While developers and politicians alike are criticized for the affordable housing dilemma, the problem may lie in the simplicity of classic economic theory. Could the premise of the "sharing economy" hold the keys to a viable solution? Much of the innovation in that sector is similar to the concept of market design, an offshoot of game theory. The theory offers greater insight into apartment supply while also addressing design, pricing and quality issues, reports Business Insider. Through market design, markets can be constructed in different ways to serve different purposes. Research has indicated that settlement risk, when buyers fail to purchase in spite of a pre-sale contract, poses the most significant threat to residential developers. Additionally, the search costs of finding buyers can significantly impact a project’s profitability. A sharing platform for apartments, such as Uber or Airbnb, could help to offset some of these issues. By aggregating buyers and sellers with the assistance of a market manager, the costs of pre-sales could drop dramatically and the prospect of buyers dropping out may be less of an issue. [BI]
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