Can real estate tech help tackle affordability problems?

May 24, 2019

As the tech industry increasingly seeks to "disrupt" the real estate sector, one area that may get more focus in the near future is the actual cost of homes in many markets. This is something agents would be wise to familiarize themselves with in the months and years ahead, as such developments could significantly impact the industry as a whole.

With prices having risen for more than seven years straight, and seemingly no end in sight since they're still appreciating at well above historical averages, affordability has been a watchword in the industry for a long time. More recently, tech startups are trying to help the real estate sector unlock the affordability puzzle, while of course trying to get a piece of the trillion-dollar industry, according to Tech Crunch.

What's the plan?
This may be particularly possible by bridging the affordability gap for the tech-savvy Generations Y and Z as they approach and pass the typical age at which people tend to buy their first homes. These are generations who earn far less than previous generations of shoppers did at the same age (on an inflation-adjusted basis) and who are simultaneously saddled with significantly more college debt.

Some tech companies are trying to leverage data to help make existing homes more affordable in high-priced areas where young people make up big parts of the population (such as New York or San Francisco) or by opening up properties as rent-to-own propositions for low-credit consumers. Others are trying to use advanced robotics to produce pre-fabricated houses at a lower cost than traditional home building.

Is it viable?
The question surrounding all tech startups is whether the idea they're presenting is viable, and unsurprisingly - because of the sheer value behind the prospect of disrupting the industry in even a small way - investors are willing to bet heavily on many emergent ideas, according to Curbed. Many startups are now receiving seven- and eight-figure investments from venture capital firms that see the value inherent in the sector as a whole.

But where affordable housing comes into it is interesting, because right now data suggests the market is more than 7.2 million homes short of the needed number of affordable units. Companies are looking for ways to make existing norms in the industry a little friendlier for people who need low-cost housing. That could be in boosting co-living opportunities, or finding better ways to analyze things like zoning rules. However, due to the tech sector's occasional tendency for self-aggrandizement, some within real estate and tech itself are wary of how much progress can be made.

"How do we contrast between the hype and bravado that often comes when applying a tech lens to a certain industry, viewing tech as a savior, with the thoughtful process that tech can enable?" Matt Hoffman, vice president of innovation at Enterprise and managing director of its HousingTech Ventures, told Curbed.

Certainly, real estate professionals would be wise to monitor these issues as they emerge, given that there may be many attempted disruptions that could end up impacting their day-to-day work.