They are healthier, they last longer, and they look better, too.
After the recent flooding in the Carolinas I wrote that "the typical North American house is not designed to get wet." This is mostly a recent phenomenon since we replaced solid wood and plaster with particle boards and drywall. In fact, for centuries houses have been built of materials that held up a whole lot better than drywall does. Here are a few of them:
Lath and Plaster
Drywall is really a cheap and fast replacement for plaster, which is why in the UK it is called plasterboard. A lot of healthy building designers prefer real plaster because the paper surface on drywall is an excellent food for mold. Plaster also has a smooth, consistent surface. Plaster can be installed on waterproof gypsum lath or cement board, or more traditional metal or wood lath.
This piece of plaster moulding fell off the wall of the Heintzman mansion in Toronto after a fire gutted it during a renovation (I was the architect); it survived that, the fire hoses, and me moving it around for the last 30 years. It is still solid as a rock.
If one insulates outside of the structure (or doesn't insulate at all in really temperate climates), then one can just leave the structural surface. When I renovated my house and rebuilt the rear, I left the concrete block basement walls exposed. In retrospect, I now think I should have used a more architectural block and perhaps struck the joints so that it was more obviously a finished wall.
For example, Watershed makes lovely rammed earth blocks that have a warm texture and look terrific as a finished wall, and use half the cement and have a third of the embodied energy of conventional blocks.
I may not have been crazy about the Sawmill House getting a COTE green building award but I did love the way the exposed concrete block worked along with Olson Kundig's other rough and ready finishes. Pick the right material and you don't have to cover it with anything.
Steve Mouzon, working in Belize, built cabins out of local mahogany, which is too beautiful to cover up, so he just left all the walls exposed.
Fiberglass mat gypsum panels
If you really want that painted drywall look, there are products like Georgia-Pacific's DensArmor panels, "a highly mold-resistant, interior gypsum wallboard. By featuring fiberglass mats on both the front and the back, they offer the best in interior moisture protection currently available." They are also much tougher than regular drywall.
There are a number of alternatives to drywall, but none of them are as cheap and fast. Perhaps if people would trade a bit of square footage for higher quality materials we would have smaller but better buildings that were more flood and storm resistant. Certainly, if we are going to have hundred-year storms every three or four years, we are going to have to do something.