New Developments: Disrupting Affordable Housing
By Thom Amdur
4 min read
Our world is in the midst of disruption. Uber and Lyft have disrupted the transportation industry, Google has transformed search and advertising, and Amazon has reshaped how we shop. In 2007, Apple released the first iPhone and ten years later, these and other powerful mobile computers are now carried in the pockets and purses of a billion-plus individuals and have transformed how we work and communicate.
But real estate development and affordable housing remain old-school legacy industries ripe for transformation and disruption. I believe our disruption will come in the form of new building methods and technology and by embracing big-data.
Though an industry where half of the cost of construction is associated with time and labor, we are still largely building properties the same manual-labor-intensive way we did 100 years ago. Modular construction and the use of prefabricated products, like structural insulated panels (SIPs), are dramatically accelerating the timeline for building and reducing both waste and the number of trades people needed for building sites. SIPs are customizable and built-to-order in a factory-controlled environment, incorporate insulation, wiring and plumbing and as a result have significantly higher insulating properties that reduce utility bills and have far lower total life-cycle costs than conventional framed construction. The advent of low-cost 3-D printing technology, low-cost sensors and virtual reality imaging has the potential to dramatically improve the operations and maintenance of our building systems. It won’t be long before most spare parts can be printed on-demand and on-site. Soon sensors and VR imaging will be ubiquitous enough to allow off-site experts to diagnose problems remotely, allowing for more timely and cost-effective interventions.
With the “algorithm” providing Google’s secret sauce and data scientists now ruling on Wall Street, clearly there is big money in big data. Collectively, owners of affordable rental properties are sitting on a trove of accounting, operating, utility, compliance and construction data. But very few firms in our industry leverage it.
For most developers, data is not incorporated into an integrated database and as a result we analyze past data to see what has already happened. Once there is a comprehensive data platform and more analytics professionals, owners will have the advantage of predictive and prescriptive analytics where they can review past data to see why something has happened, predict what will happen and determine which decisions will produce the best results.
Within the NH&RA membership, a small but growing number of owners are on this path, investing in data management products, like MRI Developer Central (formerly Integratec) or building in-house databases connected with analytics tools, like Stata. At a recent conference hosted by the Consortium of Housing Asset Managers (CHAM), I learned that additional lower-cost data management products are being rolled out by NeighborWorks and Nuestra Communidad.
At our NH&RA Asset Management Conference in June, we hosted a discussion entitled, “Custom Data: How Portfolio Managers are Customizing Databases and Reporting to Streamline Processes, Cut Expenses and Boost Revenue,” in which speakers identified numerous opportunities where they could decrease expenses, add revenue, increase the velocity of their efforts, forecast future performance, identify risks and underwrite new transactions utilizing big data to transform their businesses for the future.
Let’s not replicate the mistakes that busted Blockbuster, which had a successful brick and mortar business with over 9,000 locations across North America and Europe that dominated video rentals for almost two decades. But when upstart Netflix launched its DVD-by-mail service in 1997, followed by movie streaming in 2007, Blockbuster reacted slowly and eventually filed for bankruptcy in 2010. Meanwhile, Netflix thrived because it did not rest on its laurels. It invested in streaming technology and leveraged its trove of data subscriber rental history to pivot to an entirely new business of creating original content based on its users’ preferences. Blockbuster was so attached to its legacy business that it failed to embrace technology until it was too late.
Reaping the benefits of next generation technology and analytics strategies for any business is not quick or easy. But to remain successful, it may be necessary to change the business model and even the very culture of an organization.
