How do we get the right innovations?

February 2018

The construction sector has repeatedly been criticized for low productivity development - low innovation rate - and for a number of unsuccessful innovations. Houses with building materials that led to elevated levels of radon and to the sick-building syndrome are old examples, while plastered facades with sealing in one layer that led to mold is a more current example.

Looking at the incentives for different actors to invest in innovative solutions, we can see obvious problems. Long-term property developers who build houses for their own management underline that they only invest in proven technologies since the risk of new technologies is too high. Someone else must try it first and show that it works. But if everyone thinks like this, no one will dare to test!

On the other hand, those building tenant-owned apartments sometimes accept an unreasonably high risk, hoping that if the new and cheaper solution fails, it will do so after the warranty has expired.

If the first group would be in charge of the innovation rate, it would be too low, but leaving it to the other group would lead to an innovation rate that is too high. A group who has often been a little more positive about innovations and have been– for good and bad - prepared to accept a higher risk, are municipal housing companies. Generally, they were first to start building energy efficient green buildings.

How, then, will we get more and right innovations? One possibility is to increase the responsibility for the public sector in the role of testing new methods and products. In recent decades, regulations have become more focused on "functional requirements" and leaving technological development to the "market". This may cause a lower innovation rate due to the high cost for the company to show that the new technology meets these functional requirements. It may also cause approval of the “wrong” innovations if administrators fail to assess the prerequisites for the technology to work. There is also a risk of arbitrariness, where one municipality assesses that the technology meets the functional requirements, while another estimate that it does not. One way out of this is that the state shoulders a greater responsibility for testing new technologies, sharing the risk if approved technologies causes problems. [1]

To test new technologies testbeds are needed. KTH Live-In Lab is therefore an important tool for evaluating innovative technologies – creating acceptance for those that work and sorting out those that don’t.

[1] Read more in "Good and bad innovations in the housing sector - General background and a policy proposal" By Lena Borg, download the article here

Hans Lind
Professor of Real Estate Economics at KTH