Tag Archives: technology

Technological disruption of the housing market

There has been no lack of talk in the past few years about the potentially disruptive effect of technology across a range of areas. The effect on the music industry, as well as the demise of the video store are well documented, as is the supposed risk of automation to various vocations and professions.

What there does not seem to have been so much of, is a discussion of how technology might disrupt the housing market. The kind of disruption that I am thinking of is not primarily captured by the rise of apps that facilitate transactions between vendor/landlord and buyer/tenant. This might disrupt the real-estate business. What they do not do, in my opinion, is disrupt the fundamental basis of supply and demand of housing.

What I am going to sketch, very vaguely and hastily, are two ways that technology could disrupt the housing market. One relies on changing the nature of the transaction, the other on a more profound disruption of how people relate to their homes. The likelihood of either of these occurring, as well as the potential ramifications, is as much a question of politics as technology.

Disrupting power relations in bargaining

Apps such as Uber and Airbnb function to take out the middle-man – exposing buyers (and sellers) to unmitigated (or less-mitigated) market forces and individual bargaining. The residential rental and real estate market is not dissimilar. Or that is how it can appear to people on the buyers’ side. If you want to buy a house, or rent it, you face the market forces that influence the price, and then you bargain with the seller. I say ‘bargain’ – in Australia, as a renter, the main bargaining that occurs is for potential tenants to offer to pay more for a property, such is the level of rental housing scarcity in some areas. In the end, you need somewhere to live, and it has to be close enough to your place of work/study etc. Your landlord, and the real-estate agent acting on their behalf, is much less likely to have this same problem. Hence, even if you have a long record of perfect tenancy, you are bargaining from a position of such weakness, that any concession is vanishingly unlikely. This situation contributes a range of undesirable outcomes – ranging from housing stress to pressure on animal shelters as people are forced to give up their pets in order to gain tenancy.

How could this power relation be disrupted?

What if there was the rental equivalent of an ‘anti-Uber’ app? I mean this in the sense that it allows buyers, i.e: renters, to somehow collectively bargain against individual sellers.

I haven’t figured out what the methods for collective buyer bargaining would be. But a few things spring to mind:

  • Buyer rating – buyers indicate the price they wished to pay for a service, and then report on the outcome.
  • Buyers collectively decide (through peer network or whatever) what they feel the acceptable market price is. Note that sellers can’t be part of this network, lest they artificially inflate the price.

Either way, the system has to allow for the power of the collective of buyers to be brought to bear against the individual sellers in some way, (as well as sellers’ collectives). Thus an Uber driver, landlord, or vendor who sets the price unreasonably high needs to expect a loss of business from the buyers’ collective. For example, the buyers’ collective has decided, by as yet undetermined means, that the price for a given good or service is $100, but an individual vendors sets their price at $110. What the seller can (somehow) expect is less business from the buyers’ collective. Thus they are encouraged to keep prices as low as possible, even if some buyers are not part of the collective.

Where this might not work is in the case of seller’s markets where the good or service is scarce, and that good or service is essential – i.e: housing in much of Australia

In one sense, the effectiveness a renters’ collective might be stymied in a situation where renal property vacancy rates are low and property prices are high – people need to live somewhere. But where geographic concentrations of collective members are high, landlords are stuck too – especially if they need someone to rent the house in order to maximise the tax benefits of negative gearing as occurs here in Australia.

So it might be that the renter’s collective would need to provide some benefit to landlords. If there were, for example, some reason why a landlord might choose a collective member for a rent of $300 per week, rather than a non-member for $310, then we might have something. Obviously, the renter’s collective can supply a ready source of tenants. Whether or not they would be good tenants is another question. The interests of most members of the tenancy collective would not be served by having members who were bad tenants – they have to be at least as good as the average tenant in the eyes of the landlords & property agents – probably better. Thus the renters’ collective needs some way of managing this that is not prone to being gamed by the rent-seeking property owners and those who profit from them.

As I said, I have not worked out the details, but the bones of the idea are there, and I think it would be worth exploring.

Disrupting experience

There is another way that we may disrupt the housing industry – by disrupting our experience of the reality of where we live. This will not change that people have to live somewhere, but it could change where they choose to live, which could alter the kind of real-estate that experiences relatively high demand.

I was thinking about disruption and evolution of the music industry. In the past, people bought vinyl LPs, then cassette tapes and then, more recently, compact discs. Now, we download information, and our programs turn that information into the music we hear. If the thing people really wanted was circular vinyl discs with grooves in them, then the aforementioned innovations would never have been commercially successful. (Though some people do still buy LPs). Rather, what people wanted to pay for was the experience of the music. The disruption occurred when we minimised the physical object or token that had to move in order for us to have that experience.

How does this relate to housing? Surely real estate must be immune to disruption? You can’t digitize reality. This thinking is still in the mode of ‘vinyl discs’. All, or at least many, of the things that people want from housing can be thought of as experiences they want to have. All, or most, of these experiences could be provided by a properly developed Augmented Reality (AR) technology, especially if it includes a haptic interface.  Want to see great water views when you look out the window? Done. Want a view of Winterfell, Minas Tirith or Corasant? All achievable. A bathroom of finest marble? No problem (so long as your AR interface is waterproof).

