glendale, Arizona. Glendale, Arizona still doesn't really have apartment buildings. He was upset they were going to build a sports arena that wouldn't fit his stretchers when they were fully extended and said they should require this. He went to this code body that writes this code, a non-governmental entity called the International Code Council.
And he used a very emotional appeal. He said, "Just imagine if we were you on that stretcher trying to be taken out." And there's a line for the cost impact. And he said, "Well, there's not going to be any cost impact." And there was a cost impact, but he didn't note it. It passed. And fundamentally, I think there was just no one to stand up against him. America's a very suburban place and we tend to have opinion about who lives in apartment buildings. We often hear this from the fire service, apartment buildings house are the most vulnerable members of society, they'll tell you. And this is, I think code for you can't trust people in apartment buildings. They're poor, they're disabled, more likely to be poor, more likely to disabled, more likely whatever, than someone in a single family house.
We have these stereotypes about who lives in an apartment, for example, and it leads us to really want to load them up with requirements. And then on the other hand, the multifamily developers are not very well organized compared to the single family developers. I'm not exactly sure why this is, it might be because they're more regional enterprises that are not nationwide in scale like some of the large production home builders, for example. But in the multifamily sphere, for whatever reason, the developers are not very powerful. They do not push back as strongly. They do not send as many staffers to the code development hearings where these things are decided. It can be much easier to get requirements into the code that governs multifamily development than the code that governs single family development.
Danny Crichton:
When you think about where that influence is coming from, so you have single family homes nationwide, you have Toll Brothers, these massive, particularly in sprawling suburbia, they're building tens of thousands of homes. They have a lot of influence across state legislatures, International Code Council. Why with multifamily, I mean you said it's regional, but a lot of these building codes ultimately emanate from the zoning departments and the building departments of local jurisdiction. New York City, obviously through the Department of Buildings and Department of Design and Planning has a lot of influence over this. Why isn't the Real Estate Board of New York able to influence elevator requirements here against other constituencies?
Stephen Smith:
They do to some extent. However, as construction has gotten more technically complex, there's been a movement to harmonize the codes within the United States. Historically, every city or state had their own code. That is no longer the case. They now adopt codes that are written by a very misleadingly named body called the International Code Council, which writes codes for the United States, not really outside of the United States.
Danny Crichton:
They're very international people here.
Stephen Smith:
I think there was an aspiration to be international. They have a little bit of influence in some of the Gulf states that are very dependent on the US military, for example. And I think there's even a couple of Caribbean islands that adopt the codes in some ways. But for the most part, it's the American code. Not even the North American code, but really the USA code. As codes and standards and regulation have grown complex, the construction side of it, so it's not the zoning side, it's not the land use side, but the construction side. The building code, the fire code, the plumbing code, the mechanical code, the elevator code, the nuts and bolts stuff has been harmonized at the national level. Sometimes the bi-national US and Canada level with regards to elevators. And the local jurisdictions has lost the capacity to write their own codes in a lot of ways.
The ones with the biggest capacity are New York City and Chicago. They're very dense. They're very unlike the rest of America. But even these building departments are losing the will and capacity to come up with rules on their own. Instead, this US body called the International Code Council, it's a nonprofit organization, non-governmental. They write what's called a model code, and then increasingly jurisdictions just adopt it wholesale. The rules by which these things are decided it's not as amenable. Well, it has its own internal politics that's somewhat different from the politics of an actual polity like New York. And even Rebne, they don't exert a lot of influence. It's a different set of players. It's a different game. There's two main codes. There's the International Residential Code, which governs one and some two family houses in the United States, and then there's the International Building Code, which governs everything else.
Even just the fact that it governs everything from chip fabrication facilities to three family buildings to super tall skyscrapers, it can make it a little difficult to follow if you're not in the business of selling things or selling services. There is not a lot of influence from people concerned, especially with housing affordability, at least not yet.
Danny Crichton:
Right.
Stephen Smith:
For whatever reason, these organizations have their own internal politics. It's often quite divorced from the national conversation. There's not a lot of concern there about affordability.
