This past fall, I was on a panel at the RESO Conference in Nashville where we were discussing the impact of technology on the future and what it would mean for real estate. There was a lot of discussion around the internet of things, privacy and security and this led me to talk about how this data could be used in the near future.
I’d been thinking about something in particular with respect to the internet of things and data privacy for a bit. There is a lot of good that the data from these things can teach us. There are also a lot of challenges around this data too. For example:
- Who owns the data?
- What do the terms of service allow the device manufacturer to do with your data?
- How do you make sure your data are deleted from these devices?
These are just a few of the questions, but they’re not the one that I’ve been wondering about. The one that keeps me thinking is ‘Will smart home data become the new currency of homeownership?’ Will metrics like average CO2, air quality and humidity inform whether or not you get approved for a new home? Will nicks and dings in walls be recorded by our smart devices and add to our ‘homeownership score’?
About the time I started thinking deeply about this concept, Chris, our Lead Lab Engineer, mentioned there was an episode of the show Black Mirror called ‘Nosedive’ that hit upon some of these themes. In it, the young woman lives in a world where anyone can rate you and that rating is used for access to exclusive things in the world. In order for her to climb up the socio-economic ladder, she needs to have a score of 4.5 out of 5. I won’t spoil the episode for you, but I will say that some of the scenarios I was thinking about appeared in this episode. Overall, we are all messy in how we live our lives, but under this type of intense scrutiny, it becomes less of an honest picture of who we are as we try to meet a standard. Believe me, I don’t like the thought of it, but I see the potential for it to affect a transaction. Data is a great influencer in real estate and IoT might amplify that impact.
Data and Real Estate
Data has long been the currency of real estate. Listings are THE main ingredient to the work our members do. Having fresh data is an advantage to their business. As the internet has matured, these data sets have transformed. Rather than just data about the house, we now have data around the house and the community. Is it walkable? What is the average price around the house? What type of businesses are in the neighborhood? Are there schools nearby? What’s my drive time to work? What will it actually cost me a month to own this home? This is all data your buyers and sellers have access to already.
What about the data the industry has on buyers and sellers? There are data packages you can buy on consumer behavior and use for analysis, and some brokerages are undoubtedly using them. We can know what magazines people subscribe to, what their buying habits are and all sorts of other stuff. There are companies out there now that provide leads based on a level of certainty that a homeowner might be ready to sell.
But what the internet of things offers is a richer data set that could be used in the same way a FICO score is used. It could give us a sense of how a home has been lived in and taken care of.
The Internet of Things and Incentivizing Private Data Access
The value of the internet of things is it allows us the convenience of control but also gives us insight into how we live. Think of personal fitness trackers. They provide data on how many steps we take on any given day as well as for other physical activities. This information allows us to make better decisions about how we live. Insurance companies and corporate health programs are taking notice and incorporating these devices into their costs. They are providing discounts to policy holders for access to some of the data on the wearables. People are willing to part with this data because there’s an added benefit to them for it.
So, wearables are already seeing programs introduced to incentivize good behavior. What about smart home technology? Are there incentivized programs for data access? The answer is yes. There are examples in the utility industry and insurance industry. A common example I use when speaking is that of thermostats. Utilities are incentivizing access to thermostats for the ability to adjust them to manage load on the grid. In Chicago, for example, our utility will give us a $100 rebate if we install a smart thermostat from either Nest or Ecobee. The gas company will give us an additional $50. The programs you enroll in allow access and control of the thermostats for the express purpose of keeping load down. The hidden benefit for the consumer is reduced energy costs as well.
Insurance companies are working on home insurance and smart home devices. Liberty Mutual will give you a Nest Protect ($99 smoke/CO detector) and up to 5% off of premiums if you enroll in their home insurance. There are also insurance companies funding multi-function sensors and offering discounts on burglary insurance with smart cameras being incentivized as part of these programs.
What Could Private Data Access Look Like in Real Estate?
Seeing how insurance and utilities are incentivizing this data access, what does it mean for real estate? How soon will it be until a brokerage offers rebates to homeowners who give them access to their smart home data? What could they use this data for?
One of the scenarios that I hate thinking about but see it coming is incentivizing access to this data as a qualifier for a loan. So, let’s say you’ve been living in a home for 7 years and you’ve decided you want to move. In order to qualify for a loan to move into this new home, you need to give the bank access to data on a few things:
- How quickly do you change air filters in the home?
- What was the average CO2 in the home?
- What type of VOCs are in the home? How quickly were they mitigated?
- What was the average humidity level in the home?
- What does HVAC maintenance look like?
You get the idea. Things that don’t matter to us now are questions that could drive how we qualify. Why would humidity matter? If your humidity levels get too high, you will foster mold and bacteria growth in the home. Does this mean your an irresponsible homeowner? Not in my view…but to someone looking at this from a security of investment perspective, it could.
What if this led to variable monthly mortgage payments based on how well you keep the house up? Imagine if data from your air quality sensors would inform how much you pay. What if constant higher humidity levels affected your rates and cost you more? What if you could receive a ‘good owner’s’ discount based on the condition of the HVAC in your house (after an algorithm that looks at airflow, energy usage and regular maintenance determined you were a ‘good owner”)?
Again, I’m not a fan of data being used in this way, but I see a path to it. What do you think? Would you like to have this data used in this way? Would it help you? Would it hinder you? Leave your comments below.