Tech Solutions in the Time of Rent Regulation

Stop me if you’ve heard this one before: “commercial real estate is slow to adopt game-changing technology solutions that would revolutionize the industry.” A bit over-the-top perhaps, this has been the rallying cry of technology vendors trying to convince their prospects that the costs (and hassle) of adopting new technology is worth it compared to the reward. The conversation is always framed around becoming “obsolete” or losing out to more technological competitors.

For a lot of reasons, this has been a tough sell. The global real estate industry, and the multifamily sector in the US in particular, has been growing for the past ten years. Companies are making more profits than ever and any new capital is likely earmarked for new developments and acquisitions to fulfill the needs that they see in the market. When times are good, it’s hard to scare people with catastrophic prophecies. But, new headwinds in the form of regulation might be a catalyst for change even for companies in the growth stage. Rent regulations are being implemented, or at least considered, from New York to California, and these regulations are challenging landlords to think differently about leasing to increase profitability year over year. It’s no surprise then that tech companies are hearing the demand from landlords and property managers looking for innovative ways to cut down on the friction and burdensome workload that’s become commonplace in the leasing process.

Rudin Management Company, a player in both residential and commercial real estate, saw tremendous opportunity to use technology to maximize efficiencies across its 16 office buildings and 18 apartment buildings in New York, according to the Times. After integrating its own intuitive vertical tech, the company was able to “reduce electric consumption by 40 percent and steam consumption by 47 percent.”

Another company, TheGuarantors, used its founder’s experience of being declined housing by a number of landlords to isolate a problem and devise a technology-forward, whole stack solution. TheGuarantors work with customers and partners to find elegant, middle-out solutions to improve owners’ and landlords’ experiences while also upgrading every point-of-contact for the renter. Quality-controlled customer service and acquisition technologies alleviate stress, and communications between all parties are standardized.

Similarly, my company, Vero, created a high-speed and low-drag platform that greatly expedites the leasing process and improves renter experiences by eliminating friction with brokers during the application process. In markets with high rental demand, the application process is typically managed by a broker, who a renter may or may not trust with their personal information. It’s often nothing personal, it’s just a challenge to be a typical renter with a limited income putting their finances on the line to secure an apartment. We act as a trusted intermediary between the broker/manager and the renter—think PayPal for one of the most important financial transactions an individual can make. Instead of renters sending their most sensitive information to an unknown individual, they entrust that personal data to a reliable and highly secure third-party platform.  

With new state-wide rent regulations in New York City and California making headlines—and causing headaches for owners and brokers—landlords and property managers are now turning to cutting-edge automated tech solutions. We recently worked with Andrew Barrocas, CEO of Brooklyn-based MNS Real Estate, a full-service real estate brokerage and consulting firm, who sees the new regulations as a seismic shift in how residential real estate is done. “The screening process for applicants is now more challenging than ever. The new rent regulations and caps on application fees necessitate streamlining an outdated manual process for vetting applicants that hasn’t evolved for more than a decade,” said Barrocas. “We need a solution that provides a solution for instantly verifying employment, banking and rental history without running the risk of receiving fraudulent documents.”

In addition to the obvious trust and value proposition presented to renters, in a similar fashion, brokers are expected to be extremely responsive to renter concerns. The delays that come with the traditional application process can make a broker appear inattentive when in reality, they’re involved in a high-volume profession and the delays that occur during the application process are typically out of the broker’s control. For example, leveraging a third-party vendor that minimizes the time that it takes to verify a customer’s eligibility for an apartment will reflect positively on the broker in front of the renter. This automation not only creates a better experience for prospective tenants, it also helps cut down on operational and labor costs and therefore boosts a building’s NOI, something that becomes increasingly important when growth is capped due to rent regulations.

As anti-adoption sentiment begins to crumble, landlords holding on to “traditional” processes will scramble to catch up to those who injected refined, scalable systems that allow them to climb to meet any challenge. Yes, implementing PropTech is an investment, but when landlords begin to consider the sheer volume of applications they process and the amount of leases generated annually, it becomes clear that a technology solution that can save a significant amount of time on each application and improve prospective renters’ perception of brokers and landlords can significantly improve one’s bottom line.

While the evolving PropTech industry gradually disrupts commercial real estate, the new rent control laws present a logical adoption point for landlords and brokers to apply PropTech solutions that both minimize non-compliance exposure and augment overall rental processes. With the fight over the future of security deposits and lease agreements far from decided in the courts, lessors are finding themselves in uncertain territory. The new laws are causing a ripple effect among owners and the future of apartment leasing is uncertain. Property leasing, as it has been executed to date, will need to fundamentally change. But the question is: will properties remain as profitable as they were before these regulations were put in place? Implementing the right tech stack is one way to improve your bottom line by eliminating unnecessary labor and operational costs to make the murky regulatory landscape a bit more navigable. 

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