Danny Crichton:
It's interesting because we see this pattern a lot in all the engineering, all the expertise. It can be medical, it can be psychiatric, it can be standards around vision and facial recognition, which is happening at the International Telecommunications Union with members from US and China trying to negotiate who gets to determine how a face recognition works and who has privacy. And then it's obviously going into architecture building zoning as well. But I think it's interesting so much around these patterns of course, is that the only people qualified, it's an age-old problem with democracy versus expertise, but the only people qualified to debate these issues are the practitioners already in the field who have the most economics at stake to be in that field in the first place. To your point, yes, we want a building code that is more affordable, which would mean, or even a multi-tier building code where you could say, look, this is a certain standard, but for more affordable options, we would take this stuff out of the code, make things simpler, and as long as you're not mis-selling or mis-positioning what a property is, everything is fine.
We see none of that variation or range in most of these contexts. And so I find it fascinating because maybe you're even working on this when it comes to a housing affordability expert. There's no way onto this committee.
Stephen Smith:
It's a real insider's game, that's for sure. It's a very complex process. It's not as open as a true governmental process. You have to go in person. It's a secret ballot. It's even more secret than a real election because in a real election, at least who votes is public, it's not even really public who votes. The general rules of the game are mostly public, but there's a lot that's not. It is a real insider's game and to a large extent, there wouldn't be interest from outside of it. But increasingly, I think there is interest. The two worlds are definitely running up against each other, and I do foresee some conflict realistically, both sides will probably have to negotiate a little bit. But yeah, I mean the YIMBY movement in particular is getting very interested in building codes and the building code world. Very, very common that I talk to someone, a code official or especially a fire service official.
I have to explain to them what YIMBY stands for. Well, you heard the term NIMBY. Okay, so it's Y. I love Sonya who coined the term YIMBY, but you do sound like a fool when you try to explain it to somebody and you have to use the word YIMBY to them. They've never heard about it. The world tends to be deeply suburban, I would say. I often feel like I'm the only person who lives in an apartment building in any given venue. And sometimes I suspect that not a lot of people live in places with sidewalks even. And it's a very suburban country, so that's pretty common in America. But it seems especially this is a country where 30% of people live in multifamily buildings. That is certainly not the case in the co-development world. It is a deeply suburban world with a deeply suburban mindset.
Danny Crichton:
Just given growth, I would imagine that's where the future of the industry has been, right?
Stephen Smith:
Yeah.
Danny Crichton:
I mean, these suburbs expand, the city densifies, and just in terms of numbers, I can absolutely see a bias towards the suburban sprawl, and that's where people are drawn from. That's also where it's easiest to think through a lot of these issues. And then the largest companies, obviously the ones that are building the most homes. If you're building tens of thousands of single-family properties, you have much more interest here than another. Some of it makes sense, but obviously it has these ramifications. And what I think is so fascinating here is, I mean, it's almost a key to unlock this whole industry because on one hand, I mean as we're taping this episode, the Democratic National Convention is going on in the background. We'll probably publish a couple of weeks later, but one of the interesting things is housing affordability is an issue that was a plank that has been discussed in the policy world.
It's usually with a nice bumper sticker. Housing should be more affordable for more people. And then you get into this and it's like, well, the actual mechanics, the actual thing you have to do to actually lower the price of units is this very intricate, very, very textured, layered, complicated wicked problem work where you really have to get into trade-offs and say a stretcher is not going to work. If you want a stretcher, you're going to go through the stairs. It's the only way out of the building, and I always feel like that's the hardest part of the YIMBY movement is to go from the bumper sticker, which I think most people, particularly as you get younger and people who don't have access to housing get really excited about to this, it's going to be a five to 10 year legalistic zoning scrum and slog of reading detailed details like if you love the internal revenue code, you're going to love the international development code.
Stephen Smith:
I definitely trust my taxes more than I trust some of the conclusions that I come to when I read the building code. The YIMBY movement started out at the lowest hanging fruit, the simplest stuff. Should there be parking required? Should you limit the lot to only one unit or can you build five units? And over time, yeah, it will get more complicated. It will get deeper in the weeds. And building codes are, I mean, just infinitely more complex than zoning codes. There's not only the building code, the plumbing code, the mechanical, but then there's this whole web of what are called reference standards. You have entire documents that can be hundreds of pages long about something like a sprinkler or a fire alarm. It's infinitely complex, it goes very deep and the details really matter a lot, and they're often also not very amenable to left-right ideology, what is the left-right take on sprinklers or elevator size requirement?