You could have the illusion of living in a palace, or even outdoors, so long as you don’t walk into your physical walls, and your AR interface is more or less permanently glued to your head. The problem of interaction with the physical location can be overcome with good programming, and the likelihood is that the AR interface will be as unobtrusive as is technologically and financially viable, so don’t scoff too soon.

You could even have the illusion of continuity, security and ownership. If you have to move to another physical location, your digital home can go with you, so long as you don’t fall so far into poverty that you can no longer pay for the access to it. (Perhaps the fee will be pegged to the universal basic income?)

This second scenario seems a long way off – and that might be the case. But it is certainly conceivable. What effect would such innovations have on the housing market? I find this hard to predict. For example, a view of the ocean must surely be worth less when it is no longer restricted to those lucky or wealthy enough to live in certain geographic locations. On the other hand, there are people who will always pay a premium for the ‘real’ thing – just like the people who still buy their music on vinyl. What proportion of the population will fall into this category remains to be seen. In theory though, with an excellent AR setup and some clever programming, any utilitarian box with air conditioning can appear, to its occupants at least, as the home of their dreams. I find it difficult to image that this would have no effect whatsoever on the housing market.

So there is it, two very different ways that I imagine technology could alter the housing market. Both have technological, social and political impediments. An app that enables an effective collective of tenants is technologically viable right now, but would be politically unpalatable in any country where landlords and rent-seekers are so well-connected to politicians, such as is the situation in Australia (where they are often one and the same). An augmented-reality system, capable of the feats I describe, is some way off – though it could be as soon as years, rather than decades. The point is that the bricks-and-mortar side of housing may not be as immune to disruption as people think.

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Degrowth, Innovation and ‘Big Stuff’

There have been a range of responses to Dr Samuel Alexander’s recent article on The Conversation: “Life in a ‘degrowth’ economy, and why you might actually enjoy it”. This post started off as my comment, but it got a little longer than anticipated. I think that I can appreciate why some people are worried about the concept of ‘degrowth’ – it’s not necessarily for frivolous reasons. Here are my doubts, and my assessments of them.

Without really thinking about it, I almost instantly nurtured a concern that a degrowth or steady-state economy might curtail the likelihood of societies reaching, or even aiming for, certain future technological or intellectual achievements. Perhaps the world might never have truly global high-speed broadband. Fusion power stations? Unlikely. Forget about the space elevator, moving to Mars or holidays on the moon. In fact, forget about space pretty much altogether. There will be no quantum home-computing, miraculous nano-tech, radical life-extension, mind-uploading, strong AI, cyborgs, vat-grown replacement organs, gene-tailoring, or full-sensory VR/sim-stim.

Intellectual and scientific achievements, or more precisely, the people and institutions who enable them, would seem to require certain amount of resources. Having people study full-time for eight to ten years and then spend the rest of their working lives thinking, researching, doing experiments with specialised equipment and/or really hard sums etc. must cost quite a lot, both in terms of money and energy. In a situation of scarce resources, academia might not look like a good investment to everyone. And if we do exist, are we going to have to make do without whiteboard markers? How am I to run a lecture if I can’t do a PowerPoint presentation (and then post it online so that students don’t have to attend anyway)?

The more I thought about this though, the more I began to suspect that my fears are at least slightly misguided or without the ethical weight that I had subconsciously attached to them. My responses to these worries fall roughly into 3 categories.

1. We are not really working towards these technological achievements in a meaningful or effective way in a ‘growth’ economy. So it’s possible that degrowth would not be the relevant causal factor that would stop them from happening.

2. We might still do these things still anyway and could if we really wanted to.

3. There might be some things that, for various reasons, we shouldn’t do, so not doing them would be a good thing anyway.

Response #1 stems from the concern raised by Neal Stephenson in his 2011 article, Innovation Starvation (and that Project Hieroglyph seeks to address). “Where’s my donut-shaped space station? Where’s my ticket to Mars?” asks Stephenson (2011). Likewise he (correctly in my opinion) points out the stagnation and vacillation that has limited progress in moving the U.S. to non-oil energy sources. (The same observation could quite plausibly be argued with coal in Australia.) The point here is that many of these innovations are not even on the drawing board and if they are, they are subject to the fickle nature of short-term commercial considerations. If we accept that economies that are both wealthy and growing do not necessarily “execute on the big stuff” (Stephenson, 2011), then we have less reason to think that less materially ostentatious steady-state societies will fail to deliver. The idea that we can only send rockets to the moon if the economy is both growing and strong does not necessarily stack up.

A similar thesis regarding academia might be defended as well. This is a bit less well developed and does not apply everywhere, but it is basically that having a wealthy, growing economy does not translate into more resources for higher education and research. In fact, depending on the government of the day, it can sometimes produce a reduction in spending on these areas.

