The platform is a combination of Facebook and LinkedIn for buildings and the people that build, manage, occupy and own them - an entirely new level of access and transparency for real estate. Building 'profiles' can include basic building information: address, photos, square footage, ownership and management details, as well building certifications, regulatory compliance, project specifications and vendor contacts -bringing together information that has historically been extremely difficult to compile, let alone interact with.
While there is always some role for regulation in achieving industry change, it is notoriously hard to figure out how best to regulate an evolving market. Transparency and the resulting competition work faster, cheaper, and don’t carry the pain-in-butt burden of compliance.
Philosopher Jeremy Bentham nailed the behavior-changing power of transparency in his eighteenth century concept of the panopticon - the ‘ideal’ jail building – a circular structure where prisoners, knowing that their behavior could be observed at any time, would self-regulate. But the disciplinary tone applied by both Bentham and, later, Foucault misses out on opportunities.
Information Frees Markets
In another context, clear disclosure enables growth: Microfinance as an industry has suffered in recent years due to concerns about opaque and unfairly high prices on financial products for low-income consumers. Rather than mandate and enforce against “usury” rates, governments have partnered with MF Transparency (an NGO bred by the leaders of prior World Bank initiatives and promoted by Nobel Peace Prize recipient, Muhammad Yunus), and major banks to translate pricing into a single standard definition “annual percentage rate” or APR - which can be reported with any other materials the bank offers. MF Transparency works collaboratively with each bank, leading up to an established date in each country, when all participating banks will voluntarily disclose their products’ APR. At this point, since everyone from senior management to line staff knows how to calculate APR, no regulation is required – the customers compare and decide. And for those banks opting not to participate? Well, would you buy a car with no safety rating, or eat at a New York restaurant missing one of Bloomberg’s famous letter grades? The resulting clarity has eased minds and pocketbooks of customers and investors.
Back to buildings- for any of this kind of traction to take hold in a real estate context - accurate information needs to be available, and decision-makers need to begin using it consistently. The current information available on Honest Buildings varies widely between buildings, because users can post as much or as little as they want. However, with well over 400,000 buildings registered less than three months after the firm’s public launch - Honest Buildings is off to a promising start.
As earlier articles have suggested, information and reviews from Honest Buildings may soon become as core to real estate due diligence as Facebook is to dates and Yelp to meals, prompting building owners and operators to do even better than today’s ‘best’ - real estate, after all, tends to cost a lot more than dinner.