Startups Utilize AI and Machine Learning to Mitigate Barriers to Housing Development
Startup Arx has created a market intelligence platform for real estate developers. This visualization illustrates the numerous project options enabled by the startup’s AI-powered project recommendation engine.
Artificial intelligence (AI) is changing the way we live and work, and it is no different in the housing industry. From using AI to optimize site selection and underwriting, to automating the pre-development process and integrating pre-vetted modular factories, startups like Arx and Madelon are leveraging technology to drive affordable housing solutions.
According to a recent report by Tractica, the global market for AI is set to reach $118.6 billion by 2025, up from just $9.5 billion in 2018. The report also notes that AI is increasingly being adopted across industries, including healthcare, finance, and transportation. However, the housing industry has been relatively slow to adopt AI solutions.
Enter Arx and Madelon. These two startups are finalists for the 2023 Ivory Prize for Housing Affordability, an annual award recognizing ambitious, feasible, and scalable solutions to housing affordability. The Prize is designed to award innovators for their efforts and provide material support to advance their projects. The Advisory Board looks for solutions that implement finance, policy, and construction/design considerations. Innovators include small- and large-scale companies, non-profits, or government entities. Anyone may nominate an organization making an impact on housing affordability, and self-nominations are encouraged.
"Arx and Madelon are prime examples of how AI is being used to address the affordable housing crisis," said Kent Colton, chairman of the Ivory Innovations Advisory Board. "Their innovative approaches to optimize site selection, automate the pre-development process, and integrate modular construction methods are noteworthy for the industry."
Arx is using AI and machine learning to optimize site selection and underwriting for developers and investors. The platform analyzes millions of data points, including demographic, economic, and real estate data, to identify potential development sites and predict their profitability.
"Arx is on a mission to catalyze the development of an equitably built world," said Tomas Garcia, Co-Founder & CEO of Arx. "By leveraging AI to instantly understand the regulatory and market forces impacting a region, Arx empowers developers and investors to drastically improve their ability to deliver housing where needed most."
Madelon is focused on productizing and democratizing development by utilizing technology to facilitate the analysis, design, and development of infill multifamily residential projects through their REDtech software platform. Madelon automates the pre-development process to reduce pursuit costs and minimize development risk by delivering a consistent end product anywhere. Madelon's software addresses the construction process as well, by integrating pre-vetted offsite factories so that the building process, from start to finish, is as predictable and replicable as possible.
"We're proud to be recognized for our work in using technology to reduce the cost of construction and increase the affordability of housing," said Madelon's CEO, Alfonso Medina. "By automating the pre-development process and seamlessly connecting developers with our pre-vetted offsite factory partners, we're making it easier for anyone to leverage new industrialized construction technology and build more infill housing to address the affordability crisis in our cities.”
While each of these startups has its own unique approach, both are using AI and machine learning to address one of the biggest problems facing the housing market today: limited supply. By making the development process easier and more accessible, Arx and Madelon aim to help builders and developers deliver more housing to the places that need it most. Notably, all three startups are optimized for use in urban locales, where constrained supply has led to skyrocketing housing costs, particularly for renters. According to a recent report from Moody’s Analytics, the average American renter is now rent-burdened, with the mean U.S. rent recently reaching 30 percent of the median income.
The emergence of startups like Arx and Madelon underscores the importance of technological innovation in the housing industry. By leveraging the power of AI and machine learning, these startups are helping to streamline the development process, bring down costs, and make housing more affordable for all. As the housing affordability crisis continues to worsen, the need for innovative solutions will only grow more urgent.