increasingly commanding rental premiums and experiencing shorter vacancy periods, further incentivizing sustainable development. Construction costs: According to Turner & Townsend, global construction costs are projected to experience average inflation of 3.3% in 2024.16 While construction costs inflation varies greatly by region and sub-market, and some of the costs have moderated from their pandemic highs, they will remain elevated moving forward both for materials and labour. Long development timelines also exacerbate the expense of the construction phase. Land costs and access to financing: Land costs and higher financing costs for developers have challenged the risk-return profiles of many housing developments, forcing developers to move forward with higher-end products that can offset these costs. Inflexible zoning and minimal density allowances: Zoning that allows for multiple uses and the easier adaptive reuse of space is essential for keeping up with more rapidly evolving demand patterns and changes to highest-and-best use. As previously mentioned, density is a key component of supportive zoning for affordable housing. By allowing more housing units per area, higher-density developments increase the supply of housing, which can help stabilize or reduce housing costs. Rising insurance costs: Due to the increasing frequency of extreme weather, rising insurance costs are putting pressure on asset owners and increasing operating costs. For example, home insurance prices in the US have risen 21% from 2022 to 2023.17 Counterproductive policies: Often well-intentioned policies, including rent controls and specialized requirements such as prohibiting accessory dwelling units, can have the unintended consequence of reducing supply and disincentivizing development. NIMBY-ism (“not-in-my-backyard”): The phenomenon of community opposition known as “not-in-my-backyard” is particularly detrimental to housing development, especially housing that is on the affordability spectrum. Unfortunately, stigmas surrounding affordability, along with the misconception that adding supply will materially impact home values, fuels this opposition and has been shown to stop projects from progressing. Strategies for supporting affordability: Flexible zoning, land use and density: Zoning allows for easier adaptive reuse, the addition of accessory dwellings, and the ability to increase the number of units. Urban density plays a crucial role in promoting housing affordability, liveability, sustainability and even innovation. By allowing more housing units per area, higher-density developments increase the supply of housing, which can help stabilize or reduce housing costs. Financial incentives: Financial intervention by the public sector is often necessary to adequately reduce project costs and manage risks. Tax incentives and credits, like the US’s Low-Income Housing Tax Credit (LIHTC), tax-exempt bond financing and other discounted credit instruments, can help reduce acquisition, construction and renovation costs. Innovative construction techniques: 3D-printed homes can save on both labour and material costs. Similarly, prefabricated housing (prefab), which is a method of undergoing construction either partially or completely offsite and then assembling on-site, can also save costs. This includes modular systems and offers the benefit of economies of scale. Collaborative frameworks for housing development: Addressing the housing affordability crisis requires a collaborative approach that involves both the public and private sectors. These partnerships can align the interests of developers, investors and occupiers, ensuring that new developments meet sustainability standards and remain financially accessible. Such collaborations can also help tackle NIMBY-ism and work to get community support for projects. Due to the increasing frequency of extreme weather, rising insurance costs are putting pressure on asset owners and increasing operating costs. 30 Reimagining Real Estate: A Framework for the Future

Reimagining Real Estate 2024