Saturday, 30 November 2024

What Is Construction Artificial Intelligence Delivering: 100 Companies

 Construction AI in 2024 Part 2: Six Areas of Application

 

 

 


Source: https://builtworlds.com/wp-content/uploads/2024/10/AI-Powered-Startup-Deal-Size-By-Tech-Category.png

 

 


The companies outlined here are divided into six areas. There are thumbnail outlines of around 100 companies, ranging from large and recognised technology leaders to startups [1]. The divisions are not always neat, particularly for the larger systems because there are overlapping functions, and there are subsets within the six divisions. It does not attempt to cover every new company everywhere with a construction related AI system, but is a comprehensive if not complete survey of construction AI at the end of 2024 with a large and representative sample of nearly 100 companies. Excluded are onsite automated and robotic equipment, covered here in a previous post, and 3D printing, covered here in a 2023 post.  

 

 

Preconstruction and Cost Estimates 

 

AI is used for site layouts, submittal logs, compliance checks, takeoffs, estimating costs, bids and tenders. Two issues that artificial intelligence (AI) and machine learning (ML) has to address are the lack of standardised industry data and extracting data from different sources, such as PDFs, BIM models and drawings. The first means companies have to build databases and rely on their own projects for data, and there are providers offering assistance with those. These systems use AI and historic data from projects for estimating costs. The second has seen development of AI for image recognition to automate quantity takeoffs from drawings, PDFs and BIM, and scanning drawings to check for missing information and risk assessment. 

 

AITENDERS is a French company that systemises tender and contract management, automates data extraction and analysis. 

 

ALICE TECHNOLOGIES construction planning software uses ML to generate and evaluate thousands of possible construction schedules. This ‘optioneering’ technology simulates different scenarios on a jobsite and provides ‘what if’ analysis to help contractors find the most efficient paths, optimize resource allocation, and minimize project delays. It also streamlines processes like bids and scheduling.

 

BENTLEY SYSTEMS OpenSite+ uses the  iTwin platform for civil site design for residential, commercial and industrial sites, with a copilot and automated drawing for optimising layouts. 

 

BUILDXACT offers cloud-based estimating and job management software that uses AI to create detailed cost estimates, manage budgets, and track expenses. Founded in Australia in 2011, now also in the US, UK, and Canada, the company is focused on residential construction. 

 

CIVILS.AI: extracts construction data from PDFs of contracts, geotech reports, code and compliance documents and uses it for reporting and checking.

 

CODECOMPLY.AI automatically conducts over 60 different code compliance checks and identifies violations. Checks include fire safety codes, structural regulations, egress and accessibility requirements, and paths of travel.

 

CONWIZE is a cloud-based cost estimating software with price analysis, bidding automation for subcontractors, tools for managing indirect costs and profit loading, KPIs analysis, risk management capabilities, and predictive analytics. 

 

FIRMUS.AI scans drawing sheets, identifying issues with construction documents, such as incomplete design, scope gaps, missing information, and discrepancies.

 

mbue have an AI that reads text and automatically reviews architectural drawings to identify changes between drawings.

 

NOMITECH’s CostOS is an enterprise-scale cost estimating software and BIM integrator, using AI, virtual reality, and Big Data. Does cost and CO2 estimates, and integrates with GIS, CRM and ERP systems. Cost Modeller is a web-based application to store historical cost and CO2 data. Used across construction, mining, oil and gas, utilities and nuclear industries for major projects. 

 

DRAWER AI, an Austin startup, does takeoffs for electrical estimators, who can upload PDF drawings and get quantities of elements such as light fixtures and power devices, with routing based on guidance. It generates a report for use in an estimating system.

 

IBEAM.AI cloud based, fully automated takeoff software for contractors, subcontractors (covers trades like rebar and concreting, HVAC, plumbing, drywall, roofing etc.) and suppliers. 

 

KREO’s cloud-based takeoff and estimating system uses PDFs or CAD files to produce BQs, estimates and cost plans. It can get measurements from blueprints, and provides choice by combining AI and manual measurement tools. 

 

PINPOINT ANALYTICS have developed a platform for road construction bidding and cost estimates, analysing historical data and adjusting for variables such as materials, labour, equipment, seasonality, geography and market conditions.

 

RAAP BUILDERS Rooms as a Product, optimization software for prefabricated hotel and multifamily housing projects. Identifies alternate assemblies, industrialized construction methods, and prefabrication options.

 

SMARTBID for contractors to build a database of prequalified subcontractors, send invitations and share documents, integrates with Autodesk, Procore and ConstructConnect. 

 

THELINK.AI  creates a submittal log that lists the materials, products, and documents to be reviewed and approved. Their copilot reads the specifications and creates a log that can be interrogated, updated and shared. Integrates with Procore.