There is none. It sits outside of it. It has its own politics. It is less accessible. But I do see the YIMBYs getting, especially as they age, getting much more into the technical details of these things because it's not just the density, the number of parking spaces, the setbacks. Even within the zoning code, there's a lot more complex things, how the inside and the outside of the building work together. And there was certainly a time hundred years ago when you could say, well, we just need to deregulate it. But the truth is now every single parameter is regulated. And realistically, we're never going to remove entire axes of regulation. It's just about finding the right compromise somewhere. You look at models abroad and they have all the same parameters we do, it's just that the numbers are different. We're never going back on that complexity whenever returning to the old days, people will always want their assemblies to be fire rated in a number of minutes. This is a half hour assembly, this is a one-hour wall, this is a 90-minute door, whatever. This is how long it'll take you for the fire, the smoke gets through or whatever. There's no going back on the complexity. The only solution is to understand it.
Danny Crichton:
One of the interesting things here, we were just having a podcast episode on chip design. And in chip design with semiconductors, you use software called EDA, Electronic Design Automation, to actually map out where everything goes. People have tried to disrupt the EDA space for decades. It came out in the eighties. Three companies dominate 60, 70% of the market. It's a complete oligopoly. And the problem is the EDA companies actually work with both chip designers and chip fabs. And so if you want to actually go in the full circuit from design into manufacturing, the beauty of using these tools is that they've actually gone to the line. They've actually taped out. We know that they work. They basically have the lock-in from the manufacturer so that if you're a chip designer, you really can't try anything new. And so when I hear about this, I just think of classic lock-in, sure we could deregulate, but then the manufacturers still need to know what they're building.
And the manufacturers have all come to an agreement that this is roughly what the door or the elevator or stairs or sprinkler should be, and therefore it's actually massively incentivized economically to stay to even a standard that didn't exist because we've all come to the agreement that this is the size as the standard. It's a little bit like what we saw about USB ports over the last five, 10 years between Europe and US. Now, Europe has a single standard. They've opened it up. They've tried to make this much cleaner as opposed to the standards that were all over the place. I guess the question to me is, you can go two paths here. One is get really into the weeds, try to make minor adjustments, try to transition it from one way to the other. The other is bottoms up, start from scratch and say, what is the affordable building code, the ABC of the YIMBY movement? Is it too complicated to start from scratch? Is it the correct answer to really go in and try to make these harmonized rules better? Or is there an opportunity to say it's not that complicated.
Maybe you can use, I'm going to throw out our buzzword, gen AI to throw in, hey, we can flesh this out. We can do it really rapidly. We could do an iteration in a year or two, and you have a blue ribbon commission, you have something new to offer.
Stephen Smith:
Having tried to apply AI to building codes, I would not recommend it if we just want to get out alive.
Danny Crichton:
It'll be an MC Escher painting when you're often done.
Stephen Smith:
That's exactly what the result is. Yeah, they're very good at confidently stating things that if you squint and don't don't know what you're talking about, they look right. But then you look at the details and it's exactly like an MC Escher painting actually. In this case, when it comes to chip design, there's a leading edge of it and you're trying to advance beyond it is my understanding. But with construction, especially multifamily construction, of course there are improvements that should be made, new technological advances and things. However, the US is so far behind on the basics of building an apartment building, whether it's the cost or the quality that all we really need to do is copy foreign models and European models, East Asian models are great. I don't think we need to start from scratch. Maybe to give the elevator example, we should probably throw out eventually our own standard and just adopt the European one, which has been adopted by most countries around the world as their own standard.
You can copy the models abroad. Now for the base building code, it's a little more complex. Every country has their own of those. If I were in charge, maybe I would start from scratch there, but there are models that you can definitely call from. You don't need to derive from first principles or experiments, how tall you should be able to build with a single stair because you can just look at other countries and see what they allow and go to the middle of it. Just take the average of what everyone else does. With elevator cabin sizes, in the technical standard, those are determined by every single country, but the patterns emerge very quickly and easily. You don't need to think terribly much about it. It works from Australia to Italy. It'll probably work in the United States too. Maybe I would start from scratch within the US, but you don't need to start from scratch in a more global sense. There are many models abroad to go from, at least with the technical details.
