How local government can drive housing innovation

The dire state of housing affordability has become a chorus reverberating across American cities: The rent (or mortgage) is too damn high! Nationally, the cost of a home now stands at a staggering 5.3 times the median household income. Over 40% of U.S. renters allocate more than 30% of their earnings to housing expenses. Perhaps even more disheartening, the gulf between Black and white homeownership has widened beyond the gap observed in 1960. The repercussions of this crisis ripple outward, affecting well-being, fracturing social cohesion and ushering lifetime residents out of the neighborhoods they've cherished and nourished.

This predicament is not news—but what is surprising is the startling scarcity of robust solutions. But for some time now, Raleigh, North Carolina, has pursued a unique and creative approach to the affordable housing shortage. It saw an urgent need for entrepreneur-driven support on housing initiatives, particularly in the realm of accessory dwelling units. ADUs, sometimes called granny flats, are small attached or detached dwellings erected on the same lot as a primary home. During the half-day ADU Pitchfest, Raleigh officials heard a range of ideas for ADUs, spanning sustainable building practices, new financial frameworks and cutting-edge technologies designed to make affordable housing a reality. 

A diverse panel of judges and a public audience, numbering in the hundreds and filling the venue to capacity, choose a winner: collabADU. While the specifics of all the pitches deserve consideration (read more about them here), it’s important to pay equal attention to the way Raleigh used to generate the innovative ideas that all local governments need, rather than just relying on the same old vendors selling the same products and services they already do.

ADU Pitchfest was organized as a part of a partnership between Raleigh’s Strategy and Innovation Office and CivStart, a nonprofit innovation hub, with support from the National League of Cities and the Marion-Ewing Kauffman Foundation. During the course of the nine-month City Innovation Program, Raleigh officials received training and resources for tackling city challenges with design thinking, a nonlinear, iterative problem-solving process that helps teams dive deep into city problems to determine exactly where the issue lies. With those insights, cities publish a challenge statement that describes the problem they’re trying to solve. Rather than posting a request for proposals that specifies a particular solution, challenge statements allow others to respond with creative ideas.

At this point, it’s worth taking a quick step back and thinking about why true innovation in government often remains elusive. There are many reasons why agencies can’t get creative solutions, but here’s a fresh perspective: an innovation funnel. 

At the narrow end of the funnel is the conventional narrative: A city issues an RFP that targets a very small number of regular vendors. For mundane purchases, like paper, this is a sound approach. But because this method is ineffective for solving complex technology challenges or addressing areas requiring creative problem-solving, it earns governments a reputation for sluggishness and slow adoption of new technologies and ways of thinking. 

The second step up the funnel targets all the vendors the government knows about that can meet the needs outlined in an RFP. This level expands the pool of potential bidders, but even those known smaller and often minority-owned businesses may find the procurement process too onerous or unfamiliar to consider applying. As a result, many local governments are lowering barriers for these potential vendors to get more competitive and diverse responses to their needs. 

Local governments looking for innovative solutions are moving up another rung: trying also to reach the startups and civic entrepreneurs who are outside the traditional targets of an RFP. By using a design-thinking approach and issuing a challenge statement focused on the problem, rather than specifying a solution in an RFP, cities make room for creative responses. 

The final step up this funnel is one that circles back to Raleigh’s ADU Pitchfest. This is where the real creative ideas wait—those that haven’t materialized into businesses yet, but that could solve local government problems. CivStart partnered with the city to help it craft a challenge statement and presented that opportunity to its growing network of startups who apply to newly issued challenges. 

The winner at Raleigh’s ADU Pitchfest was a startup that came together as a new business specifically in response to this challenge statement, the potential to partner with the city to implement it and the chance to win a $5,000 prize to help get the idea off the ground. 

In this way, Raleigh’s Strategy and Innovation Office put itself in the driver’s seat, steering innovation by bringing to life solutions specifically designed to meet the city’s problems, even those as large and intractable as affordable housing. This pitchfest—both its process and winning solution—may help other cities solve similar challenges. What’s more, it brought a full house of public interest to a critical issue and showed residents exactly what their local government is doing to help alleviate housing issues.

We share this success not just as testimony to solutions on a specific issue, but as a call for local government leaders to adopt this paradigm of innovation. By tapping into design-thinking, utilizing challenge statements and hosting their own pitchfests, local governments can join forces with creative thinkers to forge a path to solving some of our most pressing challenges.

CivStart is currently accepting applications for the next Government Innovation Program, which begins in November. Interested local government leaders can apply here.