 

TOGAL AI automates takeoffs and produces estimates, provides cloud based collaboration, has an image search function, and now has a chat tool that allows users to ‘ask’ for reports, specifications and information. 

 

WORKORB, a Canadian startup, automates RFP qualification, response drafting and proposal development, quality checks and contract reviews. The AI can cross reference documents, schedules and addendums and extract compliance obligations and requirements from bids and contracts.

 

WORKPACK AI for takeoffs using image recognition and text analysis to detect, measure and count relevant objects. It integrates with estimating, project management and progress tracking applications. 

 

 

Project and Document Management 

 

As well as AI assistants for PM and construction management there are AI systems for workforce and equipment management, claims, code and contract compliance, attendance and access, and risk management. Some PM systems combine project, site and workforce data for planning, scheduling, and task assignments. 

 

AECOM has expertise in gen AI, analytics, ML, data platforms and integration, IoT and telematics. They offer development and integration of a digital strategy for clients, and use AI for project design and management. 

 

ASSIGNAR is a platform that uses AI to optimize workforce and equipment management, with communication, scheduling and time tracking tools. Job assignments include site specifications, safety guidelines, and project orientation in the app, that is also used for quantities, site diaries, timesheets and checklists. 

 

AUTODESK AI provides real-time risk and safety analytics, document management, RFIs, takeoffs, estimates and cost forecasting, bid management, design reviews with clash detection, quality control, tracking, and change order management. BIM 360 IQ scans for safety issues and attaches a tag indicating whether it could lead to a potential fatality. Autodesk partners with other companies like Oracle, Civils.ai, Triax Technologies and SmartBid, and integrates with other applications and systems. 

 

BALFOUR BEATTY is developing an AI assistant, and using AI for safety, and OpenSpace AI for site monitoring and analytics. 

 

BECHTEL began work on an AI assistant in 2018 and established a Big Data and Analytics Centre of Excellence. They are reported to use AI for project planning, risk management and predictive maintenance. 

 

BUILDPASS, an Australian startup, have developed a platform for construction management with an AI toolkit, workflows, plant management, safety, ITPs and quality assurance, and site management tools. Their goal is to become an ‘AI-powered operating system for construction sites’. 

 

 CLAIMMASTER.AI is a UK company providing an AI assistant and templates for preparing, tracking and analysing construction claims.

 

CONSTRUCTABLE.AI a copilot for construction, a platform connecting BIM data, reality capture, and scheduling with AI document search using a chatbot. 

 

CUPIX creates 3D maps and digital twins from 360 degree cameras using AI for progress tracking. 

 

DOCUMENT CRUNCH, an Atlanta startup, analyses and summarises contracts and documents, identifying risks and automating contract compliance.  

 

HOLOBUILDER  reality capture uses 360 degree cameras for progress tracking. Allows photos to be attached to floor plans and shared, and manages markup lists. 

 

LARSEN & TOUBRO‘s Smart World offers AI, ML, cloud and integration services. On their own projects AI is used for project planning and construction automation, resource management and risk mitigation. 

 

MICROSOFT Copilot for Project uses Azure and Open AI’s LLM. The new copilot became available in November 2024 and has four capabilities: task plan generation; risk assessments; project status reports; and interactive, chat-like experience. The copilot is an addition to the Dynamics 365 Project Operations platform. 

 

NPLAN developed their own LLM for project forecasting and risk management. It uses ML to analyse historic project data and predict future project outcomes, and creates project schedules, identifies risks, and provides recommendations to avoid potential delays. Their Knowledge Base page is very good, with research papers as well as case studies. 

 

NYFTY AI offers jobsite automation, including communication with subcontractors using text messages and safety inspections. Its system manages attendance and access control, and creates robot assistants (bots) to handle tasks, initiate and record conversations about them. The bots are integrated into Procore and Autodesk. 

 

ORACLE Construction Intelligence Cloud captures, analyses, predicts, and makes recommendations. Their  Smart Construction Platform uses project data for schedule, cost, safety, and other performance metrics, and provides collaboration, billing, bidding, payments, and compliance management. 

 

PROCORE has1 million projects, 1 billion construction documents and $1 trillion in construction work on the platform. In June they announced three AI products: Procore Copilot AI with Microsoft Teams is a chatbot for users to ask questions about Procore projects in Teams and receive a summary of information with links to related sources; AI Locations will allow users to scan project drawings and automatically build out project location lists and organize project items with information on RFIs; Procore Maps will be able to filter photos on a map by date to pinpoint specific milestones or events captured during a project timeline.

