Divine Akplehey
Finance Student, Kogod School of Business
The global housing crisis continues to exacerbate inequality and environmental challenges, leaving millions without adequate shelter (G20 Brazil 2024). “Approximately 1.6 billion people live in inadequate housing conditions, lacking access to basic sanitation services, and struggling to afford their own homes,” (G20 Brazil 2024). Addressing these issues requires urgent, comprehensive solutions to ensure access to safe and sustainable housing for all.
Furthermore, the scale of the housing crisis will impact millions of people around the world. It is estimated that 100 million people around the world are homeless (G20 Brazil 2024). Each year, approximately 2 million people are forced to leave their residences, and by 2030, 3 billion people —nearly 40 percent of the global population—will require adequate housing (G20 Brazil 2024). As the demand for affordable housing grows, the construction industry remains one of the most resource-intensive sectors, contributing significantly to greenhouse gas emissions and waste generation (US Department of Agriculture, 2022). However, a shift toward a circular economy presents an innovative pathway to not only provide affordable homes, but to also reduce the environmental footprint of housing. Circular economy principles focusing on reuse, recycling, and resource efficiency can create sustainable housing solutions that promote long-term affordability and environmental stewardship.
The Environmental Toll of Traditional Housing
Traditional housing construction and demolition processes are responsible for immense waste and environmental damage. According to the US Environmental Protection Agency (EPA), construction and demolition (C&D) activities generated nearly 600 million tons of debris in 2018, most of which ended up in landfills (Sustainable Management of Construction and Demolition Materials, 2024). This level of waste, coupled with the high energy consumption of conventional buildings, contributes to the global climate crisis. The World Green Building Council (WorldGBC), the largest and most influential local-regional-global action network, is leading the transformation to sustainable and decarbonized built environments for everyone, everywhere. WorldGBC estimates that buildings account for nearly 39 percent of global energy-related carbon emissions (Advancing Net Zero).
The circular economy aims to address the challenges from high emissions by promoting the use of renewable materials, reducing waste, and designing buildings that can be easily deconstructed and reused. This approach will dramatically decrease the need for new raw materials and lowers emissions, making housing both environmentally sustainable and cost-effective in the long run."
Divine Akplehey
Finance Student, Kogod School of Business
Circular Construction: A Solution for Sustainable Housing
Circular housing solutions focus on designing homes that can be built, maintained, and dismantled with minimal environmental impact. The Ellen MacArthur Foundation, a leading voice in circular economy advocacy, emphasizes the importance of designing out waste by incorporating materials that can be reused and recycled at the end of a building's lifecycle. This approach not only reduces waste but also makes buildings adaptable to changing needs (Circular Economy in Detail).
In cities like Amsterdam, the adoption of circular principles in housing is already underway. The city’s roadmap for a circular economy includes modular housing projects, where buildings are constructed with components that can be disassembled and reused in future projects. These homes are not only sustainable but also more affordable due to the reduced need for new materials, as components like steel beams, wooden panels, and insulation materials can be disassembled and reused in future projects (Amsterdam Circular).
Amsterdam's commitment to circularity is outlined in its Implementation Agenda, which sets out over 70 actions planned for the next four years in partnership with residents, entrepreneurs, and social initiatives. The city has allocated €14 million (approximately $14.95 million) to fund these efforts, with €3.5 million (approximately $3.74 million) dedicated to the necessary system changes to support circular practices among businesses. Priority areas include consumer goods, the built environment, and food and organic waste streams, reinforcing Amsterdam’s leadership in creating a sustainable, circular urban model. (Amsterdam Circular).
By creating a circular housing market, cities like Amsterdam are setting a precedent for how urban centers can tackle both environmental and housing crises. Taking a clue from Amsterdam, cities can address both housing and environmental challenges by adopting circular principles like modular construction and design for disassembly. This approach, which allows building components to be reused, can reduce costs and environmental impact. For US cities facing housing shortages and rising costs, circular construction offers an innovative solution. By supporting recycling and modular manufacturing and providing incentives for sustainable practices, American cities could scale circular housing models. This shift not only lowers waste and material costs but also promotes a resilient, sustainable future in urban development
Financing Circular Housing Solutions
A major barrier to widespread adoption of circular housing is the financing required to implement these innovations.
Traditional housing finance structures may not always accommodate the higher upfront costs associated with sustainable building methods."
Divine Akplehey
Finance Student, Kogod School of Business
One of the key barriers is that the initial capital cost of sustainable construction projects tends to be 2 to 7 percent higher than the cost of less sustainable buildings (Yang et al., 2017). However, long-term savings from reduced material and energy use make circular housing a viable solution for affordable living. Public-private partnerships (PPPs) and green bonds are emerging as financing mechanisms to support circular economy projects, especially in housing.
The International Finance Corporation (IFC) has been at the forefront of efforts to create markets for affordable housing, leveraging green bonds and collaborating with private investors to address the pressing needs of urban populations. According to an IFC report, the demand for urban housing has skyrocketed, with the global urban population rising from less than 15 percent in the early 20th century to 50 percent today, and this is projected to exceed by 66 percent (7.7 billion people) by 2050. This rapid urbanization has created a severe shortfall in affordable housing options, leaving an estimated 1.6 billion people struggling to secure adequate shelter by 2025. Integrating sustainability into housing finance not only attracts investors but also ensures that low-income populations gain access to quality homes. As the IFC report highlights, “Not only does the housing sector play a key role in progress toward multiple Sustainable Development Goals, but it plays a vital economic role through its impact on incomes, productivity, and savings” (Creating Housing Markets, IFC, 2021).
