The construction industry is undergoing rapid transformation. The most significant transformations are driven by new sustainability requirements, which may bring unforeseen obstacles. Here are the key subjects you should pay attention to this year, according to an analysis by GBDMedia.

General Overview

The housing sector is expected to experience modest growth in 2024. Interest rates are estimated to decrease from a peak of 7.9% in October 2023 to 6.5% by the end of 2024, providing homebuyers with minimal financial assistance.

While the mortgage rate lock effect is likely to keep existing home inventory low, housing prices are forecasted to decrease by 1.7%, and national sales are expected to increase.

Beyond economic projections, the housing sector will continue to undergo transformative changes this year. Here are some sustainability-related trends to watch in 2024 and beyond.

Net Zero Carbon

Could Net Zero Carbon homes become a sensation? In my decades of experience in the green construction industry, I have never witnessed such a solid conversation among builders, developers, architects, manufacturers, lenders, investors, and consumers about decarbonizing the built environment.

COGNITION Smart Data from Green Builder Media shows a remarkable increase in consumer demand for decarbonization across all sectors of our economy. The data reveals that receptive consumers—especially millennials and Gen Z—have a positive attitude towards decarbonization and are willing to pay more for carbon-neutral packaging, vehicles, clothing, and even homes. To decarbonize their lifestyles, these consumers are driving electric cars, increasing the energy efficiency of their homes, and transitioning their homes to fully electric.

Fortunately, some builders are responding to the call. COGNITION data shows that over 75% of green builders are optimistic about the long-term prospects of the real estate market, largely because they believe that funding through the Inflation Reduction Act (IRA) will positively impact their business by improving energy efficiency and decarbonization technology. These builders are also seeking products with Environmental Product Declarations (EPDs) to reduce the embodied carbon of their projects.

Additionally, codes, regulations, and policies will drive decarbonization of the built environment. For example, California's 2025 Code will likely favor heat pump technology over central air conditioning systems, and this example can be replicated in many European countries where a zero net carbon emissions code is being developed.

Integrated Electrification

Driven by the heat pump revolution and the decreasing costs of battery storage, the construction and transportation sectors are electrifying at lightning speed. The main drivers are reduced carbon emissions, increased resilience, and cost savings.

Electric vehicles can already outperform their gas-consuming counterparts on a lifetime cost basis in most markets. Over 1 million electric vehicles were purchased in the European Union in 2023, and we can expect to see 30 million electric vehicles by 2030.

The increasing sales of electric vehicles mean higher demand for home chargers, and vehicle-to-grid charging will fundamentally change how we power our homes, optimizing demand-side energy management, increasing self-sufficiency, saving money, and reducing grid stress.

In turn, heat pumps, which are becoming increasingly affordable due to government tax credits, are up to four times more efficient than conventional solutions, making them an extremely cost-effective method of heating and cooling. In some countries, heat pumps are now outselling gas furnaces, even in cold climates.

The demand for heat pumps will continue to grow in 2024 and beyond, considering that 20 governments have committed to doubling heat pump projects to reach 20 million installations by 2030.

Climate-Adaptive Design

2023 was the hottest year on record. El Niño promises to make this year another scorcher, triggering extreme temperatures, droughts, storms, floods, and wildfires. For the built environment, these climate impacts are likely to lead to ratcheted-up regulation and increased demand for climate-adaptive design.

As temperatures rise, cities suffering from the heat island effect, resulting from impermeable oceans of asphalt, concrete, steel, and other heat-absorbing materials, become intolerable, impacting the health, well-being, and quality of life of residents. Many cities are responding by adopting climate-adaptive design practices to manage intense heat while simultaneously reducing carbon emissions and increasing resilience.

Buildings and urban landscapes are being covered with trees, vegetation, and shade structures to protect sidewalks and streets. Reflective glass is used to block sunlight, and urban canyons are designed to align buildings with sunlight and wind direction 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 utilize pressure differentials inside a building to increase natural ventilation and circulate cool air. Reflective surfaces are also used on roofs, walls, and hard landscapes to keep indoor spaces and sidewalks cool.

The use of phase-change materials and substances designed to melt at certain temperatures, absorb heat, and cool the surrounding area, such as paraffin wax and salt hydrates injected into walls, floors, and roofs, will be expanded. These substances can lower temperatures by up to 21°C.

Resilience Challenges and Insurance Issues

According to COGNITION Smart Data, resilience is paramount for Millennials and Gen Z because their homes are directly affected by hurricanes, tornadoes, extreme temperatures, wildfires, droughts, and floods. Approximately 60% of Millennials and Gen Zs report having considered moving due to climate change, and 62% indicate being concerned about climate change affecting the value of their homes.

Perhaps the acute interest in resilience stems from the fact that 77% of Gen Z and 66% of Millennials report that climate events have affected their ability to obtain insurance for their homes.

Climate change systematically destabilizes the insurance market. As extreme weather intensifies and damages accumulate, homeowners in disaster-prone locations have seen their premiums increase by 20% or more in recent years if their insurance company hasn't completely withdrawn from the market.

Some of the states most prone to disasters also have the most active housing markets, along with astronomical insurance rates. Due to rising costs, more homeowners are forced to forego coverage, leaving them vulnerable and ill-prepared to handle a disaster that should be covered by insurance.

Solar Dominance

In 2023, investments in solar energy surpassed oil investments for the first time, a trend that is likely to continue in 2024. Solar is the flagship of the transition to clean energy. Since the early 2000s, the cost of solar modules has dropped from $4 per watt to an astonishingly low value of $0.10 per watt, and global solar installations have grown from 1 gigawatt in 2004 to 413 gigawatts in 2023, largely due to massive technology deployment in China. Soon, both annual global installations and production capacity will reach terawatt territory.