 

SKANSKA Sidekick is an internally developed chat bot to for AI-content generation that ‘empowers our teams to summarise information, generate content, and collaborate’. Skanska also uses AI for safety management and project monitoring. 

 

SMARTAPP’s Brena.AI is an assistant developed that automates tasks. generates schedules, automates job reports, updates progress and enhances safety

 

SMARTBUILD is a platform for contractors with PM, document and resource management, task, safety and financial reports. Uses Microsoft Azure. Has SMART-Sub, a subcontractor construction management version, and SMART-Designer for architects coming soon.

 

TRIAX TECHNOLOGIES provides safetylabour productivity and equipment tracking solutions using Spot-R video and wearable devices for monitoring. 

 

TRIMBLE has a number of AI offerings. SketchUp Diffusion allows architects and designers to create rendered images based on a natural language text prompt or a preset style. ProjectSight brings automation to project management workflows, 

using AI to read and extract critical drawing information for project visualization. Trimble LiveCount uses AI to detect and count symbols on construction drawings. 

 

TRUNK TOOLS workflow automation and document management for administrative tasks using “agents” and text chat to monitor construction schedules and tasks, prepare for meetings, compare project information etc. 

 

Site Monitoring and Safety 

 

Safety systems monitor sites and people using sensors, cameras and wearables like badges and detect hazards. Reality capture and computer vision matches site work to BIM models to track progress and defects, and provide access control, headcounts, timesheets and other analytics. 

 

ACCIONA developed AI-powered platform BIONS for water supply network management in 2020. They have a construction innovation centre and a digital hub for project automation, a HR virtual assistant, and use Boston Dynamics Spot robot with Trimble software. 

 

AI CLEARING uses AI with GIS/CAD integration to optimise construction progress tracking, integrates with Oracle Aconex,

 

AILYTICS is a Singaporean video analytics company with an AI platform that uses CCTV and video footage to monitor vehicle movements, hazards and site safety, and track progress and productivity. Its face recognition system for workforce tracking would not be accepted in some other countries. 

 

ALWAYSAI computer vision for sites with worker counts, gate and safety monitoring, and progress tracking. Used in nine industries. 

 

BUILDOTS automates progress tracking and predicts delays comparing site scans with project schedules and plans. Its platform identifies discrepancies and suggests adjustments. It ‘offers a single source of truth that fosters efficient collaboration with your supply chain’. Their AI assistant Dot collects information and answers questions using OpenAI’s GPT-4, and integrates with Autodesk’s BIM 360 for tracking and site analytics.

 

CINTOO, a French startup, have developed a cloud based reality capture platform with BIM workflows, design vs as-built comparisons, and a digital twin platform to virtually navigate project sites.

 

DRONEDEPLOY uses AI to process images and ML to find patterns.

 

EVERGUARD AI uses AI to monitor multiple inputs. Its Sentri360 platform integrates computer vision and real-time data from wearables to monitor workers' behaviour and detect hazards.

 

EYRUS workforce and safety management with registration access control, and video monitoring. Integrates with Autodesk, Procore, Oracle. 

 

GENDA combines workforce management, safety alerts, and logistics in one app, using onsite Bluetooth location beacons for headcounts and task monitoring, and AI based hoist management. Integrates with Procore and Autodesk. 

 

INCON.AI is a Swiss company that provides reality capture for progress tracking. Converts 3D model visualizations into sequenced AR fabrication plans with videos, images, or PDFs, with digital instructions and guidance for installation.

 

KWANT AI is a workforce management system using smart badges to track access, safety, productivity and compliance. It provides schedules, timesheets, predictive analytics and heatmaps linked to 5D BIM models. 

 

NASKA.AI a cloud-based platform that connects BIM, reality capture, and schedule, automatically comparing a BIM model against the project.

 

OPENSPACE uses AI for image mapping with 360 degree cameras and photos for documentation and progress tracking. Creates an interactive visual record of construction progress. 

 

SWMS AI creates safety risk assessments using an AI assistant trained on workplace safety data from sources including Safe Work Australia, the Health and Safety Executive, OSHA, and codes of practice. Can be customised to industry or company.

 

TRACK3D have developed a reality data capture platform for integrating content from drones, 360 degree cameras, laser scanners and mobile devices into a single system to monitor construction progress.

Predictive Maintenance for Construction Equipment

 

Called telematics, these systems integrate sensors and wireless to collect and record equipment use and performance, and use AI for analysis and predictive maintenance. Typically available as a subscription service, manufacturers now install them on most new equipment and they can be retrofitted to older machines. 

 

CATERPILLAR’s Cat Product Link system for construction machinery. It collects data on hours and fuel use, idle time and location, provides diagnostic codes and predicts maintenance needs. 