Danny Crichton:
I mean, to your point about the US just being far behind, I mean, having lived in South Korea as an example, where you have basically model apartment buildings that just get replanted over and over and over again. You can be in a block of 10 by 10 apartment buildings, and it's not so dissimilar from suburbia. It's not so dissimilar from the five model homes that get spread out over thousands of homes in a subdivision or whatever the case may be. I mean, it's expensive to design a new model. Using it over and over, cloning as a way to cut costs. But I mean, one of the most amazing things is the apartments are so modern and so cheap because they've been basically battle tested over and over and over again. Every aspect of this has been optimized. Space is optimized, the quality of the amenities is optimized, and you really get more bang for your buck.
And I mean, one of the things that I've always observed that I always just think is very fascinating is that in cities, it feels like every apartment building has to be de novo from scratch. Every building's unique, everything has its own feel. Everything has a different size, and that just doesn't apply in a lot of the new growth multifamily dwellings you see, particularly in Asia. But I think it also applies to modern Europe as well outside of the old historic course where that redo and reuse and cloning really saves a lot of costs and you can optimize in the same way that an assembly line optimized cars and manufacturing in general. But we've talked a lot about elevators, and I know there's a lot of other categories. You've also talked a lot about stairs. You've personally done with the Center for Buildings in North America. You're a single stair tracker. I'm curious, what else are you looking to focus on since obviously people are very curious about this and this one hyperviral. Are there other categories you want to draw people's attention to in terms of areas that could be optimized within American buildings?
Stephen Smith:
I suspect you could find something in every single part of the building. Things that are of particular interest, heat pumps are very interesting. These are air conditioning heating pumps that rather than creating heat from electricity, they move it around from inside to outside or outside to inside, depending on what your heating or cooling. We tend to be behind the global standards. The models we have access to are older. We have a whole bunch of rules about where these units can be sited that make them more difficult to install. Like in Europe and Asia, it's common to have these, what are called these mini splits, these condensers, these air conditioning units to be just on the facade of the building, whereas we don't typically allow that in the United States. That drives a lot of cost. Also, the units themselves are just, they're older models that often are not sold abroad.
The regulatory mote creates a barrier to entry within the US and we don't get access to some of the cheaper models. Very interesting in heat pumps. Plumbing is a field that I think is right for efficiencies. There's a plumbing designer named John Lansing in Oregon who has done some really interesting work on ventilation lines and plumbing. That is the air that enters the plumbing system to make sure that waste flows downwards. I don't know as much about it, but I suspect that the whole electrical system is very fertile. In the United States, we tend to design for fire safety because we build a lot in light wood frame, whereas in the rest of the world, they tend to optimize for electrical safety, like running shocks and things like that. Egress, there's a lot there. The number of stairs, everything down to how the handrail has to be attached to the stair.
You can go really deep into these things and find little differences that on their own or a small cost, but really add up to a lot more. My hope is with enough money to go through the building system by system and find efficiencies everywhere because there's not going to be one neat trick. Cutting the number of stairs in a small multifamily building from two to one, that's a big cost savings, but it can be 7% of total construction cost, which is big, but that's the biggest. Everything else is going to be smaller. The elevator is generally 2% of the total cost of construction. If our elevators are three to four times as much as they should be, can maybe save one, one and a half percent of total construction cost, but that leaves a lot of other things. You really do need to go very in-depth into a lot of different systems to find the savings that really add up.
And what do they add up to? Well, on the West Coast, the hard costs, which is to stay, not the cost of permitting, not the cost of land, not the cost of lawyers, but the actual parts and labor for construction, those costs can be 500 bucks or more per square foot, whereas in Germany, they tend to be something like 200 bucks a square foot. There are a lot of savings to be found there. We'll probably never quite reach German levels because our salaries are higher, but even in Switzerland, maybe they can get to 250 or 300 bucks a foot. You could imagine that on the West Coast you could cut the cost by 40%, but if every individual item is only half a percentage point, one percentage point, maybe in a rare case, five percentage points, it leaves a lot to uncover. The journey to understanding and unraveling building codes and understanding the cost drivers has only just begun.