As the National Bank of Canada CEO Laurent Ferreira pointed out, the housing crisis will not be solved in a year and could take up to 10 years to address (“Canadian Finance conference, 2024”). The US Department of Housing and Urban Development (HUD) recently underscored this need for sustained funding by announcing $2.8 billion in annual funding to help alleviate homelessness across the country (Department of Housing and Urban Development). This significant investment reflects the ongoing, large-scale financial commitment necessary to address housing needs. This underscores the importance of long-term financing solutions that can support sustainable development over time. Circular economy principles offer the perfect opportunity to rethink housing finance for the long haul.
Global Innovations in Circular Housing
Around the world, innovative housing projects are emerging that exemplify circular economy principles. In Africa, the UN-Habitat has documented efforts to recycle plastic waste into durable building materials for affordable homes. These projects convert plastic waste into bricks or interlocking blocks, where shredded or melted plastic is combined with sand or other materials to create strong, weather-resistant construction components. By turning waste into building blocks, these communities are addressing both the housing shortage and the environmental impact of plastic waste, providing a dual solution to two pressing global issues (Recycling Waste to Build Homes). This approach not only reduces the demand for traditional construction materials, but also offers a cost-effective, sustainable alternative to conventional housing.
In developing countries, circular economy solutions are especially critical as rapid urbanization and resource scarcity intensify the housing crisis."
Divine Akplehey
Finance Student, Kogod School of Business
The World Bank’s report, What a Waste 2.0, highlights the growing need for better waste management strategies, particularly in low-income nations where housing and waste disposal are pressing concerns (Kaza et al., 2018). Circular housing models in these regions can address both waste and housing shortages, providing a roadmap for sustainable urban development.
The Next Step: Circular Economy as the Key to Housing Sustainability
The shift to a circular economy offers a powerful framework for addressing the global housing crisis in a sustainable and equitable way. By rethinking how homes are built, financed, and deconstructed, we can reduce the environmental impact of housing while creating affordable, resilient communities. From modular housing in Amsterdam to plastic waste homes in Africa, the circular economy is paving the way for innovative solutions that benefit both people and the planet. As the housing crisis deepens, now is the time to embrace these transformative ideas and build a future where everyone has access to sustainable, affordable housing.
Works Cited
"Ellen MacArthur Foundation: Circular Economy in Detail." Ellen MacArthur Foundation, 15 September 2019, https://www.ellenmacarthurfoundation.org/the-circular-economy-in-detail-deep-dive
"Recycling Waste to Build Homes." UN-Habitat, https://unhabitat.org/topic/solid-waste-management.
"Sustainable Management of Construction and Demolition Materials." Environmental Protection Agency, January 23, 2024 https://www.epa.gov/smm/sustainable-management-construction-and-demolition-materials.
"Advancing Net Zero: Buildings and the Climate Crisis." World Green Building Council, 23 September 2019, https://worldgbc.org/article/new-report-the-building-and-construction-sector-can-reach-net-zero-carbon-emissions-by-2050/
Kaza, Silpa, et al. What a Waste 2.0: A Global Snapshot of Solid Waste Management to 2050. The World Bank, 2018, https://openknowledge.worldbank.org/handle/10986/30317.
Cleo Rose Innes and Brian Casabianca, Creating Housing Markets in Emerging Market Economies, International Finance Corporation, a member of the World Bank Group, OCT 2021, https://www.ifc.org/content/dam/ifc/doc/mgrt/emcompass-note-106-housing-in-emerging-markets-web.pdf
Amsterdam Circular: A Vision and Roadmap for the City. City of Amsterdam, https://www.amsterdam.nl/en/policy/sustainability/circular-economy
Jean Buzby, Food Waste and its Links to Greenhouse Gases and Climate Change, USDA, Jan 24, 2022, https://www.usda.gov/media/blog/2022/01/24/food-waste-and-its-links-greenhouse-gases-and-climate-change.
G20 Brazil 2024, 23 August 2024, https://www.g20.org/en/news/under-discussion-at-the-g20-global-housing-crisis-calls-for-urgent-solutions.
Yang et al., 2017 M. Yang, D. Vladimirova, S. Evans, Creating and Capturing Value through Sustainability: The Sustainable Value Analysis Tool A new tool helps companies discover opportunities to create and capture value through sustainability, ResearchGate, April 2017, https://www.researchgate.net/publication/331544707_Creating_and_Capturing_Value_Through_Sustainability_The_Sustainable_Value_Analysis_Tool_A_new_tool_helps_companies_discover_opportunities_to_create_and_capture_value_through_sustainability
U.S Department of Housing and Urban Development; “Hud Announces $2.8 Billion In Annual Funding To Help People Experiencing Homelessness”, HUD No. 23-062, 28 March, 2023, https://www.hud.gov/press/press_releases_media_advisories/hud_no_23_062
Canadian Finance conference, 2024; “Laurent Ferreira on National Bank of Canada’s Priorities.”, Bloomberg,17 October 2024, https://www.bloomberg.com/news/videos/2024-10-17/laurent-ferreira-on-national-bank-of-canada-s-priorities