 

KOMATSU has its Komtrax system to monitor equipment and predict maintenance. The system collects data on fuel use, productive hours, idle time, load factors, economy vs. power modes, travel times, and for models equipped with load meters, tons, cycles and travel distances.

 

JOHN DEERE’s JDLink system monitors equipment performance and predicts maintenance. The system provides location, history and utilisation data, alerts and diagnostic reports to help prevent equipment failures and optimize maintenance schedules.

 

LLUMIN is a software company, not an equipment manufacturer. They provide real-time alerts, automated workflows, analytics and reporting. Used in over a dozen different industries for machine and asset management and maintenance. 

 

VOLVO Construction Equipment’s CareTrack system monitors machine health and predicts maintenance. The system provides data on usage, production and performance. 

 

 

Design and Planning

 

One of the first applications of construction AI was in design, which was already software based. Generative design systems generate multiple design options according to specific criteria, by providing alternative solutions using a given set of parameters. Used to optimise a design, examples are crane positioning in site plans, and site and floor plan layouts for office and apartment buildings.  

 

 

ARCHITECHTURES is a building design platform for optimal residential developments, with quantity takeoffs and parameter presets. 

 

ARKDESIGN  creates automated floor plans and feasibility reports for multi-family and mixed-use projects and generate variations based on regulations and building codes.

 

ARKO.AI is a rendering platform that generates photorealistic 3D models from 2D drawings and sketches, and generates design options. Compatible with Rhino, Revit and Sketchup. 

 

AUGMENTA is an automated building design platform to create designs that are code compliant, error-free and constructible. Also does electrical systems, with plumbing and other coming soon.

 

BLUEPRINTS AI creates blueprints and generates floorplans and construction drawings using Open AI’s GPT.  

 

GOOGLE EARTH has a design system called Delve that evaluates ‘building and solar design options for early stage urban development’ that can ‘Generate designs in a matter of minutes and evaluate over 80 different performance metrics to uncover the most optimal and sustainable options.’ An explanation of how it works, inputs like energy use and building types, and outputs like gross floor area is here. Use Delve to ‘discover what works best based on financials and metrics like quality-of-life and sustainability, create a Highest and best use study. A Highest and best use study can take 20-30 minutes to generate.’

 

HYPAR automates the generation of floor plans and turms text into  A BUILDING MODEL

 

PANTHEON AI is an architecture startup aimed at developers, owners and tenants. Their AI can generate floor plans, refine a design and provide construction ready documents.

 

PLANALOGIC is a design and decision-making platform to find the best performing design to support acquisition decisions, feasibility studies, and scenario analysis.

 

SKEMA builds a BIM model using a firm’s existing BIM layouts to generate design schemes and construction documents. 

 

SPACEMAKER is an Autodesk platform that does feasibility analysis for architects and urban planners, creates optimal site plans taking into account factors such as sunlight, noise, wind, and regulations, and generates layouts for buildings and spaces.

 

SWAPP automates dimensioning and tagging of project elements for architects, what they call ‘generative documentation’ with annotations customised for client conventions and standards. 

 

TESTFIT automates generation of building layouts and site plans, optimizing for factors like unit mix, parking, and building efficiency.

 

 

Materials

 

There are AI applications for concrete quality control, and some country-based ones for selection of materials by designers. 

 

AICRETE are developing a quality control operating system for the concrete and aggregates industry integrating with various batch, dispatch, and truck systems.

 

CAIDIO a Finnish AI company with quality assurance solutions for enhancing the productivity and quality of concrete construction.

 

GIATEC, a Canadian startup, is developing an AI and IoT sensor enabled platform for the concrete industry, providing real time, wireless concrete temperature and strength measurements and using AI to optimize concrete mixes.   

 

KOJO sources building materials from US preferred vendors, with product availability, pricing, specifications and photos. Integrates with accounting, Autodesk and Procore software. Uses GPT 4 and Hugging Face. 

 

OPUSENSE AI system for real-time concrete strength and temperature monitoring.

 

STYLIB is a UK material search platform that matches images with suppliers’ products by scanning catalogues. 

 

ZEYKA.AI has 3D design software that helps select materials from a digital library of materials from India's top brands.

 

 

Conclusion

 

This survey divided nearly 100 companies with construction AI systems into six areas: preconstruction and estimating; project and document management; site monitoring and safety; equipment management and maintenance; design and planning; and materials. It is a large and representative sample of the state of play at the end of 2024.  

 

Many of the companies listed are American, which is because that is where AI development is concentrated. There are, however, companies from other countries, such as France, the UK, Switzerland and Finland. Note that any non-English language companies will have been missed. 