Danny Crichton:
I want to emphasize here too, that when we say that Germany is 200 bucks a square foot and the United States is $500 a square foot, we're not getting a better home in most ways, two and a half X of the price, right? It's not like a luxury. And I think that's always one of the hardest challenges to understand this. It's the same with subway costs and transportation costs and a lot of infrastructure in the US, [inaudible 00:31:31] just pay more for the exact same thing. In some cases, even worse, because our standards are behind a lot of other countries. We're definitely not afraid to optimal. We're actually a very unoptimal place on a lot of these categories. We're not just cutting costs to try to make things cheaper. The home's going to actually be the exact same quality while saving this cost. It's just really a question of efficiency rather than luxury.
Stephen Smith:
No, in a lot of cases, the quality is worse. Europeans are often a little appalled at the quality of American houses. On the West Coast, when I said 500 bucks a foot, that's for building the whole building in light wood frame, and that's often felt to be a necessary efficiency or it's too expensive to build in concrete. But everywhere from Switzerland to Bangladesh builds their buildings in bricks and concrete. And when you don't, it imposes some real quality constraints on you. Like sound travels much more easily. Tornado can pick your whole house up, take it away. A little less common nowadays, but it is a risk of having such a flimsy building material. You see it in other things as well. Our electrical systems are not as robust. Windowless bedrooms are becoming very common in America, whereas they're definitely not in other countries. There are a lot of quality differences. I would say there's very little that we get that's better. There's certainly a lot of things that there's more of them. There's definitely more pipes in an American building than a Swiss building, but that doesn't mean that the Swiss people can't flush their toilets. Everything still works the same. We just achieve it with a lot more materials than they do.
Danny Crichton:
Let me ask you a question. I mean, one of the things that I was looking at a couple months ago was the house inflation from the National Association of Home Builders. They do a survey annually of materials costs, labor costs, et cetera, basically adding up to what is the median price of a home in the United States new construction, and how does that shift over time? And one of the things that was really shocking to me was looking at pre-COVID to post-COVID numbers and seeing that the growth has gone up 50, 60, 70% in a lot of the categories. Why has there been so much inflation? I mean, does that have anything to do with the work that you're doing on these individual subsystems? Is that just something like labor where it's independent? But single family homes have gone up dramatically in price, particularly in the last couple of years.
Stephen Smith:
I don't know. I don't know how much of it is above inflation. I don't know how much of it is proceeding or lagging inflation of the general sort, which presumably has very little to do at all with construction and more to do with broader macroeconomic trends. I don't know the answer to that. I've been so focused on trying to understand the differences in absolute numbers that if it goes up 12% in America and 9% in Germany, it's small compared to the absolute differences in cost. I haven't been focused that much on it.
Danny Crichton:
As we finish up the show here, one of the interesting things I noticed, obviously you founded this think tank. You're based in Brooklyn, you publish this report, self-published, typical for a think tank obviously, but you just got started. You did the pullout into the New York Times. But I'm curious when you think about building up, because I think of the YIMBY movement, there has been so much creativity around organizing, using decentralized tools. I mean, the YIMBY movement really came together around the tech community. I think SF in particular, it sprung up with a lot of the anger that happened in the SF Bay Area housing prices. It took advantage of a lot of the new tools around social and community building, organizing, publishing, et cetera, to grow. I'm curious why, go back towards the think tank model, the PDF report on the website. Why not a tweet storm? Why not, I don't know, a substack that goes on over and over like a Brian Potter over at the Institute for Progress? Why this approach to publishing your work?
Stephen Smith:
It's interesting that you asked it that way because traditionally these things would get published in government or academia, and so to do it as a white paper in an independent think tank without any peer review or anything could be thought of as more innovative than these things are often published. I guess I wanted it to be more permanent, I wanted it to be way deeper. I did tweet a lot about these things, but at some point someone wants something to read or even to just point to. I guess my question is why are there not more of these in even more formal venues? Why is academia not been that interested in the nuts and bolts of construction? Why has the federal government not been, why have HUD and NIST taken a backseat from these things which you would expect? I would like to go through the building and myself hire people and understand the full picture, but realistically, the organizations, the agencies that handle these things are massively resourced with way more resources than I'll ever be able to get.
