Initially focused primarily on luxury homes, proptech is now making a name for itself in multifamily at all levels. Technology solutions span every phase of a building’s lifecycle, from planning to managing the completed community. The impact of proptech can be vast, from ease of living to sustainability.
One area where proptech is likely to bring immense change is the affordable sector. Today’s solutions can significantly reduce costs for residents and owners. Proptech is already making a contribution by reducing costs for residents and owners, but great potential remains untapped.
Addressing affordability
Proptech startups addressing construction, ESG and operational needs are emerging in the multi-family industry. Proptech can improve housing affordability in multiple ways, during planning and construction and during operations.
“Equipping these buildings with connectivity backbones will enable proptech solutions. The ones I find very interesting are focused (on) energy efficiency and carbon footprint reduction,” Aki Karja, director of proptech at Fairstead, Told Multi-Accommodation News.
Fairstead has made sustainability-focused proptech investments. A, Environmental power, is a boiler technology that can help large communities efficiently heat water and generate electricity. By implementing such systems, affordable community landlords can reduce expenses and, in turn, lower rental prices.
A proptech designed to reduce costs for residents and owners is Matterport, a spatial data software currently in seed funding. The solution reduces virtual space component costs by digitizing buildings with 3D cameras and virtual tour software. Matterport reduces construction time and project costs by approximately 30% by allowing the team to access the site from anywhere. The software can also reduce travel time and costs for potential residents by eliminating the need for on-site visits. It also reduces carbon emissions.
Another impactful site capture solution is Open space, which enables offsite monitoring, progress reporting, problem identification and other tasks. The software is already sophisticated enough to enable rapid adoption across projects, a progression in proptech that will likely have an impact shortly.
A platform, provided by Mosaic, a general contractor, coordinates between owners and trades, suppliers and subcontractors to improve schedule and production efficiency. The faster the build, the more money is saved, maximizing the developer’s return on investment upon release.
“We are coordinating hundreds of units in production at any one time across multiple businesses and piling things tighter and tighter to reduce costs for everyone,” said Ron Gonski, vice president of development and growth. business at Mosaic. “At the end of the day, time is a lot of money.”
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Yet another technology addresses the needs of individual tenants, rather than the affordability of the community as a whole. Gravy helps residents save for a down payment on a home and earn rewards on the rent they pay.
Although most of these proptech software solutions are not specifically geared towards affordable housing, each of them has the potential to push the market towards affordability. At the intersection of proptech and affordable housing, the market needs solutions that directly address costs.
“It’s about understanding where your employees are spending time, in terms of costs, and figuring out how to use technology to augment what they do and replace their most tedious tasks,” observed Jenny Song, director of Navitas Capital.
Once a project is complete, most operating costs go to people. Technology can reduce operating costs by automating certain tasks. MeetElise, to name just one, is a virtual rental assistant that can conduct virtual conversations with residents and prospects.
Proptech augmenting pre-existing roles saves owners on operating and personnel costs. It also increases opportunities for staff to grow professionally without getting bogged down unnecessarily in routine tasks. To make housing affordable, proptech must continue to tackle the areas where landlords and property managers spend the most.
Structural change
Proptech solutions already on the market address issues that can drive up rental prices, but many are still relatively marginal in terms of cost impact.
“If we’re really going to have a structural impact on housing affordability, we have to look at construction,” Song said.
Technology could help reduce costs by making building permits more effective and efficient. Although this area of proptech is still largely experimental, it has enormous potential. The overlap of proptech and government technology could also help streamline processes that slow construction.
According to construction labor market analyst, labor accounts for 20-40% of construction costs. The intersection of proptech and education technology can reduce these costs. With a more skilled workforce, labor costs come down, but the market faces the challenges of a labor shortage and an aging workforce. Construction needs skilled workers to keep up with demand, and proptech can help fill the gap.
Another potential area for proptech to make affordable housing more accessible is in the manufacturing process. Manufactured homes and 3D-printed houses could make a significant difference to the housing shortage in the United States; however, these large-scale systems require time, effort, and research to build. With a larger pipeline of manufactured home manufacturers and distributors, along with more efficient off-site construction techniques, the cost of building multi-family communities would drop significantly.
“You have things like transportation costs that are not, at this time, sustainable to get a lower cost than locally constructed buildings,” Song said. “Having said that, I think there’s still huge potential there going forward. We’re seeing more and more software-focused companies that don’t necessarily own the whole process, but say that they will help to facilitate certain steps.
It is difficult to create more affordable building strategies and platforms while meeting the return goals of investors and owners. Proptech solutions, however, offer the potential to achieve both goals. “Where I think the greatest potential for cost reduction is in some of these different business models, like ours for example, but also in the area of prefabricated homes or advancements in materials,” Gonski said.
Barriers to implementation
Proptech, compared to other technologies, lags the rest of the business world by a decade. This is not due to a lack of know-how but because proptech can be difficult to deploy in real estate.
“One of the challenges in construction is the adage that it’s an (industry) where it’s hard to drive the adoption of new technologies,” Gonski noted.
Often, owners invest little or nothing in communities before selling, instead focusing on operational changes to reposition the asset. When proptech is not implemented during these retrofits, finding the right technology for full-line retrofits can be costly and difficult.
“I think a lot of access control is already happening at the high end,” observed Karja of Fairstead. “There’s also a lot of decarbonization and electrification at the high end. You have these market-priced buildings that have sophisticated building management systems that are much easier to deploy.” The deployment of proptech is particularly difficult in affordable housing, as many legacy systems are present.
Margins for retrofits that include proptech can be particularly tight in affordable housing. The government subsidizes many affordable housing rebuilds through tax credits, so once ownership stabilizes, there’s even less room to fund renovations.
“At PEF Advisors, we have not pursued proptech because it is not yet profitable for our affordable housing strategy,” said Richard Bennion, senior vice president of capital markets at Preservation Equity Fund Advisors.
Although many affordable housing owners do not yet have the bandwidth to include proptech solutions within their communities, with more solutions on the rise and ideas circulating, we are sure to see future changes resolved. in industry.
“I think technology is the only real hope we have to really push accessibility forward. It’s a long-term solution,” Gonski said. “I’m really excited about the attention to space now. I think it’s long overdue, and I think it’s still young and we’re just scratching the surface of what’s possible. .
Read the November 2022 issue of MHN.