The Rise of High-Tech Real Estate Investment Platforms and Their Impact on Housing Affordability – GeekWire

Real estate technology startups are making it easier for people to invest and manage property. But critics argue that these software companies and their business models are improving scarce housing in the process, driving up costs and pushing out first-time buyers.

Tram Tran-Larson, Community Engagement Manager for the Housing Justice Project, a Seattle-based legal aid clinic, provides eviction prevention for low-income renters and encourages beneficiaries to invest in multiple properties while taking on the already difficult housing stock. It is part of the King County Bar Association. This will increase the cost of the available housing, she added.

But researchers argue that the lack of affordable housing has to do with limited supply, not the proliferation of technology-enabled real estate investment platforms.

“The fundamental problem with housing supply is long-term,” said Shahriar Bokhari, senior economist at real estate giant Redfin. “If you had a house for everyone, you might not be on the market because the investors wouldn’t be interested.”

Arrived Homes, a Seattle-based startup that offers fractional ownership of rental properties, has secured nearly $50 million in real estate financing. That equates to about 150 properties in 20 U.S. cities, said CEO and co-founder Ryan Frazier.

“I really understand their criticism, especially with housing prices going up,” he said of the push on real estate investment platforms. “We certainly don’t want to take away from people who want to buy a home that they want to live in.”

It has reached around 100,000 people currently registered for the service, with around 10,000 users actively investing. On an average, there are 200-300 investors per household.

Frazier added that there is an equal need and demand for quality rental housing, especially as the cost of borrowing continues to rise and more home buyers are moving more frequently.

James Young, director of the Washington Real Estate Research Center at the University of Washington, said that while there are real estate investment applications, there is always a high demand from investors interested in buying real estate as an alternative asset.

“Should we blame the personal computer for rising home prices?” he asked.

Factors such as rising housing costs and a slowdown in housing construction have made it difficult for many Americans to afford a home. There was also a lot of property investment during the pandemic as investors took advantage of record-low mortgage interest rates.

70% of Americans say they have a harder time buying a home than their parents did, according to a survey by Pew Research. The median home price in the first quarter of 2022 was $428,700, according to data from the Federal Reserve.

Investors accounted for a record 28 percent of U.S. single-family home sales in the first quarter of 2022, according to a recent report by the Harvard Center for Condominium Research. That’s “well above” the average market share of 16 percent between 2017 and 2019, the report said.

According to data provided by Redfin, the market share of investor-owned homes is growing steadily in Seattle and Portland, where investors own at least four properties as a person or business.

In the first quarter of 2022, investors accounted for 10% of Seattle’s total housing supply, compared to 3% in the first quarter of 2000. Portland’s share of the investor market rose from 7% to 12%.

Market share growth in the Pacific Northwest has been subtle compared to investor activity in the Southeast, with investors in Atlanta, Jacksonville and Charlotte accounting for more than 30% of home sales in the first quarter of the year.

Redfin economist Bokhari said investors are boosting spending in places like the Southeast, where private equity and Wall Street firms are buying more assets. In contrast, real estate investment startups have relatively little impact on supply, he said.

He said he often feels frustrated at the small scale of real estate investment startups. These investment platforms often bring money to the table and have the ability to sell to first-time buyers, he said.

“This basically gives them an unfair advantage because they raise more money and have more bargaining power,” he said. “Given the state of the market, it creates frustration for the average American consumer.”

In King County, home buyers are sometimes paying $100,000 to $200,000 in asking price, Tram-Larson said.

Asked about competing with first-time home buyers, Frazier said he often avoids bidding on properties he would otherwise own.

Young, the UW director, said investing in real estate is different from investing in other assets such as stocks or bonds because of the similarities between assets. Each property comes with its own set of problems, takes up physical space, and has utility. This means that real estate assets will not be released easily, he said.

“You can raise all the capital you need in real estate markets through an application,” he said. But that still doesn’t mean you can close faster than anyone else.

Shikelkim Kelmandi, executive director of the homeless nonprofit Housing Connector, doesn’t see real estate investment startups as a threat to affordable housing.

“Innovation isn’t bad,” he says, having recently partnered with Zillow to launch a tool that helps private property owners and landlords rent to people experiencing homelessness.

He said that his company is interested in working with them to solve the vast housing problem in our country to create real estate investment startups with large scale and bandwidth to create social impact.

“Are there ways we can leverage or collaborate with some of the new companies and this innovation that’s still on the street to meet demand?” he asked.