In this issue of the Leaders & Innovators series Offsight CEO, Vikas Murali sits down with Tyler Pullen, Senior Technical Advisor of the Builders Lab, a new accelerator that’s part of Terner Labs. The goal of the Builders Lab is to drive innovation in building affordable housing by working closely with architects, engineers, builders and manufacturers to adopt and promote modern methods of construction including modular construction, panelization, and kits of parts.

In addition to selecting companies and startups that can help achieve this goal, the Builders Lab will leverage their strong network and established presence with The Terner Center to help enable cross-sector collaboration between their cohort companies and the public-sector and to bring resources including industry partners, experts and coaches to help their startups succeed.

We sit down with Tyler to discuss why now is the right time to launch the Builders Lab program, how companies manufacturing affordable housing can differentiate themselves when pursuing competitive bids, and how technology can play a role in driving more affordable housing.

Builders Lab is launching in 2024 and now accepting their first batch of companies.

T: The original idea and program design for the Builders Lab reflected research insights from our sibling organization, the Terner Center at UC Berkeley, which identified industrialized construction (IC) as an important tool to address chronic housing undersupply in the U.S. As other research also finds, IC and related building industry innovations could meet the urgent need to reduce the time and cost of delivering housing while simultaneously minimizing environmental impact, in alignment with our core goals at the Terner Center and Labs. But IC innovators face numerous challenges in industry practice and the regulatory framework governing housing delivery.This means there is a need to support innovators and to identify and push systems-level change: an environment in which Terner Labs thrives.

Candidly, the “right time” to push this (and other!) initiatives was decades ago. But converging awareness and earnest engagement from agencies at local, state, and federal levels, as well as continued and increasing investment from the private sector, provide ample connective tissue for the Builders Lab to take advantage of right now. My colleague and Builders Lab Director Ben White recently put out a blog post further detailing our conviction behind the Builders Lab and the innovations we’re most excited to support.

T: There are numerous challenges in both the regulatory framework and the industry practice behind traditional housing delivery.

Within the public sector’s purview, one of the most difficult aspects of scaling a business in the building industry — not just in IC — is the fragmented system of building and planning codes, which are set individually in each jurisdiction in the U.S. Even minor, prescriptive differences between the building standards across jurisdictional lines can complicate any attempt to standardize high quality, affordable housing to meet regional demand.

Many other frictional elements of traditional housing delivery in the U.S. are not exclusively in the realm of policy change. Notably: project-based financing mechanisms require significant effort from developers to align eligibility criteria and funding timelines, and project delivery methods (e.g., design-bid-build procurement models) can lead to siloed decision making based on partial information, furthering adversarial stakeholder relationships. The public sector could play a key role in reconfiguring these barriers to incentivize and support innovation, especially through projects using public funds.

For better and for worse, the building industry writ large has shaped and been shaped by the contours of the regulatory structure described above. As such, the public and private sectors must work hand-in-hand towards systems change, including in-step changes to policy and industry practice. Examples of visionary policy shifts we’re excited about include performance-based (rather than prescriptive) building codes, federal certification systems for factory-built homes and products, and improved funding mechanisms for companies producing off-site housing affordably and sustainably. It’s this kind of large-scale collaborative coordination effort that Terner Labs is poised to facilitate.

T: In short: there is no perfect formula. Different developers in different regions will have slightly different needs, funding sources, and respective criteria and priorities. In recognition of that, perhaps the most important strategy for startups attempting to partner with these developers is to connect early and listen. Be prepared to adapt your service to their needs, but try to not compromise on your primary product offering by overpromising with design customizations or unrealistic cost performance targets. This is why we’re thrilled to have advisors in the Builers Lab representing developers and builders such as AvalonBay Communities, Eden Housing and Suffolk Construction; their insights as established players in the space will be invaluable as we seek to cultivate emerging AEC innovators.

Most developers, affordable and otherwise, are very cost-conscious. So startups that can offer measurable cost savings will likely be more successful in procuring projects. If your product unlocks access to other financing or rebates for their project, such as programs designed to reward energy efficiency, call this out. Another concern we hear from affordable housing developers in particular is finding a partner that can commit to the often long development timelines endemic to affordable housing. With several high-profile business failures in the IC sector still looming large in the perceived risk among developers, those with a demonstrated track record of completed projects, pipeline security, and/or liquidity will further improve the chances of winning projects.

T: Though the current housing and climate crisis is a systems-level issue requiring changes across many institutions and practices, technology does have a role to play in modernizing the housing industry. In recognition of that, we’re seeking to highlight impactful innovation rather than invention for invention’s sake.

Within the construction sector, we see at least one area in which technology could play a significant role: digitalization of the information and decision making tools that drive the industry. This includes every aspect of project delivery: design iteration and optimization, supply chain management, off-site fabrication, on-site installation and coordination, facilities management, and the feedback loops across them. Software tools that can collect, organize, and analyze all of this information, and then make it actionable, are crucial accompaniments to the physical hardware innovation advanced by many IC entrepreneurs. Simultaneously, this would allow more robust mechanisms to research and understand industry-wide performance. Finding the baseline is crucial to improve project- and industry-level accountability in the effort to “rise the tide” of the AEC sector performance writ large.