Does a maturing rental proptech sector need to work more closely with tenants?
In this blog, Dr Thomas Wainwright discusses the emerging rental proptech market and highlights the need for the sector to work with tenants to better understand their needs and also to develop guidance for the future growth and development of this exciting new technology. This is the third blog in our series following the CaCHE event, Towards a fully automated housing system in 2030?, which took place in December 2019.
As part of a larger project examining the emergence of rental proptech (property technology) in the US, Germany and Australia, I’m currently looking at the sector’s emergence in the UK. In contrast to proptech more generally, the rental subsector focuses on the UK’s residential – rather than commercial – rental sector, seeking to provide innovative new digital solutions for tenants, landlords and other stakeholders such as letting agents and local authorities.
The emergent sector is populated by entrepreneurial start-ups that have grown quickly, offering a highly diverse range of services: for example, tenant reviews of landlords, regulatory checks, utilities provision, digitally-enabled build to let blocks, tenant passporting, and online-only letting agents. Many of these start-ups are beginning to pivot away from their original services: they’re aiming to diversify their business models, capture additional sources of revenue, grow their businesses, and to attract investment. The activities of many start-ups are therefore beginning to overlap and compete.
The sector has potential for growth as digitally savvy generations view the use of apps and platforms as the norm for accessing services, making rental proptech an attractive market. It is plausible to assume that in the not-so-distant future we will begin to see mergers and consolidation within the sector, as more successful and dominant rental proptech start-ups grow and marketing firepower becomes more important to drive tenants onto their platforms. One needs only look to food delivery platforms, such as Deliveroo or JustEat, to see how platform consolidation has changed the sector dramatically. However, it should be noted that, as with the debate of high-street vs online only estate agents, it is likely that rental proptech ventures will complement or augment traditional players, cross-selling some services, rather than replace them completely.
Some rental proptech ventures scrutinise landlord quality, increasing transparency for renters. But our initial findings indicate that start-ups are collating new and novel data on tenants, which is used to make decisions on who to let property to. In a future where the use of rental proptech becomes mainstream, we may find that tenant data can be used to stratify rental markets, in the same way that data has been used in consumer credit and mortgage markets to stratify into prime and subprime sectors.
These developments raise some complicated ethical issues on how tenant data is used and how accurate the data is, given the potential impact on their ability to rent particular properties. While basic data is currently used to determine tenant affordability, open banking and the centralisation of new data types through dominant platforms, post-consolidation, has the potential to make more sophisticated judgements and decisions on potential renters. Quantitative data and automated decision-making are often seen as being neutral and objective, although some values and prejudices can still be encoded into the algorithms that decide which tenants should be accepted or rejected for rental contracts.
It’s not surprising that little consideration has been given to ethics in rental proptech so far. Entrepreneurial start-ups can be forgiven because they are young and seeking to develop a sustainable business model, with limited resources. They don’t have time to work closely with tenants on how data is used. Similarly, as the whole sector is new, it’s unclear who should be steering debates on the ethics of how tenant data is used. The organisation Unissu in the UK, which is central in organising debates and provides thought leadership on proptech, is itself only a year old. It does, however, have legitimacy among key stakeholders to potentially guide this conversation.
As the sector begins to mature, it needs to develop a ‘Tenant data code of conduct’ on how tenant data is used, shared and can be accessed by tenants. It is important that tenants are able to access, view and contest data that is held on them, to check for inaccuracies, as is currently possible with credit referencing agencies. Conversations are needed to determine what data can be reasonably used and shared, while also sharing the logic in underlying algorithms, so tenants can see on what grounds they are assessed and what behaviours are viewed positively/ negatively. It is important that there is an industry agreement that greater data transparency is essential. While some existing rental proptech ventures have chosen to use this data carefully, some future competitors might not.
In short, the emergent rental proptech market is developing and changing quickly. Now is the time for the sector and entrepreneurial ventures to begin working more closely with tenants and tenant groups to better understand their needs in using rental proptech, but to also begin to develop a ‘Tenant data code of conduct’, to guide the future growth and development of this exciting new proptech sector.
Dr Thomas Wainwright is Reader in Strategy and Entrepreneurship and Director of Education Strategy at Royal Holloway, University of London.
Views expressed by the authors may not represent the views of CaCHE.
Date: January 15, 2020 2:25 pm
Author(s): Thomas Wainwright