Why can’t tech solve America’s affordable housing problem?
We recently hosted a roundtable in partnership with Verizon and JP Morgan on “Housing Access & Affordability,” where we brought together policy makers, tech leaders, and development experts. Our goal was to discuss the question, “What role (if any) can tech companies play in tackling the housing crisis?” 

The general conclusion was that no tech company – big or small – is going to solve the housing crisis. Most attendees agreed that the most impactful role tech can play is actively supporting and educating employees about housing policy initiatives. But, while no ingenious tech product or service will single-handedly move the housing needle, attendees identified three areas where startups are (or could be) delivering real value in the housing market.

Crippling college debt, lower real incomes, and limited housing supply means that many consumers can’t afford to buy homes. The median home price in Los Angeles County is approaching $600K, and $1.3M in San Francisco (yikes!). This represents a real opportunity for private business to step in. For example, a new platform called Landed is offering down payment assistance to teachers – with the backing of some large partners. There was also some discussion of new “fractional ownership” startups that are appearing on the market, offering tools to help streamline the process of buying property as a group.

 Unfortunately, helping people buy existing homes won’t increase the supply of housing – which is particularly problematic at a time when the US Federal government is cutting funds to important housing-related initiatives and organizations. That said, we are seeing platforms like Fundrise emerge to drive private capital towards the construction of new housing – the company estimates that its new housing eFund will translate into the construction of between 250 and 750 new homes over the next five years. It doesn’t seem like much of a logical leap before we see tech companies like Neighborly (a crowd-investing platform for municipal bonds, and a Tumml alum) begin to offer investment opportunities in new public housing.

According to a recent McKinsey study, the construction industry is experiencing a serious productivity problem: over the last 20 years, construction labor productivity has grown only 1% a year, compared with 2.8% for the world economy and 3.6% percent in manufacturing. The study identifies opportunities to address this issue in areas such supply chain management, materials innovation, process automation.

One of the roundtable participants noted that a few developers like Berkeley-based Nautilus Group have acquired their own factory to build modules that make the construction process less time and capital-intensive. We also discussed the rise of the “modular housing startup.” The big question around these potential solutions is scale (ie their ability to produce large-scale real estate projects).

Additionally, with the cost of urban land contributing significantly to the expense of new construction, one developer in the room observed that materials and process innovation would have a hard time making a meaningful dent on housing costs – although he’s hopeful! Additionally, many consumers and communities have expressed interest in supporting real estate projects that minimize construction waste and utilize “green” materials and processes – so there could still be good business reasons to start a company in this space.

Ultimately, the panelists concluded that, unless regulations change significantly, there is little hope for meaningful movement on the issue of housing access and affordability. “Third rail” policies like Prop 13 in California, as well as local building and permitting rules, must be reexamined. Otherwise, there will be little need for housing innovations in financing or construction. But no one could point to any technologies that were effectively mobilizing citizens around these issues. That’s not to say there aren’t entrepreneurs out there trying to crack this nut. One roundtable participant observed that harnessing people’s self-interest is key to activating them around housing/new construction policy. We hope to see more companies in this space – using technology to activate constituents to deal with the heart of our housing and affordability crisis.

When considering the housing crisis, the problem is primarily regulatory and the solution will likely require significant civic action. And the tech community has a role to play – as both innovators and just plain voters – in addressing one of the greatest challenges of our generation.

Photo credit: Ian Ransley, Flickr Creative Commons