 

What is the overall picture this survey of companies offering construction AI at the end of 2024 provides? The number and diversity of point solutions is striking, with all standard tasks and functions addressed by a dozen or more companies. Many of these point solutions automate repetitive tasks for AI for construction firms. 

 

The importance of Autodesk and Procore is apparent from the many systems that integrate with them, and usually with both. These are clearly the dominant industry platforms, and they now have copilots and AI assistants. The other major software companies Trimble, Oracle and Microsoft also have platforms with AI. There are also several new entrants with systems that are comprehensive enough to be called platforms, such as Buildpass and Smartbuild. 

 

Chat GPT was launched in November 2022 by OpenAI, and GPT-4 in March 2023.  In two years, AI has gone from being unreliable and error prone to a technology that allows firms to combine and analyse complex and diverse data. It can synthesise, summarise and interpret data, and provide insights and suggestions, however it does not and cannot replace expertise because it also requires supervision and checking of results.

 

As discussed in Part 1 of this post, construction companies looking at AI have to weigh up four considerations. First is the cost of subscriptions, and whether they have to workload to pay for a platform rather than one or more point solutions. Second is how much difference AI can make to their capability to win, organise and deliver projects. Third is competence in the skills required, and whether their people have or can be trained in these. Fourth is what their competitors are doing, and whether AI can provide a competitive advantage. Cost, capability, competence and competition are the four Cs of construction AI. Firms will have to start working with AI somewhere, sooner rather than later, if they are to survive. 

 

 

 

[1] Many of the startups came from Last Week in ConTech, an invaluable source of information on leading edge technology for the industry.

 

Saturday, 16 November 2024

The HomeBuilder Program and Australian Housing

 State and federal governments criticised in COVID inquiry report 

 


The release of the COVID 19 Response Inquiry Report on October 28th included a section on the HomeBuilder program. This was the third report on HomeBuilder, following a KPMG report on the National Partnership Agreement in 2022 and an AHURI report on Responding to the Pandemic in 2020. There was also a review by PWC for Treasury in 2020. 

 

A book published in 1979 called The Construction Industry: Balance Wheel of the Economy argued counter-cyclical economic policy increased construction during recessions, through expenditure on public projects and the effect on residential building of lower interest rates. This has often been the case, in Australia the Rudd Government increased public expenditure on construction after the 2008 financial crisis and the Reserve Bank lowered interest rates to boost residential work after the mining boom ended in 2014. 

 

From this perspective, HomeBuilder was a conventional policy, introduced to counter the recessionary effects of the COVID-19 pandemic. In 2020 economic activity was decreasing and there were estimates of potential GDP losses of up to 20%. In a 2022 speech the Treasury Secretary Steven Kennedy said: ‘The pandemic was unlike any other downturn in recent history and precipitated the most severe economic downturn since the Great Depression. It was a health crisis before it became an economic crisis. Public health restrictions and cautious behaviour by people who didn’t want to catch the virus severely disrupted daily life and led to a sharp decline in output.’ 

 

Total Australian Government spending on economic support measures was $314 billion, or 15.2% of GDP. In that context, HomeBuilder was a minor program compared to the tens of billions spent on JobKeeper and other transfer payments. However, those were programs administered by the Australian Tax office for a large proportion of the population, whereas HomeBuilder was a targeted program administered by the states and territories with strict eligibility requirements. 

 

This post first outlines the program, followed by the relevant section of the Inquiry report, and the review of the National Partnership Agreement. It assesses the effectiveness and consequences of HomeBuilder. How accurate were the forecasts of expenditure on the program? What were the goals of the program and were they achieved? What were the outcomes? Is it an example of good policy, or of poor policy-making that did not consider industry characteristics and capacity? 

 

Outline of the HomeBuilder Program 

 

The program was introduced in mid-2020 to support residential construction by providing a grant of $25,000. Applicants had to have signed contracts between 4 June 2020 and 31 December 2020 to purchase a house and land package, build a new home, do a substantial rebuild or renovation of an owner-occupied property, or purchase an off-plan apartment or townhouse. Construction had to have commenced within three months of the contract date. On 29 November the program was extended to 31 March 2021, with the grant reduced to $15,000 and the commencement time increased to six months. In April 2021 the construction commencement time was increased to 18 months. 

 

There was an eligibility income cap of $125,000 for an individual or $200,000 for a couple, based on 2018-19 or later taxable income (the lack of clarity here became a source of confusion and an issue for the states and territories). There was also a cap on the value of new builds that differed between states, and on the value of renovations. However, the grant amount was the same everywhere for everyone, and the program itself was uncapped. 

