AHURI: Blockchain can make Australia’s housing system more efficient
It's not too early to start considering the impacts of blockchain technology.
The Australian Housing and Urban Research Institute (AHURI) has explored blockchain as part of a recent inquiry into the potential of new technologies to disrupt housing (PDF).
The gist is that while it's still early days, blockchain offers potential for improved efficiency even in the relatively near term, which will only increase over time. At the same time, some of the proposed applications of blockchain in housing aren't as viable in Australia as elsewhere thanks to the relatively efficient existing systems.
The potential gains
"In an era of smart cities, there should be policies to support innovation, pilots and testbeds in exploring the potentials of new disruptive technologies. Blockchain has been identified as one such emerging technology," the AHURI says.
Cutting out the middlemen
The most beneficial applications, it suggests, might be those offered by trustless smart contract blockchain platforms which stand to cut out the great many intermediaries that facilitate the current housing market.
Unlike more general "products", the life cycle of a piece of real estate involves a complex construction process with myriad stakeholders, while real estate transactions can similarly involve a lot of facets like mortgages, shared ownership and more. The actual usage might involve many participants and different parties with different contracts as well.
The ability to manage data across this life cycle, come what may, without falling into the comparatively unwieldy trap of separate data warehouses, could bring considerable time and money savings, the AHURI suggests.
"While still at an early stage, it [blockchain] can be applied to housing functions such as title registration, co-ownership options (including in reverse mortgages), tenancy management and utilities maintenance, to ensure data integrity. These may reduce the risks and costs of manual entry and expand the capacity of current record-keeping by linking up relevant datasets.
"The internet has already had an impact on the housing market, for example in the form of online real estate listings, mortgage advertising and online transactions, but it has not fundamentally changed the nature of transactions themselves or the management of a ledger," it says. "Internet protocol is not equipped to transfer value in a trusted fashion. As a result, bureaucracies, banks, lawyers and estate agents are still required to perform the institutional arrangements that make property ownership possible, including the enforcement of transactions, the granting of exclusive use, as well as transferability and inheritability.
"Data is managed in central repositories and protected against security breaches at significant public expense. The blockchain protocol, unlike internet protocol, enables the transfer of value without the need for intermediaries."
It might also allow for benefits by making previously impractical interactions viable. For example, setting up joint ownership arrangements that would previously have been too convoluted may now be possible.
"There may be scope for using a blockchain for interests that cannot be registered under the Transfer of Land Act. These interests may include, for instance: short leases, equitable leases, other equitable interests like trusts, or rights associated with adverse possession," AHURI says. "Efficiencies that are achieved in land registries, for instance, might also enable complex title arrangements for co-ownership to evolve, possibilities that are currently not pursued due to onerous administrative requirements."
The use of blockchain technology for land titles is being explored quite widely around the world.
"A number of nation states—for example, Ghana, India, The Netherlands, Brazil, Ukraine, Japan, Russia—and US states have experimented with putting land titles onto blockchain platforms," the AHURI says. But it might be less practical in Australia, it observes, where the transaction volume is relatively low and the existing system works smoothly as is.
Fortunately, Australia's Land Titles Office doesn't suffer from the same lack of public trust that its equivalent in other countries does.
"The transaction volume for real property is unlikely high enough to really benefit from automation, and the Land Titles Office is a trusted and secure institution."
And blockchain, as a range of institutions have noted, really shines in areas where trust is lacking.
It's not necessarily beneficial to replace widely trusted institutions with trustless blockchain systems, but AHURI suggests that there are still reasons for those institutions to explore blockchain in the spirit of cutting out middlemen and automating its own processes where practical.
"In the short term, for Australia’s housing system, blockchain technology could create significant efficiencies, including land title processes. This would involve the use of blockchain technologies in the service of traditional governance functions like data registration and management. In the longer term it may also bring about significant transformations in the housing sector by automating reference checking, access to property, and property or tenancy escrow," AHURI says.
Beyond that, when integrated with other technologies, there's the potential for "automating" the actual use of housing in ways that aren't currently an option. Think Amazon Key with some of the current limitations ironed out by smart contracts. For example, making it a little bit less creepy by storing video footage from the connected Amazon camera in a decentralised way where it can only be viewed by Amazon with the customer's permission for conflict resolution purposes, rather than just allowing Amazon unlimited access to all the footage.
"If integrated with IoT technologies, smart contracts can also be deployed to manage access rights to properties," it suggests.
AHURI also notes that the regulatory hurdles for blockchain adoption aren't all the same height. There are some places blockchain might be usable with relatively few obstacles, and others that still need years of technology and regulatory development to be applicable. Blockchain technology might be able to prove itself in some areas without substantial change, AHURI says.
"Regulatory and legal issues may need to be addressed before the full possibilities of blockchain technology can be realised," AHURI notes. "However, the promise of blockchain is that by simplifying the processes involved in selling property, or portions of property, significant shifts might occur even without substantial regulatory change."
And advancing blockchain technology, such as increasingly complex smart contracts that can draw on an increasingly wide range of data, might shift the impacts over time.
"Transaction and process automation using smart contracts may similarly have applications in housing services in a manner different to rule-based automation," it notes.
AHURI also encourages policy makers to consider the impact of emerging technologies widely and in a holistic sense. For example, it points at how services like Uber and Deliveroo are tangentially impacting the housing market by "destabilising vulnerable groups' financial positions through the casualisation of work and short-term 'gig'-based engagements."
"While offering flexibility, these can have lasting impacts on individuals' ability to sustain tenancies, access housing loans and keep up with living costs, the outcomes of which may be far broader than any technological and policy interventions can anticipate."
And then you have the potential for blockchain technology to disrupt these disruptors, which means a constant need to stay abreast of research.
In this context, it may also be worth considering the impacts of the impacts of blockchain technology, so to speak, and the consequences for housing of blockchain applications that might not initially seem strictly related.
For example, blockchain projects like Power Ledger, which is focused on allowing trustless peer-to-peer buying, selling and sharing of energy, might provide more of an impetus for homes to install solar panels. Over time, the solar-suitability of different locations could start shaping housing prices in different locations, especially in combination with other startups that aim to let people monetise their home renewables in other ways such as by charging other people's cars.
More directly, you have the variables introduced by developments like asset fractionalisation. With sufficient uptake, platforms like BRICKX, which fractionalises real estate for investment purposes, might start impacting housing demand. When going through a mortgage and actually owning a home is no longer seen as the only way most people can get real estate exposure, this might have follow-on effects.
And what about how blockchain can cut costs in the construction process? When "late and over budget" is no longer the norm, what will that do to the supply of and demand for skilled construction workers? And what will the follow-on effects of that be?
New technology has resulted in a lot of changes coming just over the horizon. And while it might not be possible to predict all of them until after the fact, it's probably still worth trying.
Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and ADA.
- What we learnt from the rise and fall of the DigixDAO autonomous organisation
- BIS survey suggests Libra blindsided central banks, stablecoin use in EMEs
- Chamber of Digital Commerce sides with Telegram in SEC lawsuit
- Reserve Bank of India vs cryptocurrency: RBI cites Libra as point against crypto
- Digital Dollar Foundation: Why the former CFTC head is pushing for digital USD