Even if I got $10 million a year, it would be really nothing compared to the budget of the International Code Council or the National Fire Protection Association or HUD or NIST. I would turn it around and say, why are these formal nonprofits, government agencies, academia, why are they not getting involved? Why when I was doing my citations, did everything in Zotero have to be a document? Nothing was a paper. There was no academic papers to cite on the issue. I guess that would be my challenge to those in academia, government and the more established nonprofits. Why was it so informal in a way?
Danny Crichton:
My answer would be the difference between intellectualism and praxis, which is most of what you're talking about is nuts and bolts, literally and metaphorically of building a building. And if you're a professor at a research university, you don't build a building. You can talk about it, you can theorize, you can design, you can push new standards around green buildings. And I'm just thinking of some of the stuff that I saw at design school and graduate school, but you don't actually sit down and say, well, how does the plumbing work? How much does a toilet cost? How do these get connected? How does the elevator get inserted? How do you negotiate a union contract? You just don't do it. In the same way that I'm in a venture firm. You can be a venture capitalist for 25, 30 years and not know how to run a company.
Stephen Smith:
Mm-hmm.
Danny Crichton:
And you might say, that's insane. How could you be on the boards of 15, 20 companies and not know how to run one? But it's like you're on a board, you show up every 90 days, you give strategic advice, and then as CEO, you're sitting down and be like, I need to renegotiate my lease. And there's a term in my lease that's really annoying and I need to find a lawyer who knows how to go do that. And other than other CEOs, no one else is going to be able to help, because there's all these small minor problems you deal with in the actual construction of a company and the construction of a building that I think you just never get access to. And I do think there's a little bit, I think of like Allen Levy, NYU here in New York City, New York University as a whole center that's trying to do more around costs and just get comparative cost data.
Oftentimes not at the most simple component level, but even just at the high end of per mile, it costs 400 million bucks to go build a subway or whatever the case may be. But to me, there's that lack of connection to praxis. Then second, I think there's a, particularly in the design community, just that disconnection with the social sciences, particularly economics, where it gets gross. We'll look at numbers. It's like, oh, that's too detailed. It's in the weeds. I just want to look at the forest, not the trees.
Stephen Smith:
Yeah.
Danny Crichton:
And maybe that's the pendulum that has to switch the other direction as people say, look, but that's where the interesting stuff lies.
Stephen Smith:
There's certain methods that academia likes that really can't be carried out without voluminous data. For example, when I compared the cost of elevators, I found a couple installations. It was literally a couple of installations. I looked at a lot of elevator pricing, but I couldn't find the detail that I need and get the permission that I needed from, but a handful of them. An academic would want to assemble a very large data set of these things and then run some regressions on them. And I think I ran one or two extremely basic regressions, but for the most part, it's basic descriptive work. Finding what is the cost of a elevator modernization. And the quality of the sources individually was not great, but I found six of them and good enough. One was in French, one was in German, and one was in Italian.
And I'll translate it for you, there you go. The methods that are often needed to understand codes are often not well-respected in academia, basic descriptive work. The things like what Allen Levy and the others at Transit Cost project did, you'll notice they published those as white papers as well. They didn't publish those as formal academic articles. The methods are typically slightly unorthodox. I could imagine data that I could have and regressions I could run, and ways to isolate variables. But if it doesn't exist, what's the point of imagining? You have to work with what you've got, and academia isn't always the best at that.
Danny Crichton:
We see this pattern in a lot of fields. Biology is another one where you can't get tenure building data sets, although if you build the data set, it's amazing because the science is obvious.
Stephen Smith:
Mm-hmm.
Danny Crichton:
In so many fields, stats are the easy part. Collecting data and actually putting it into a usable format, that's the hard part. That takes years. You can run regression in five seconds.
Stephen Smith:
Mm-hmm.
Danny Crichton:
In the cloud, maybe even in half a second. But well, Stephen, this has been an amazing conversation. Appreciate all the work that you're doing, bringing attention and light into our dark crevices of our buildings, including elevator shafts. Stephen over at the Center for Buildings in North America, thank you so much for joining us.
Stephen Smith:
Yes, thank you very much.