Much has been written about the ability of technology to change our lives. But decades into the digital revolution, the results of technological advancement have a mixed track record at best. Every productivity gain or positive connection brought by new tech, is countered by harms such as hacking, service and product outages, and the unprecedented aggregation of wealth among large tech firms.
These same issues transfer to the real estate industry. Digital platforms like Zillow, Airbnb and Redfin, to name a few, have changed the way we buy, use, and even upgrade or maintain properties. They have introduced efficiencies into the market, like instant property or market research and online transactions, that were unthinkable just two decades ago.
In the best of all worlds, the next iteration of tech-enabled solutions will transform the housing sector in a manner that benefits affordability, economic stability and environmental sustainability.
Out of their reach
Homeownership is just a pipe dream for many Americans, particularly in high cost-of-living areas where many of the best employment opportunities are concentrated. This is not an issue of lack of new construction or population growth (many luxury projects are being built as we speak). This is an issue of insufficient affordable developments being built. Most new construction is simply out of the reach of the vast majority of home seekers.
Technology might offer a possible roadmap to transforming the development and construction of housing for investors or developers interested in building affordable housing solutions.
Alternatives to public policy solutions
Often affordable housing solutions are found through public policy such as subsidies provided to make these projects viable. Rapid technological adoption has not traditionally been the strong suit of governments. While there are some key policy levers our society could pull to use technology to improve housing, it is more likely that the biggest shift will come from the market side through applying technologies. Mostly these technologies have not yet penetrated the housing sector compared to other industry sectors. Entrepreneurs who are willing and able to apply business and technology innovation to the housing market will be a major contributor to the eventual solution to this crisis.
It makes sense that venture capital funds and other large financial institutions are at the forefront of tech-enabled problem solving in the housing market. While these solutions can be expensive, they are often built to scale in a way that could fundamentally alter how we envision, develop, build, and offer housing to consumers. These technologies can help shift focus to expanding homeownership and increasing affordability.
The question is, where are the entrepreneurs who are ready to embrace and implement these solutions? Transportation had UBER’s Travis Kalanick. Hotel disruption came in the form of Airbnb by Brian Chesky, Joe Gebbia, and Nathan Blecharczyk. Many other industries have technology-focused entrepreneurs with the vision and ability to force market incumbents and regulators to adapt to changing realities in the way we distribute and consume services and goods.
Potential solutions offered by new technology are limitless. Equity crowdfunding platforms have only existed since 2013, and now they connect many investors across the country with socially driven developers. Technology can also help to drive costs down- and the less it costs to build a development, the more savings can be passed on to the end consumer.
When projects become more affordable, they have a better chance of finding the funding needed to come out of the ground. These are just some obvious solutions. There are many other opportunities for entrepreneurs to use digital technology to reach their affordable housing goals.
With a shortage of 7.4 million affordable units across the country we need housing solutions today, not tomorrow. To satiate the demand, we’ll need to add 400k net units per year over the next decade, assuming population trends and housing demand growth remain stable. We are collectively already suffering from a lack of housing availability. Technology has helped lower the cost of services and goods across a broad variety of sectors – it is time for the real estate industry to catch up to the rest of the pack.
Image of Housing Tech Ventures home page.