PATH - A Public Private Partnership for Advancing Housing Technology

October 21, 2004

Homebuilding Industry Examines Risks Involved in Technology Innovation

PATH Sponsors Dynamic Roundtable to Spark Solutions

Washington, D.C. - Diverse members of the homebuilding industry met for the second day in Washington, D.C., to discuss risk as a barrier to innovation. Participants represented regional and national builders, manufacturers, architects and review boards, insurers, evaluation and code officials, inspection services, and academic researchers. Each panel member provided input to the discussion based on his or her representative role.

The two-day discussion considered the definition of "risk" as a barrier to innovation, examined case studies of innovative products and recommended potential steps for a roadmap to address risk barriers. PATH sponsored the roundtable, the first of three, to address barrier removal strategies -- a key component of the program's mission.

Participants noted that risk is defined differently depending on one's role, but generally encompassed money, time, design and performance. Several risk hypotheses were discussed and the following were generally accepted:

Market risk is a signficiant barrier to innovation in the housing industry and the level of risk is correlated to the size of the firm.

• Venture capital can be difficult to acquire, especially for smaller firms.
• Many housing technologies fail in the market.
• The high rate of failure and litigation inhibits introduction of new products.

Potential product liability is a barrier to innovation.

• Major product liability settlements discourage introduction of new products.
• Potential product liability inhibits specification of new products by designers and use by builders.

Consumer protection law advancement has increased the risk of innovation.

• Successful claims by homebuyers against builders, designers, suppliers and inspectors pose barriers.

The risk of unintended consequences, such as mold resulting from energy conservation, is a barrier to innovation.

• Complexity and fragmentation of the housing production process make limited product innovation too difficult to test and coordinate in advance of market application.

Participants noted the importance of uniform codes, product standards, testing protocols and inspection requirements for creating an even playing field and ensuring a basic level of quality. Public trust in the homebuilding industry was cited as a fragile commodity, difficult to cultivate and easy to damage, that could affect risk. The discussion revealed that insurance enables more risk through innovation and only becomes an issue when a product fails.

Detailed results from the roundtable will be posted on PATH's Web site in December. PATH will convene two more barriers panels in the future and is implementing a variety of initiatives to combat the bigger institutional barriers to change.

Content updated on 9/1/2005

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