 

The government underestimated take-up of the program. It was forecast to support 27,132 applications totalling $680 million, with the extension expected to add 15,000 applications at an estimated cost of $241 million. However, by June 2024 113,156 applications had been approved and $2.6 billion had been paid. Although applications closed in April 2021, there may be further costs as applicants have until 30 June 2025 to submit documents supporting their applications.

 

HomeBuilder was implemented through a National Partnership Agreement with the state and territory governments, which made the states responsible for administering the program. It was designed to complement existing state and territory First Home Owner Grants Programs, then all states except South Australia gave stamp duty concessions for new builds (whose value varied greatly but might be up to $40,000 depending on the house and location), and Western Australia, Tasmania and the Northern Territory added an extra ‘home building boost’. Combining HomeBuilder with the state and territory schemes, first home buyers in Western Australia and the Northern Territory could access $55,000 in grants, in Queensland, Victoria and Tasmania up to $45,000 in grants, and in NSW $35,000. The federal and state programs are in Table 1.

 

 

Source: AHURI 2020: 15. Responding to the Pandemic. The table does not include the value of stamp duty exemptions.

 

 

The COVID Inquiry Report

 

The report included a couple of interesting data points on construction during COVID. It noted industries with a large proportion of small businesses received most of the JobKeeper and Cash Flow Boost payments, including construction, which received $2.5 billion. These payments were made to employers. There was also a graph of changes to revenue for firms between 2019 and 2020 (p. 582), which showed 45% of construction firms increased their revenue, 30% had decreased revenue by up to 50%, and there were 15% of firms with revenue decreasing by more than 50%. 

 

The report focused on the inflationary effects of HomeBuilder. Between September 2021 and September 2022 the contribution of housing to quarterly inflation was between 20% and 40% of the total change in the consumer price index (CPI). The fiscal stimulus from government grants combined with existing labour shortages, exacerbated by border closures, and pandemic related supply chain disruptions that increased material costs. As a result, the cost of building a house increased by around 30% during COVID. 

 

Table 2. Construction contribution to quarterly inflation (% change)

                                    Sep 21  Dec 21  Mar 22  Jun 22   Sep 22

Construction                  0.35        0.37        0.56        0.52        0.67

Total CPI                       0.8           1.3           2.1         1.8         1.8

Source: COVID 19 Response Inquiry Report 2024: 59. From ABS data. 

 

The inquiry report found the program inappropriate and inflationary: ‘the HomeBuilder program created excess demand in an industry facing supply constraints. This has been a significant contributor to inflation coming out of the pandemic, and the program’s focus on renovations rather than new builds added to the general housing shortages. These types of demand-side stimulus measures are largely not appropriate in pandemics where industries are facing supply constraints’ (p. 549). 

 

A counter-cyclical increase of government expenditure in a recession is a common use of fiscal policy, and the construction industry is often targeted because it is both an employer of many workers and a major source of demand for domestic suppliers. The inquiry report concluded: ‘There are clear indications that the infrastructure measures taken – in particular, HomeBuilder – overheated the industry and contributed to inflation in the post-pandemic era. The program was designed explicitly to stimulate aggregate demand and support the residential construction sector. It acted to stimulate consumption expenditure and lowered the significant household savings built up during the pandemic. However, the measure failed to appropriately take into account the supply-side effects of the pandemic’ (p. 593) 

 

The section of the Inquiry report on HomeBuilder is unsatisfactory because, apart from the 113,156 applications received and the table on CPI, there is no other data. A review of the program that does not include houses commenced and completed, or people employed, is not comprehensive and does not allow conclusions to be drawn on the effectiveness of the program. That data is provided below when assessing the program. 

 

In an immediate response to the report ‘Master Builders Australia CEO Denita Wawn said HomeBuilder was the right policy for the time and should not become the scapegoat for systemic housing challenges.’ At the time of writing no other industry association has publicly commented on the report. 

 

Infrastructure Spending

 

As well as HomeBuilder, Australian governments significantly increased spending on infrastructure during COVID. The Inquiry report found by May 2021 the Commonwealth Government had committed $14 billion to infrastructure projects, and the 2021–22 Budget included an additional $15.2 billion over 10 years for road, rail and community infrastructure. Also in 2021, the New South Wales Government committed to $100 billion in infrastructure work, and the Queensland Government announced projects worth $52 billion. In both cases the projects were expected to be completed over four years. 

 

Figure 1. Engineering construction

Source: ABS 8762. Work commenced by the private sector. 

 

As Figure 1 shows, the public infrastructure projects announced in 2021 were commencing in 2022, and in the five quarters from March 2022 to March 2023 over $57 billion of public engineering work commenced. This was an unprecedented amount, for comparison, in the 2020-21 financial year public engineering work commenced was $21 billion. In 2021 private engineering commencements also began increasing, and both public and private commencements then peaked at the same time in December 2022.