If growth isn’t helping, then degrowth might not be such a problem.
Response #2 follows from this. An economy with less resources is not an economy with no resources. We just might have to be selective about what we try to do. It might also be that there has to be a change in how the economics of certain grand projects are construed. If we cannot borrow against the future and wait for our debt to be inflated away, then a different approach will probably be needed. There is a limit – obviously. But we would still have a lot of people, knowledge and a planet full of resources, and that has to count for something.

Similarly, academia and research need not be curtailed. We can probably still find the money if we really want to. And who knows, if there are no more PowerPoint presentations, perhaps our lecture halls will be packed with students once more. It should also be noted (if I wasn’t making it obvious enough already), that intellectual achievement and material wealth are not necessarily linked. True, that’s easy for a philosopher to say – I just need something to keep the weather and wildlife away from me and to be fed at regular intervals. But the same is likely to be true for at least some other academic disciplines. Activities that are more resource intensive (regardless of their nature) are going to require a correspondingly high level of political/societal consensus. This will mean convincing people that we need to channel a large chunk of their real resources (directly or not) into these projects. People will need to appreciate why this is important. So, somewhat radically, we might have to have a population that is better educated than it is now in order to convince them to support the building of a supercollider or space-station. Importantly, people will need to be able to see the potential benefits and accept the potential risks. If you cannot convince a society to support your project, you can always fall back on the observation of ‘givens’ as Stephenson’s ‘avout’ do in Anathem.

Response #3 is a bit more complicated and does not apply to academia so much. What I’ve put here is just a sketch and does not address the full nuance of such an idea. What I am not doing is passing judgment on space exploration or any of the other potential future technologies that I mentioned earlier.

In one sense, to say that there are some things we shouldn’t do is a bit of an over-simplification. Rather, I would say that there are some things that we really should think very carefully about before we commit to doing them. Now, if we were in a steady-state economy, we could not avoid this as easily as we do now. I think that one of the results of present-day economics and politics is the ability, both individually and collectively, to not think about what we are doing, why we are doing it and where these decisions might take us in the future. So we still might have fantastically advanced but dangerous nano-tech. But only if enough people so convinced of the risk/benefit balance that they will materially support it.

There is another stronger and broader sense in which #3 can be construed though. It is that the appeal of some of these technologies are symptoms of our individual and collective inability to deal with the fact that we are short-lived, unfulfilled, irrational, passionate and sometimes unpleasant animals, living on one isolated planet (that we seem intent on ruining) in an uncaring and absurd universe. My worry is that space exploration, for example, might be appealing because it allows us to avoid thinking too hard about difficult subjects like the economy that mysteriously grows forever, or what sort of environment we are leaving for future generations. It isn’t totally implausible that sufficiently advanced space travel and habitation technology could allow (some) people to avoid the reality of these problems, carrying our maladaptive ideologies and economics along with us as we go. This is a concern of some space-exploration detractors – we might simply end up making a mess of other places. So maybe this is a case where we just need to develop a better attitude to how we relate to the universe. Dan Simmons’ Ousters perhaps? I would argue that we could do worse than Peter F Hamilton’s Edenists as well.

Please note that I cannot rule out that some technologies or achievements are ethically or morally problematic in a way that is independent of their ability to allow us to avoid dealing with (or thinking about dealing with) certain problems. Thus, it is possible that they might turn out to be no great loss, because they were a bad idea in the first place. The arguments for other technologies and projects are probably going to be different for each. For example, radical life-extension has different ethical complications to immersive VR or colonising space. What these things do have in common is that they are worth thinking about and involve choosing certain values.

Response #3 is the one that has the least amount of potential easy answers. It’s necessary to consider whether or not we should do something rather than simply asking whether or not we can do it. The answers are rarely a straight yes or no affair. Many things fall into the category of ‘Yes, if certain conditions are met’. For example, we might be that we could ethically colonise space if we preserve and integrate into the environments we find there, rather than exploit and degrade them as we have done on Earth. It would be OK to build a space elevator, if certain environmental, social and economic conditions are met. Some things might seem too dangerous or otherwise just too unethical to pursue. But I am willing to speculate that there would be a lot of ‘big stuff’ that we could do with a clear conscience if we put some serious thought into it.

Would a de-growing or steady-state economy stop us from expanding our knowledge, stifle innovation and education and stop society from ever creating and completing the kind of grand projects that Neal Stephenson has in mind? Not necessarily at least. Would our approach to these things have to be different? Definitely, but as Stephenson (2011) and I have observed, our current economy isn’t really enabling these projects anyway. Our approach might have to be much more inclusive at a political and economic level. Because of this, we might have to think really hard, at a collective level, about what it is that we really want to achieve. There might be some projects and technologies that we ought to avoid. But if we have to carefully consider our options, we might be able negotiate a path that is environmentally/economically sustainable, reasonably ethical, and still have room for the great innovations and ventures that Stephenson would like to see.