In the past decade, rents have skyrocketed 47% with the cost of living topping $1,250 (without rent) in Canadian urban markets. No matter how much money is saved by living frugal, it’s still difficult to pay off next month’s rent or mortgage.
The biggest obstacle of it all is, we don’t know what’s ahead of us. We are at the whim of the economy that insists on having a 30-year loan on our future home.
So the question stands: can technology help break the current cycle and support innovative ways to create more access to housing?
In sponsorship with CMHC, Skyline hosted its first of many online sessions as a build-up to their scheduled conference on May 18, 2021. Hosted by August’s Andrea Diamond, they welcomed Michelle Killoran, VC from OMERS Ventures, Brad Bradford, City Councillor for Ward 19 Beaches-East York for the City of Toronto, and Atul Bhatt, Advisor for the Innovation and Policy team at the Canadian Mortgage and Housing Corporation (CMHC) to the digital stage. The session brought together stakeholders that have viewpoints in government, real estate development, investment and technology to discuss how technology can help provide more access to housing.
Here are a few key takeaways from the session.
Companies being proactive towards affordable housing
Having recently opened an office in the Bay area, Michelle Killoran from OMERS Ventures witnesses a ton of startups that have grand aspirations to impact affordable housing. However, are these companies proactive in their approach to housing, or is there something that companies are not considering when they’re attacking such a nuanced issue in today’s market?
Michelle’s take is that companies have the challenge of educating the consumer on what their product or service is, especially when there are various financial models in housing. The most important aspect is having the consumer understand what these companies provide and building that trust to others, so being able to build that message around companies attacking affordable housing plays a huge part in what they’re trying to solve.
Can tech help builders get incentivized?
Builders talk about taking all the risks of building a home and producing margins on the sale, earning monthly revenue for the life of the home. Are there tech solutions to incentivize builders to plan their long-term investments based on their income?
Atul Bhatt from CMHC sees that builders tweak their business model to allow for a long-term view of keeping housing affordable, building community and equity at the same time, also generating long-term returns for themselves. However, he believes that it’s on the builders to try and innovate their own business model. Where there is a gap, there’s an opportunity, and Michelle does believe that there is a ton of innovation. She sees companies disrupt the transactions by integrating smart home technologies for builders to constantly get recurring income on top of the monthly revenue for the life of the home. However, it’s up to builders to be innovative on their projects.
The future of prefabricated housing
The innovations around construction are incredible, and having the discussion around modular and prefabricated housing is vital for the future of the sector. Reducing the cost of construction is key to making it efficient, but are the savings ultimately passed down to the renter at the end of the day?
City Councillor Brad Braford’s take is that the promise of modular and prefabricated housing breaks when the construction cost is more than what builders think. He sees it going down as the market matures, but the real savings on prefabricated housing is the time to deliver the projects. Expediency is critical because builders are not saving weeks, but months and years in the delivery of these projects, and so much of the performance is based on their financing. Brad believes that the industry as a whole needs to think about prefab and modular as the future of construction, and in terms of the time savings, it makes it much more competitive to keep the promise of completing a new development on time.
The demand for social impact-oriented investments
After Atul Bhatt’s opinion on the struggle on affordable housing, Andrea brings up a great point on discussing the possible investments on social impact-oriented prospects. Is there more demand for these companies to drive the housing market?
Michelle knows that housing tech is a major interest on the VC side. Companies like Landed have a mission around helping workers purchase homes, and it’s definitely a focus that is important when looking at companies, but it’s still important to be financially sound with profit and growth as a target to attract investment. Social impact has a broader interest across all investments, and it’s something that Michelle and her team are taking into consideration.
If you have not yet watched the entire recap of Skyline’s first session, be sure to watch it here to get the whole picture. Also, don’t forget to register for our next event, The Prefab Modular Housing Revolution, on November 5.