 

 

HomeBuilder National Partnership Agreement Review: Stakeholder Consultation Report

 

The 2022 review of the National Partnership Agreement (NPAby KPMG found state and territory governments were not consulted on the design or implementation of the HomeBuilder program. The first they knew about the program was when it was publicly announced. This is somewhat ironic, given first the objective of the NPA was to create ‘a framework for the parties to work cooperatively, to provide financial assistance to eligible owner-occupiers to increase residential building and maintain jobs. No administrative funding was provided by the Commonwealth Government for establishing, running and reporting on HomeBuilder, despite the size of the program. 

 

The states and territories were responsible for administering the program, checking eligibility, and compliance and auditing. The review found ‘This created significant implementation challenges for these jurisdictions.’ There were also significant costs associated with assessing eligibility and the principal place of residence of applicants. The report also found insufficient clarity and guidance on the income caps, in the definition of substantial renovation, on citizenship requirements, and for cases where replacement contracts were required. Treasury ‘erroneously assumed’ existing First Home Owner Grant portals could be used. 

 

The review commented on the inflationary effect: ‘It could be said that the HomeBuilder did partially contribute to the constraints in supply of labour, materials and land that resulted from this industry overheating. However, it is critical to note that this would have been just one factor. Broader supply chain issues because of the COVID-19 pandemic were another, and much more impactful, factor.’ (p. 15).

 

Issues raised in the consultations with the states and territories were:

·       Did the eligibility criteria favour middle to high income earners?

·       Was offering the same amount for new build and renovations a fair approach?

·       Did the NPA consider state and territory ‘operating environments and industry contexts’ such as internal migration and their supply and demand balance?

·       Did HomeBuilder only benefit a small number of builders?

 

 

What Were the Outcomes of the Program?

 

The purpose of HomeBuilder was to increase residential building and maintain jobs by providing financial assistance to eligible owner-occupiers. Both of those objectives were achieved. The total number of people employed in construction in August 2020 was 1,145,814, a year later in August 2021 it had fallen to 1,114,644, but by August 2022 it was 1,251,601. Construction employment continued increasing through 2023 and 2024, reaching a record high of 1,358,239 in May 2024. 

 

As Figure 2 shows, residential commencements increased rapidly after the program started in mid-2020. The 42,475 houses commenced in the June quarter 2021 was an all-time record, well above the quarterly commencements of around 30,000 during the housing boom between 2015 and 2018. The increase for apartments was not as dramatic, although still substantial, rising from 15,070 in the September quarter 2020 to 22,913 in the June quarter 2021. 

 

Figure 2. Number of dwellings commenced

Source: ABS 8752

 

The combination of HomeBuilder induced demand with COVID supply chain disruptions had three effects on residential construction. First was the increase in completion times for houses. As Figure 3 shows, the industry usually delivers between 25,000 and 30,000 houses a quarter, less in the March quarter because of the January holiday, with most houses completed within 12 months. It took three years, until the December quarter 2023, to complete the extra 100,000 houses commenced in 2020 and 2021 during HomeBuilder [1]. There was less effect on apartment completions because the number of commencements was well below past record levels, so the volume of work was within industry capacity not above it. 

 

Figure 3. Number of dwellings commenced and completed

Source: ABS 8752

 

Second was the increase in the cost of inputs. Some of the materials and component price increases were due to global factors, but there were also significant increases in domestic prices and labour costs. As Figure 4 shows, the ABS input price index increased from 120 in December 2020 to 154 in December 2022.

 

Figure 4. Housing costs 

Source: ABS 6427

 

In the 12 months after the surge in commencements due to HomeBuilder, between the December quarter 2021 and December 2022, the price of basic inputs such as timber, plywood, glass, cement and steel all increased by around 15%. Some of the increase was due to higher energy and freight costs, and the other materials category was affected by plaster products because of a global price increase for gypsum. However, the main driver of these price increases was the high level of demand created by HomeBuilder and also, for concrete and steel, infrastructure projects. 

 

Figure 5. Construction input price changes to December quarter 2022

Source: ABS 6427

 

The increase in house building costs differed across the states. In the Reserve Bank’s November 2024 Statement on Monetary Policy the RBA commented: ‘Labour costs continue to contribute to ongoing cost growth, partly driven by the large pipeline of construction work and ongoing labour shortages for certain trades. Outcomes have varied across capital cities. Year-ended new dwelling cost inflation has returned to around its pre-pandemic average in Sydney, Brisbane and Hobart. By contrast, new dwelling cost inflation in Perth has increased further in year-ended terms, consistent with high demand for new homes and increases in labour costs’. The accompanying graph highlights how rapid and extreme the pandemic cost increases were.