Battery storage is also on the rise. In the third quarter of 2023, the world boasted more grid storage installations than ever before. In some areas, grid storage capacity in states like California and Texas has increased tenfold.

As lithium-ion battery costs hit record lows, we can expect continued adoption of this technology, leading to lower energy costs and increased grid resilience—both crucial as global temperatures rise and natural disasters proliferate.

Furthermore, solar recycling programs are emerging nationwide to recover photovoltaics and batteries that have reached the end of their lifespan. Some states are now enacting laws requiring companies

to recycle solar panels and batteries. By recycling these materials, manufacturers can extract valuable resources, reduce costs, and minimize environmental impact.

Green concrete and steel

Concrete is the second most consumed material in the world, after water, and the most used construction material. On a global scale, the tonnage of concrete used is twice that of steel, wood, plastics and aluminum combined. More than ten billion tons of concrete are produced every year globally.

About 50% of emissions from concrete production come from the chemical process and 40% from burning fossil fuels. In addition, concrete production requires large amounts of water, accounting for nearly 10% of global water consumption.

Stakeholders in the cement and concrete industry are not turning a blind eye to the sector's environmental impact. Some companies in the sector are replacing the minerals used in the cement mix with alternatives that can be processed at lower temperatures.

Alternatives such as fly ash and slag (byproducts of other industries that would otherwise end up in landfill) are also gaining popularity as additives. These alternatives not only lower the carbon footprint of concrete, but can also increase strength, decrease density, extend durability and improve carbon sequestration.

In addition, more renewable sources are used in the concrete production process, as well as direct air capture technologies to capture carbon at the source rather than emitting it into the atmosphere.

Steel is also one of the most consumed materials in the entire economy, producing almost 7% of annual global carbon emissions and consuming about 8% of total global energy.

The massive amount of carbon emissions from the steel sector is not only attributed to a very intensive production process, but also to exponential demand, which also played a role. China's huge construction industry over the past three decades, of vast cities and massive infrastructure projects such as high-speed rail systems and hydroelectric projects, has driven demand for steel to increase by orders of magnitude.

If there's any drag on steel's growth trajectory, it's that there's a lot of it that can be reused: there are hundreds of billions of tons of scrap metal that can be reused using electrified, renewable energy.

New steelmaking processes are being improved by the use of electric arc furnaces and direct reduction of iron ore, both of which have much lower carbon emissions than conventional processes.

Carbon capture

If we are to meet our climate goals, we will need to remove hundreds of gigatons of carbon dioxide from the atmosphere. While advances are undoubtedly being made in direct air capture technologies, they are still quite nascent and quite expensive.

Many states are turning to natural solutions, such as tree planting and wetland restoration, for sequestration.

Efforts to conserve habitats for carbon sequestration are changing the way developments are planned and built. Instead of allowing developers to bulldoze large tracts of land and tear down communities, municipalities are beginning to demand increased ecological sensitivity, ensuring that critical ecosystems are protected.

Transparency requirements

While the European Commission deliberates on long-awaited climate disclosure rules, some states have passed their own climate transparency laws, requiring companies making more than €1 billion annually to disclose their 1, 2 and 3 emissions and carbon content, but also the compensations they buy.

These climate disclosure requirements will affect both large and small companies, as anyone in the value chain who does business with reporting companies will have to comply, potentially forcing companies that do not emit a substantial amount of their own emissions to , but interact with suppliers, clients, other stakeholders who do, such as architects, designers, banks, investors, law firms and other professional services firms, to make difficult decisions about which clients and partners to stay aligned with .

To prepare for the new climate disclosure laws, it is important that firms of all sizes, not just those that meet the billion dollar revenue threshold, but also those that sell, interact with and service the industry, start to consider measures needed to comply with the eventually inevitable change in climate disclosure requirements.

Increasing ESG

Sustainability has been considered by many business leaders as a moral imperative, and the pace at which companies are engaging in comprehensive ESG strategies is accelerating at a remarkable pace.

ESG strategies help companies minimize risks, improve long-term performance and improve resilience against market volatility and idiosyncratic events.

A growing body of evidence shows market-level returns (or better) for ESG investments, which means we can expect increased demand for ESG commitments from lenders, venture capitalists, private equity funds, pensions and other stakeholders who prioritize a triple bottom line. While investor momentum has been a critical factor in ESG's meteoric rise, consumer demand is also a dominant force.

COGNITION Smart Data shows that 70% of consumers who are early adopters of such strategies believe that firms with a strong ESG focus are more likely to achieve long-term financial success than those without.

71 percent of them have stopped buying products from other companies because of 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.

In addition, consumers link ESG to quality: 50% believe that a company's ESG practices have a significant impact on the quality of its products and services.

Persistent work challenges

As homes electrify, there has been an increase in demand for skilled contractors, and dramatic shortages of skilled workers are limiting progress in many markets. Continued labor shortages, especially for the installation of advanced technologies such as heat pumps, smart electric panels and geothermal, will continue to affect the industry.

In California, as an example, there is only one licensed electrician for every 478 housing units in the state, according to the US Census, California Department of Industrial Relations.

A recent survey by the Associated General Contractors of America shows that 72 percent of contact firms reported having open positions they could not fill because available candidates were not qualified to work in the industry.

The aging workforce in the construction industry will only compound the problems as younger generations are lured into the tech industry with the promise of high wages and cushy office jobs.

However, even with the increased labor shortage, 2024 will be a year of opportunity and progress. Climate solutions such as solar and battery storage, electric vehicles and heat pump technology are achieving price parity with their conventional counterparts, paving the way for greater adoption and removing any remaining institutional resistance. Sustainability is now both smart and profitable. (Photo: Dreamstime)