Zoning, permitting delays, land costs and labor shortages all constrain housing construction. But there is another, less-discussed problem: construction has struggled for decades to turn workers and materials into completed buildings more productively. That matters to housing supply, though it does not mean productivity is the only barrier—or that improving it alone would make homes affordable.
Why construction productivity belongs in the housing debate
When housing is scarce, familiar explanations tend to focus on rules that limit what can be built, slow approvals, neighborhood opposition and shortages of skilled workers. Those constraints are real. A separate question is how effectively the construction sector uses its labor and materials to produce finished buildings.
Research by economists Austan Goolsbee and Chad Syverson finds that construction productivity has declined over decades. For physical housing output per worker, their working paper describes the trend as falling or, at best, stagnant across multiple decades. This makes productivity an additional supply-side concern—not a substitute explanation for land, finance, labor or regulatory constraints.
The distinction matters: a sector can face limits on how much it is allowed or able to build and also make weak gains in how efficiently it builds. Addressing one problem does not automatically remove the others.
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What the productivity figures measure
Two statistics help show the scale of the concern, but they describe different things. The Becker Friedman Institute for Economics at the University of Chicago reports that construction averaged 4.3% of U.S. GDP from 1950 through 2020. That is the construction sector’s average share of the economy, not the share devoted specifically to housing.
The institute also reports that raw Bureau of Economic Analysis data put construction-sector value added per worker in 2020 about 40% below its 1970 level. This is an aggregate-sector measure of value added per construction worker, not a count of homes completed per worker. It should not be treated as a direct estimate of housing output or as a forecast of how many additional homes could be built.
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The researchers’ physical housing measure is different: it examines housing output per worker and finds a long-run decline or stagnation. Meanwhile, economy-wide productivity rose, according to the institute’s summary. Taken together, the measures indicate that construction has diverged from broader productivity gains, but they are not interchangeable and do not by themselves identify a single cause.
What may be behind the stagnation
Goolsbee and Syverson investigate whether measurement problems explain construction’s weak productivity record. They conclude that measurement error is probably not the whole story. Their evidence points to at least two broader issues:
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- Weak reallocation across places: The researchers examine whether construction activity shifts toward states where the sector is more productive. The observed state-level patterns do not match a simple account in which more productive places steadily gain a larger share of activity.
These findings support a picture of persistent operational and allocation problems, not a definitive diagnosis of one root cause. They also do not prove that adopting a particular tool, material or building method would reverse the trend.
Why construction can look unchanged
MIT Technology Review’s 2024 article connects the productivity question to the persistence of familiar building practices. It attributes this observation to Albert Saiz, an MIT professor of urban economics and real estate: “if you go to any construction site, you’ll see the same methods used 30 years ago.” This is Saiz’s reported observation, not a measured finding from the Goolsbee and Syverson paper.
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The article also attributes to Saiz an estimate that construction costs account for more than two-thirds of the price of a new house in much of the country, including the Southwest and West. That is an estimate reported in the 2024 article, not a newly verified nationwide figure. It helps explain why construction efficiency matters to the cost of building, but it does not establish how much a productivity improvement would reduce a buyer’s price.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What this means for housing supply and affordability
Better productivity could mean getting more completed construction from a given amount of labor and materials. That is relevant when more homes are needed. But the evidence here does not quantify how much a productivity gain would increase housing completions, lower prices or rents, or reduce the housing shortage.
Nor does a productivity-focused explanation make zoning or permitting less important. If regulations prevent housing from being built where demand is high, more efficient construction cannot by itself remove that restriction. Likewise, efficiency gains do not guarantee that additional homes will be financed, approved, staffed or built in the places people need them.
The useful conclusion is narrower: the housing debate should consider both the barriers that limit construction and the sector’s long-running difficulty in improving how it builds. Productivity is not a complete explanation for housing scarcity, but leaving it out gives an incomplete account of the challenge.
Quick Recap
Sources
- Becker Friedman Institute for Economics, University of Chicago: Goolsbee and Syverson working paper, Jan. 18, 2023.
- Becker Friedman Institute for Economics, University of Chicago: research summary, Jan. 19, 2023.
- MIT Technology Review article text reproduced in a LinkedIn post, Nov. 5, 2024.
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