 

Figure 6. Capital city cost inflation

Source: Reserve Bank of Australia, Statement on Monetary Policy, November 2024. 

 

 

Third was the increase in insolvencies between 2022 and 2024, as many builders on fixed price contracts entered into during HomeBuilder were unable to continue after cost inflation led to losses on those projects. Because of measures put in place to support industry during the COVID pandemic there were fewer insolvencies than usual in 2021-22, with a total of 1,639 construction businesses going into administration. The numbers for 2023 and 2024 show a substantial increase in total insolvencies from 2,812 to 3,882.

 

Figure 7. Construction insolvencies

Source: Australian Securities and Investment Commission

 

 Conclusion

 

A counter-cyclical increase in government construction expenditure is a common use of fiscal policy. However, the COVID Inquiry report concluded: ‘There are clear indications that the infrastructure measures taken – in particular, HomeBuilder – overheated the industry and contributed to inflation in the post-pandemic era.’

 

The purpose of HomeBuilder was to increase residential building and maintain employment, and it succeeded in both of those. There was a small decrease in total construction employment in 2021 of around 30,000, followed by a steady increase to a record 1,358,239 people in 2024. The program quickly increased housing commencements to record levels, but completion times increased and it took three years to complete the extra 100,000 houses commenced in 2020 and 2021.

 

The size of the program was uncapped and Treasury significantly underestimated the number of applications [2]. Their forecast for the cost of the program was $680 million, and the extension $241 million but, instead of $921 million, by June 2024 $2.6 billion had been paid. Although HomeBuilder was a minor program compared to the tens of billions spent on transfers through the Australian Tax office, it was targeted at a specific industry and administered by the states and territories. 

 

Over time the effects of the sudden increase in commencements financed by HomeBuilder became less positive. The COVID Inquiry report focused on the inflationary effect of the rapid increase in demand on the cost of housing, which accounted for up to 50% of CPI increases in 2021-22. The report concluded the demand side stimulus was not appropriate and ignored the supply side effects. The increase in residential commencements was not only due to HomeBuilder, which combined with first home owner grants, stamp duty exemptions, and other incentives given by state governments, all of which added to the excessive level of demand. 

 

Likewise, the increase in materials and component prices was not only due to HomeBuilder. Both the Commonwealth and the states also increased expenditure on infrastructure during COVID, which added to the inflationary effects. In the five quarters from March 2022 to March 2023 over $57 billion of public engineering work commenced, a record amount, and both public and private engineering construction commencements peaked at the same time in December 2022. 

 

There was a notable failure in policy making in 2020, governments and their advisors should have decided to target either residential building or engineering construction for stimulus. To simultaneously do both showed a poor understanding of construction industry characteristics and capacity, and ignored the obvious domestic and international supply side constraints during the pandemic. Also, governments would have been aware of rising private sector engineering expenditure when increasing their own spending. There is no evidence of industry being consulted or asked for advice at any point while these decisions were being made. 

 

The consequences of these poor policy decisions by state and federal governments have now become apparent. Over 8,000 construction businesses have become insolvent since 2021, many because of losses on fixed price contracts entered into under HomeBuilder, affecting thousands more customers, subcontractors and suppliers. The cost of inputs to housing construction have increased by around 30% since 2020, increasing house prices and making new houses unaffordable for many first home buyers. Further, the build cost of new apartments is now above the price of existing stock, so the apartment market is broken. Infrastructure projects have had cost increases and delivery delayed. 

 

There is a long tradition of increasing government expenditure on construction to counter economic downturns, however HomeBuilder was not good policy. Rather, when combined with the increase in public infrastructure spending, it is an example of reactive over-reach and poorly considered policy-making. Over the last two years inflation, and therefore interest rates, would have been substantially lower without HomeBuilder, as would house prices. That may be hindsight, and with COVID the circumstances were extreme. Nevertheless, the program did not take into account the characteristics and capacity of the construction industry, and at no point attempted to address the important supply side issues the industry had to deal with. Unfortunately, the implementation and size of the program demonstrated little understanding of the industry by governments and their advisors.


 

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[1] In the Australian Financial Review (1.11.2024)  the Stockland CEO Tarun Gupta was quoted: ‘pre-COVID it took his company 16 weeks to build a home, it doubled to 32 weeks in the pandemic, and is back to 20 to 22 weeks. He dubs it a new “resistance level”. Likewise, he says civil works for a 300- or 500-lot precinct used to take 26 weeks, blew out to 42 weeks in Victoria (the worst state at the time) and is back to 32 to 34 weeks.’

 

[2] None of the reviews of HomeBuilder looked at the Treasury forecasts or asked why they were so far off the mark.