Q&A: The Habitat Company’s Mark Segal

Mark Segal, president & CEO of The Habitat Company, talks to MHN about technological innovations that are making property management more efficient, and about why the echo-boomer generation is more likely to rent than to buy.

When was the Habitat Technology Solutions Group formed?

We’ve always had a strong technology focus, but we organized the group about two years ago. It’s become more important for us in terms of two sides: One is delivering better service and more convenience for our prospects and customers, and the other is improving our overall operating efficiencies for us and the owners we represent. We’ve been very successful since we launched that effort. We launched recently an online service called Habitat at Home, which is a branded pool of online services that facilitate online leasing and also allow for online service requests and online payments, and we’ve had great ramp-up of use by our residents. It’s a focus for us on making sure that we’re there to meet the needs of our clients when it’s convenient for them, not necessarily when our physical office is open. That’s been a great enhancement for us.

Are you developing these services under your own roof or having a technology company help you?

Habitat at Home was a collaboration that we had with an outside provider. From that perspective it was a joint pursuit. … One of the solutions that we developed in-house that people don’t see but that has been an incredible enhancement to the efficiencies of our operations is developing our own paperless accounts-payable system. From an operating perspective that’s been wonderful for us because we’ve eliminated the need to move paper. It’s been well received by our vendors as well because it streamlines our processes with them, allowing them to be paid on a very convenient basis.

Part of the focus that we have with the Technology Solutions Group is to make sure we have our team members spending their time where they can make the most impact for our customers and delivering service. So to have people, say, on site who are spending time with transaction processing, that is not as effective as having people spending time with our residents.

This newest technology program of yours is Pro-Active, the preventive maintenance program. Can you tell us how that’s going to be able to lower operating costs, help with energy conservation and provide other benefits?

Obviously one of the key responsibilities we have as a property manager is preserving the physical asset, and critical to that is making sure that there is an effective preventive maintenance program in place. If you don’t, over time you’re going to end up with big problems rather than spending small amounts of money to preserve an asset. You can have a roof that needs to be replaced sooner, boilers that need to be replaced sooner, and what we try to do is focus on extending the life of the physical asset to minimize the investment that owners have to make so that we can enhance their financial return while preserving the quality of the asset.

With Pro-Active, we’ve developed a tool that can be customized for the individual needs of each community that we manage. We do an assessment of the physical conditions and all of the systems and what preventive maintenance needs there are, and we automate that so that there is better tracking and service requests are generated on an automated basis to make sure that the work is being done. It is a more effective tool for us also because if you have personnel turnover, you’ve got the system in place; it’s easier for training people to understand what their responsibilities are; and so by extending the life through a more disciplined preventive maintenance program, you’re saving money over time for the owners.

In using Pro-Active to monitor the condition of a piece of equipment, how do the human elements and technological elements mesh?

This is a combination of technology and human interaction. It is not that Pro-Active is monitoring the operation of a system; the people are still responsible for doing the work. Pro-Active is something that identifies the work that needs to be done—that the testing of the equipment needs to be done on this basis, that the valves need to be changed on this basis—and lays out an entire template that people are able to work through. Pro-Active automatically generates a work order for our maintenance team members.

Stepping away from technology, can you give us a little perspective as to what you see for the multifamily industry in 2011?

We think that multifamily is going to keep growing. The demographics that we’re looking at for the next decade are going to be absolutely outstanding for the multifamily industry. Among all the real estate sectors, multifamily has performed better than any other. We haven’t had all of the challenges that a lot of other people have had. We had in Chicago this year about 2,500 new residential units delivered, and even with that amount of supply coming out of the market in the middle of this economic recession, we’re projecting that the units will be completely absorbed by the fall of 2011. We have no new supply coming out of the market in 2011, and occupancies are rising. Rents are rising.

So we’re at a point where we’re looking at new development opportunities to be able to deliver product in 2012. And we’re not alone. There are a lot of people who are looking at new development opportunities. We believe that there is going to be a real pronounced shift in renters versus homeowners, and we think that’s going to continue, which is going to fuel more demand for rental housing. Our community development group is in the midst of two affordable-housing redevelopments right now. We think affordable rental housing is going to continue to be a big driver for the growth of our business. As multifamily generally is going to be on an upswing, we think the need for affordable housing is only going to grow as a component of overall rental housing demand.

What are some of the factors you see contributing to this swing from people buying houses to renting apartments?

Certainly the recession and unemployment are important. I think you’re also seeing a change in people’s mindset as to homeownership being an investment. I think in the past—basically since the 90s—you’ve seen a real upswing in home ownership. People have seen the value of their homes go up. They’ve seen them as investments, or as a financial resource that they could then obtain funding from over time as the value was going up through equity lines of credit or what have you. I think people today have now seen what’s happened, and I think that mindset is changing. I don’t think people are going to be looking at homes necessarily as an investment.

One of the key drivers of the growth in rental housing that we’re projecting, is this younger generation of echo boomers that are already coming into the marketplace. When they look around now and they see that, if you invest this money in a home, you’re not sure you’re necessarily going to get it out. Or, you may not get it out when you need to. The market may be more challenging. One of the things that people have seen is that there is not only a potential loss of investment, you may be tied into that investment, and so, if you’re looking to relocate for a job, it may be harder for you to relocate because you have this investment tied in.

Our general belief is that this younger generation is going to be a more transitory group of people. They’re going to be more mobile, moving around a lot more. They’re also pushing back life changes—marrying later, having children later—and so the typical demographics of a family are changing in the United States, which we think is going to extend the time within which people who may even ultimately become homeowners will remain renters. So the demand pool is going to be around for a longer period of time than it otherwise would have been a generation ago.