Builders and developers are simply not building enough houses to keep pace with demand, and won’t close that gap unless they change the equipment and methods of construction they use to build homes. That is according to a new report published by Goldman Sachs, which warned that a multi-decade lack of innovation in technology (dating back to the 1970s), tightening land supply, and a surge in green and red tape have slowed productivity to a crawl.
“Labour productivity in the U.S. construction industry (for example) grew steadily from 1950 to 1970, narrowly outpacing economy-wide productivity growth,” the report said. “But from 1970 to 2024, productivity in the construction industry fell by 30%, while economy-wide productivity more than doubled.”
And the problem is not limited to the United States: “Over the last two decades, we have found that many other advanced economies also experienced stagnation or persistent decline in construction productivity, despite their economy-wide productivity growing at a solid pace.”
We still build the same way we did in the 1950s
The vast majority of the equipment and technology used to build homes today can be traced to the 1950’s and 1960’s, with only small incremental improvements over the last 70 years. “The rate of adoption of new technology increased sharply in the 1950s and 1960s, but has since stagnated,” the report warned, adding that the share of industrial machines (in terms of total production cost) rose from 4% in 1948 to 12% in 1968 before levelling out at 10% in the 1970’s.
And then there is prefabricated technology, which often produces timber components and other ‘kit of parts’ in off-site factories. “At its peak (in the 1960’s), it contributed about one-third of the total new residential housing units in the United States,” the report said. “However, its use has persistently declined since, now accounting for only 5% of total new residential housing units.”
In addition to a lack of equipment and machinery, the industry has also had very little benefit from technological advancements and other patents. “Over the past 50 years, technological breakthroughs have been concentrated in industries like information, communication, and chemical manufacturing that are quite distant from the construction industry’s supply chain.”
“As a result, the economy-wide innovation spillover to the construction industry has remained very limited compared to other industries like pharmaceutical manufacturing and professional management,” Goldman Sachs said.
Co-Design is key to closing the innovation gap
Today, Wood Central spoke to Tim Woods, Chair of the Steering Committee for the AFWI-funded Centre for Smart Forestry (CCSF) and research lead for ‘The Precinct’, who said productivity is also a major drag on Australia’s building and construction supply chain.
“To be clear, adding more labour cannot fix the non-labour ‘systems of work’ problems. Construction is full of transactional models that duplicate, create friction and atomise work down to the smallest task, which has multiplied transactions that add no value or actual building activity.”
Tim Woods, Chair of the Steerling Committee for the AFWI-funded Centre for Smart Forestry at the University of Melbourne, who is also the research lead of “The Precinct,” an AFWI-funded research project which is using modern methods of construction (MMC) to help short-circuit Australia’s acute housing crisis.
Woods, who attended the 2026 launch of the Centre for Smart Forestry earlier this month, said research centres like the CCSF and the AFWI-funded Centres for Sustainable Futures and Centre for Sustainable Resource and Product Solutions play an important role in driving modernisation across the full value chain.
“Bringing industry and researchers together to discuss the key issues and the most effective collaborations delivers genuine co-design,” Woods said. “That should happen all the time, but it is critical when the focus is on transformation.”
- To learn more about “The Precinct”, which is converting plantation fibre into factory-built frames, panels and modules, click here for Wood Central’s special feature from October 2025.
