This summary article showcases ideas from a recent episode of BCG’s Imagine This . . . podcast. With our guest Matthias Tauber, a BCG managing director and partner who leads the company’s operations in Europe, the Middle East, South America, and Africa, we explore a future of affordable, sustainable, and attractive housing.

BCG’s AI agent Scribe generated this summary—with oversight and editing provided by humans.

Imagine this: it's the year 2035, and affordable, sustainable, and aesthetically pleasing homes are abundant.

How did we get here? A combination of technological innovation, public-private collaboration, and modular construction has transformed the housing landscape, solving today’s global housing crisis, in which 1.6 billion people worldwide lack adequate housing—a number that could rise to 3 billion by 2030. In the US alone, the housing shortfall is estimated at 4 million units. Factors such as policy failures, urbanization, a lack of public housing, and investor-driven housing purchases have contributed to this shortage, driving up costs and leaving many people without access to affordable homes.

Solutions are on the horizon.

What Will Change in Housing Construction?

By 2035, modular construction techniques will dominate the industry, replacing traditional methods. In this scenario, prefabrication and standardized design will drastically reduce the complexity of home building. Among the key advances:

• Modular Design. Homes would be built faster, with higher precision, using premanufactured parts.
• AI Integration. Artificial intelligence would play a major role in construction, optimizing processes from project management to human resources and ultimately improving productivity. AI's role in ensuring quality control and catching potential flaws before scaling production will mitigate risks. Moreover, digital innovations, such as AI-driven inspections and predictive maintenance, will become essential tools for construction companies. These technologies will help ensure that modular homes are sustainable, safe, and suited for a rapidly changing society.

Although modular homes offer great promise, some may fear that mass-produced homes will lack character, or worse, create environmental waste if not built sustainably. However, efforts to incorporate eco-friendly materials, such as low-CO2 concrete, will ensure that homes of the future are both green and varied in design. In fact, the variety of modular housing options will prevent uniformity, allowing for customization based on local needs and preferences.

A Variety of Housing Options, with Sustainability Top of Mind

In 2035, the days of one-size-fits-all housing will be gone. Rather, homes will be tailored to diverse needs and preferences, including:

• Affordable Units. Low-cost, standardized homes designed for efficiency and quick assembly.
• Shared Living Spaces. Smaller, subscription-based units suited for more transient lifestyles.
• Eco-Friendly Homes. Zero-waste homes powered by renewable energy, with advanced insulation for reduced energy consumption.

Sustainability will be at the forefront of the housing revolution. Homes built in 2035 will be highly energy-efficient, featuring advanced insulation materials, renewable energy systems, and even smart technologies that help reduce energy consumption. By adopting greener construction materials and energy solutions, the housing industry will significantly reduce its environmental footprint.

Transformation Across Industries

A major barrier to housing production today is the talent shortage in the construction industry. Modular construction, paired with technological advances, will solve this problem by making construction jobs safer, more efficient, and more appealing to a diverse workforce. We expect this shift to attract a broader demographic to the industry, moving beyond its historically male-dominated workforce.

But the housing revolution will not be limited to construction companies. It will extend to other sectors that support the building process, such as:

• Building Materials. Companies will produce more prefabricated materials such as precast concrete.
• Logistics. The distribution of building materials will be more efficient, often facilitated by online marketplaces.
• Financing. Developers and financial institutions are likely to adapt by offering more varied financial products to meet the evolving needs of homebuyers and renters.

Navigating Regulatory Barriers

Permitting and zoning laws have traditionally slowed housing development, especially in urban areas where demand is highest. By 2035, digitization could revolutionize the permitting process, cutting approval times significantly. The introduction of government incentives could also encourage communities to support new housing projects, overcoming opposition from existing homeowners resistant to development.

The Future of Renting and Home Ownership

Demographic shifts and the rise of modular housing will influence societal attitudes toward home ownership. With populations aging, households shrinking, and individuals moving more frequently, renting could become increasingly popular. While this shift would mean fewer people investing in traditional home ownership, it would call for innovative financial solutions to help families build wealth in new ways.

Note that in many countries, including Germany, corporate landlords have driven up rent by purchasing large stocks of housing. Experts now argue that rather than relying on price caps, which have proven ineffective, society will find that the only way to lower rents is to build more homes. A better match between housing supply and demand will ultimately stabilize rents, even in densely populated urban areas.

Urban vs. Suburban Housing

Urbanization will continue despite predictions of a slowdown that arose during the pandemic. In both urban and suburban areas, housing will evolve:

• Cities could feature more varied housing stock, while suburbs could increasingly adopt multifamily units.
• This shift would make suburban housing denser and more efficient, contributing to a more productive housing market overall.

But with rapid urbanization and modular housing on the rise, concerns about urban sprawl are valid. Proper city planning is crucial to ensure that new developments are sustainable and that cities grow in a balanced way. Planning efforts should focus on integrating transportation systems and making sure that cities remain livable and environmentally friendly.

Disruptors, Allies, and Next Steps

The future of housing is not without risks. Persistent labor shortages, regulatory hurdles, and financial instability could impede progress. Additionally, consumer resistance to change could slow the adoption of modular homes. However, allies in the education sector and advancements in technology offer hope. A well-trained workforce and continuous innovation will be key to overcoming these obstacles.

Business leaders can prepare for the future of housing by taking three key steps:

• Invest in Talent. Close the skills gap by creating apprenticeship programs and attracting a diverse workforce.
• Foster Public-Private Partnerships. Work with governments to streamline permitting processes and support scalable housing solutions.
• Embrace Technology. Leverage AI-driven tools to enhance quality control, improve project management, and boost energy efficiency.

Matthias Tauber works in the building materials, metals and mining, and chemicals industries.

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