"PropTech companies are addressing the housing crisis by leveraging technological innovations to enhance the efficiency of various aspects of the real estate process"
- Hans-Christian Zappel - IMMO
The United Kingdom is grappling with a housing crisis characterised by a chronic shortage of affordable homes, a growing number of households in emergency and temporary accommodations, and an ageing housing stock in dire need of retrofitting and upgrades.
Despite ambitious UK government plans to build 300,000 new homes annually, the traditional real estate industry has proven ill-equipped to solve this crisis, with only 212,000 homes built in 2023 and over 34,000 remaining “long-term vacant”. The current system is failing to meet the urgent need for energy-efficient, secure, and affordable housing.
So, how are we addressing the challenge? The answer lies with PropTechs - innovative companies leveraging technologies key to delivering energy-efficient, secure, and affordable housing at scale.
The United States has set a valuable precedent in addressing similar challenges through the emergence of the single-family rental (SFR) market. US PropTechs have played a crucial role in professionalising and institutionalising the sector by using AI, machine learning, and data analytics to develop innovative solutions that optimise existing housing stock, streamline property management, and promote sustainable practices. The UK can gain valuable insights from this, adapting them to enhance its own housing market.
Just as FinTech revolutionised the UK’s financial sector by leveraging technology to improve access to financial services and increase efficiency, PropTech has the potential to transform a traditionally slow-moving industry and address the housing crisis.
Optimising our existing housing stock
In the midst of a housing crisis, the temptation is to prioritise new construction. However, given that 80% of the housing stock projected to exist by 2050 is already standing, retrofitting existing properties needs to be a critical component of the UK’s strategy.
Retrofitting can drastically enhance a building’s efficiency, with potential reductions in energy consumption reaching up to 78%. In contrast, even the most energy-efficient new builds tend to have a large carbon footprint due to the embodied carbon in the construction process.
PropTechs' utilisation of technology is placing them at the forefront of the retrofitting revolution. One example is the use of AI-powered predictive modelling, which analyses variables such as commute times, rental growth rates, local employment rates, and school quality to provide insights into local supply-demand dynamics.
Advanced analytics add to this by incorporating information on neighbourhood development plans, green spaces, and local amenities. As these factors play a significant role in determining residential desirability and investment performance, this information is invaluable to stakeholders who can pinpoint investments in locations with the best prospects.
Promoting Sustainable and Eco-Friendly Practices
With residential properties accounting for 26% of the UK’s emissions, the housing sector is a noteworthy contributor to the nation’s carbon footprint. In addition to worsening the climate crisis, neglecting housing sustainability will lead to energy-inefficient living spaces that are costly to maintain and harmful to residents' health.
Poor housing conditions are estimated to cost the NHS approximately £1.4 billion annually, highlighting the urgent need for sustainable and healthy living spaces. Rising demand for housing combined with the government’s ambitious construction targets underscores the relevance of establishing sustainable practices moving forward.
Having recognised the urgent need for sustainable practices, the UK government implemented the Energy Performance Certificate system to promote energy efficiency in the housing sector. By 2028, all rental properties will be required to achieve an EPC rating of C or higher.
This is a significant step towards reducing the carbon footprint of the housing sector, as every EPC grade climb brings a 30-40% reduction in CO2 per year. Proptechs can assist this by leveraging advanced technologies to help navigate EPC concerns. For instance, AI-driven energy assessments streamline EPC compliance and enhance the overall energy efficiency of properties.
Improving Efficiency
PropTech companies are addressing the housing crisis by leveraging technological innovations to enhance the efficiency of various aspects of the real estate process. For instance, the AI-driven solution KnoX is streamlining legal due diligence and reducing the time spent on property acquisitions.
Another example is IMMO’s CompsAI, which automatically identifies the most relevant comparable properties for a given property, significantly reducing the time and effort required. These innovations collectively make real estate processes faster, more accurate, and less resource-intensive.
The Future for Institutional Investors
Institutional investors have a pivotal role to play in driving the growth of the UK's housing market. With the integration of advanced technological solutions by PropTechs, there are opportunities to address the UK's housing crisis, invest in retrofitting existing properties, enhance energy efficiency, and create sustainable housing.
By leveraging data-driven insights and AI-powered tools, investors can make more informed decisions, optimise asset management, and maximise returns. As the sector evolves, institutional investors who embrace these technologies will be well-positioned to succeed in the housing market.
