Why Local Governments Should Nurture the Growth of Proptech

It's transforming the worlds of real estate and development. Cities and counties can experiment with it for themselves, but their most important role is in sharing the data that drives it.

City of Miami's zoning map.
"Proptech" describes a range of innovative information technologies, along with the companies that provide the platforms for them, that in recent years have begun transforming the real-estate industry. An acronym for "property technology," it is increasingly being used in the planning, construction, marketing, and sale and rent of homes and commercial property, as well as for the management and maintenance of buildings.

While proptech hasn't yet become as widespread in real estate as its cousin fintech has in the financial sector, its use has taken off with the coronavirus pandemic's need to operate remotely. A streamlined, efficient real-estate process is in the interest of local governments, and wider use of proptech is something they can facilitate through data sharing — and experiment with for themselves.

Proptech is used in a variety of ways in the private sector. In administration, for example, real-estate development companies improve their labor efficiency and reduce overhead by using digital platforms like LegalZoom, QuickBooks and Google Drive. For construction, they use 3-D-printed prefab materials. For marketing properties, they install Matterport cameras that allow virtual touring of units and Latch smart door locks that allow self-guided in-home tours. And for property maintenance, they use digital dashboards to monitor and operate indoor utilities.

But proptech's most interesting use may be for activities that come before all this, in planning and development. Jake Auchincloss, a Newton, Mass., city councilor who once worked in the proptech space for Liberty Mutual's innovation lab, describes how some proptech companies are providing services now to help developers navigate upfront government hurdles. Citybldr, for example, sells technology that clarifies land title ownership, allowing developers to begin assembling parcels even if they don't have the legal sophistication to search obscure city documents. For developers, Coda Compliance streamlines entitlement — the process of obtaining government permissions for a property's specific use, ranging from building permits to architectural approvals — to minimize costs for land use consultants and attorneys.

Auchincloss thinks this latter service will be tough to pull off, since regulation is a human process. An algorithm can't determine, for example, what density bonus might be granted to a residential project in return for including affordable housing, given all the bureaucratic layers involved as well as political considerations. But he sees potential for "super-forecasting" firms that crunch data about a city's past entitlement applications to predict the likelihood of current ones winning approval. This would help developers weigh the risks of applying for one.

There are crucial lessons that city governments can take from this sub-genre of proptech. The first is to look in the mirror. If regulations and entitlements have gotten so complicated that technologists must use machine learning to decipher them, something's wrong. It shows the need for approval processes that are fast, cheap and predictable.

Lesson two is that governments can simplify things by adopting the proptech ethos themselves. Cities could, for example, roll out interactive zoning maps that are easy for laypeople, not just lawyers, to interpret. A good example is Miami's zoning map, which uses GIS to show aerial photos, current usage, flood risks and applicable regulations for every lot. Anyone can click on a parcel to learn what's allowed regarding density, setbacks and more. But most existing maps are more limited than Miami's: They show broad color swaths indicating how properties are zoned but don't supply background information, forcing users to search through other online legal documents.

Another thing local governments could do, which would help build public support for granting entitlements, is to show the taxable value of parcels. Planning consultant Joe Minicozzi has created color maps like that for some cities, demonstrating that dense, centrally located lots have higher tax yields.

Auchincloss warns that, while improving government's use of technology is always a noble goal, cities and counties need to be wary of sinking too much taxpayer money into their own proptech platforms. Instead, he says, government "just needs to make the data transparent and tractable."

That could include data on land titles, tax revenues, zoning law, past entitlement history and more. Software-as-a-service companies within the proptech space could use it to build their own unique data services, selling those products to developers who benefit from them. This is already happening, and making more government data available would speed the proptech momentum along.

Governing's opinion columns reflect the views of their authors and not necessarily those of Governing's editors or management.

A journalist who focuses on American urban issues. He can be reached at scott@marketurbanismreport.com or on Twitter at @sbcrosscountry.
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