How Proptech Will Help Renters Navigate The Next Recession


The coronavirus pandemic has plunged the Dow Jones into bear market territory, led to worldwide travel restrictions and forced the shutdown of nearly all major gatherings. Now, 95% of Americans are being ordered to stay at home.

In the middle of a crisis, we must do our part to “flatten the curve” of infection and follow the guidance of public health officials. However, we must also keep in mind that the economy will recover, and we will make it through this trying time together.

Many remember how scary things were after 9/11 and recall the very real pain that was felt as millions of people were laid off during the Great Recession a decade ago. We must also remember that we made it through those challenging times. While we emerged from the last recession with an 11-year bull run in the market, the gains in the economy were not equitably distributed. There was a $60 billion wealth transfer from Main Street to Wall Street in the housing market; a contributing factor to a widening wealth gap in America. With that in mind, it is imperative that on the other side of our next recession, we don’t just get back to business as usual growing the economic divide.

Innovation in real estate ownership is sorely needed. Realizing this, a crop of fintech and proptech organizations, a group our company is proudly part of, are working to improve our country’s housing by applying new products, services and business model innovations that can help put housing within the reach of more people.

Not All Recessions Are The Same

As anxiety spreads and a recession appears likely, it’s hard to fault anyone for wanting to hunker down with fear for the worst. However, while it may be tempting to brace for another total collapse like in 2008, when the financial crisis and housing bust caused a massive transfer of housing wealth away from the pocketbooks of everyday Americans, things may be different this time around. The housing market is positioned to perform well during the next recession.

In 2008, the implosion of the housing market led to a broader economic decline, not the other way around. There’s a strong case to be made that today’s housing market will be relatively insulated from shocks to the broader economy, not only because home prices have proven to be resilient in past recessions (with 2008’s being an exception), but also due to several key structural differences in our current market.

In addition, our government institutions are working quickly to stabilize the market by passing large stimulus packages, granting a mortgage forbearance to owners of multifamily properties, lending billions of dollars to small businesses and providing relief to homeowners.

Democratizing Real Estate Ownership

While the next downturn may not affect real estate in the same way as the Great Recession, we are still at risk of more wealth being concentrated in fewer hands, with fewer people buying homes.

However, in a reversal of previous trends, new products and services are allowing people to have more access to the upside of real estate. The emergence of a “rent to earn” market, where our company has taken root, is an exciting development that turns rent into a vehicle for savings and ownership. Variations make renting more financially rewarding by providing renters with a vehicle to earn a return from where they live.

“Rent to own” is one option in which a home is rented for a certain amount of time with an option to buy it. A portion of the tenant’s rent payment also earns equity that can be used toward buying the property. Separately, with renter ownership (or “rentership”), a renter’s stake in the property can be bought and sold, or held for longer to participate in the financial value of the property. It’s a modern solution to fractional ownership through which renters can become stakeholders in the buildings in which they live. These venture-backed solutions give renters the flexibility of renting while capturing some of the value of ownership.

A Wave Of Venture-Backed Companies 

The technology industry is well prepared to bring this much-needed change to the housing market. Venture capital (VC) firms raised $46.3 billion across 259 vehicles in 2019, reaching the second-highest annual total in the past decade. When VCs raise capital, they typically need to deploy it within four years into new companies. VCs also reserve capital to provide follow-on funding for portfolio companies throughout the 10-year duration of each fund’s existence.

Even if a recession is imminent, lots of capital will be put to work, especially in companies that are able to perform well during a downturn. So while large incumbent businesses are cutting back, startups will still be investing in and creating the new economy. And, much of this investment is likely to be put to work by fintech and proptech companies.

Why Now?

It’s critical that after the next recession, the average person participates in the market comeback. Research shows that “the ability to buy and own housing, much more than income or any other source of wealth, is a significant factor in the growing divides between the economy’s winners and losers.” Democratizing real estate this time around is about more than turning renters into owners — it’s about granting access to the benefits a home can provide. In a time when the average American can’t afford a $400 emergency, this is more important than ever.

While it’s interesting to ponder how markets might develop, it’s important to pause to recognize the significance of this moment in our collective history. We’re living through a pandemic. However, we can still look ahead and plan for our future. It’s during times of market instability that we have the greatest opportunity to change our institutions and lay the groundwork for a more equitable society. Let’s not miss that opportunity this time around.



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