Blockchain! Help to solve problems in housing and communal services! - FFC Media
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Blockchain! Help to solve problems in housing and communal services!

Housing and communal services, as any other industry, have some problems. The very first and most painful of them is the price problem. As for the modern American housing market, the monthly payment even for a tiny one‐bedroom apartment in a non‐prestigious area can cost 600 – 700 dollars. This is not about a rented living space, but square meters that are the owner’s property.

We have studied the opinions of different experts on what needs to be done to reduce the problems in housing and communal services.

Reduce the number of non‐payers

Prices for housing in America are hefty and significantly «hit pockets». This leads to problems with non‐payers. Unpaid bills affect the credit history of the tenant, which begins to accumulate from student times.

American authorities are trying to deal with the situation using the carrot and stick approach. Among the loyal measures, there are benefits and discounts of 20% on housing for people with low income. If you suddenly and unexpectedly found yourself in a financial pit, the authorities can help with a one‐time payment grant. And all fine and dandy, but a one‐time grant does not motivate paying bills in the future, and to get the above discount or benefits you need to go through a lot of trouble.

In America, there is a zero tolerance policy for debtors. In case of non‐payment, the so‐called «instant kick» rule is used — they will come, cut off communications, and that’s that. At the same time, if the housing is not owned, but rented, the owner has every right to turn tenants out of doors.

By the way, everyone can be «kicked», except for the needy. In California, for example, at first such people can be given three months for «correction» (in particularly difficult cases — a year) and only after that the authorities go to extreme measures. And if suddenly the tenant decided to «demand his/her rights» — the US authorities can put him/her into the «black list of tenants». This means that it will be very difficult or almost impossible to rent an apartment or buy any other housing in the future.

The experience of the British is even more lamentable. Three years ago the authorities of the country confessed that about 5 million households are not able to pay for heat, and therefore it is simply cut. In the country there is a so‐called problem of «fuel poverty». The problem arose in the winter of 2017, when a 38‐year‐old Englishwoman and mother of four children Elaine Morrell died in her own apartment because of the cold. The young woman was unable to pay bills for heating and renting; in the course of this the authorities simply deprived her family of heat supply.

Strengthen the control over management companies

The main fraud in the housing and communal services is associated with the movement of funds on trust accounts, which receive payments for services from tenants. The company settles up with all counterparties (including owners of backbone networks), pays taxes from these amounts, and transfers the remainder as profit to its current account. The problem is that the profit margin often exceeds the permissible norms.

The authorities are trying to fight this, tightening the bank control over the movement of funds on trust accounts, improving the legislation governing the conduct of the relevant operations. However, to date, these measures have not resulted in the proper effect.

Natalia Evstigneeva, Vice President of the Transwestern Real Estate Management Company, who has been living and working in the US for more than 20 years, notes one more painful problem in the sphere of the US housing and communal services system — a huge competition between management companies.

According to Natalia, the contracts with the managing companies, as a rule, are concluded for one year. This encourages companies to offer competitive prices and conditions. And those companies that already have a contract try to work as qualitatively as possible, so as not to lose it in the future.

After all, American legislation allows tenants to change the management company once a week … This complicates the situation in the market, making its participants angry, and provoking them to resort to methods of unhealthy competition.

Eliminate mistrust between members of the communal system

In the sphere of housing and communal services, the functioning of the entire system depends on trust between the participants in the process.

The low level of trust between the service provider and the buyer is a serious problem. It is necessary to create a tool for funds movement control, which will increase the transparency of business processes in the housing and communal services sector and solve the non‐payers problem.

To increase the level of trust of tenants to the whole housing and communal services system, it is necessary to ensure absolute transparency of payments. Payments must be public, so that any participant in the system can check their validity and reliability. Tenants need to know for what management and resource companies spend money on trust accounts.

Another problem that worries tenants is the transparency of payments. According to the Politico publication, to date, corruption in the US is pervasive and, in the opinion of the Americans themselves, it is the second largest problem of the country after unemployment. According to a Gallup poll, about 75 – 80% of Americans believe that the housing and communal services sector is corrupt.

Use the magic wand of new technologies

It is possible to solve the mentioned problems with the help of new technologies, for example, a blockchain. This technology really looks like a magic wand: it automates operations that are now done manually, opens operations for any checks; operations are almost instantaneous and have a minimum cost. It’s not a technology, but a dream!

The so‐called smart contracts have been built on the blockchain, which actually carry out all the rough work. They can record obligations between consumers and resource providers, and automatically write down the exact amounts for the supplied communal services. In this case, consumers will see how much and for what they paid.

The use of «smart contracts» will release the parties from intermediaries. With the use of a blockchain, falsifications are practically impossible, since the stored documents cannot be replaced, and it is impossible to force the program code to make an unreasonable payment.

The principle of openness is very clearly manifested by the blockchain. After all, tenants will pay exactly for the amount of resources they have consumed (water, gas, electricity), and also track what amount and in what time it came to the account of resource provider, what benefits were transferred from the social protection authority, etc.

With the use of a blockchain, all processes in the housing and communal services system will be implemented directly between the consumer and the supplier of communal resources. And this means that there is no need for any intermediaries in the conduct of transactions. We are talking about billing companies that deal with informational support of financial flows. In other words, they are responsible for charging fees for housing and communal services, drawing up and printing receipts, delivering them to consumers, maintaining a database on accruals, indebtedness, etc.

If you implement blockchain technology into the practice of modern housing and communal services system, you can withdraw from composing and printing receipts — all information will be available in electronic form. Smart contracts will automatically make payments. This will reduce the tenant’s costs for billing. Also, the cost for administering settlements and the cost for resources will be reduced (by reducing the number of intermediaries).

Another undoubted advantage is the guarantee of data security. The way information is stored with the help of the blockchain is reliably protected by mathematical algorithms so that it can protect data from fraudulent actions: theft, forgery, deletion. The system is immune to hacker attacks, and users have the opportunity to independently change keys and block access.

If you take a look at the situation from the point of view of the economy and the situation in the market of management companies that are in constant struggle for tenants, the introduction of blockchain technology into the practice of any MC could provide it with an undeniable competitive advantage.

Deprive the corrupt officials of the technical ability to take bribes

It remains to answer only one question: if the blockchain technology in the housing and communal services system could bring so many advantages, why are they still not used in practice? It seems to us that it is a matter of people who are simply unprofitable for changing the usual régime — corrupt officials who are accustomed to putting money of tenants into their pockets and controlling the system that gives illegal, but permanent income.

In turn, understanding people who realize that a chain of blockchain technologies is overdue for the housing and communal services sector are afraid of a number of obvious problems. One of the first is the high cost of implementing blockchain in practice. It is necessary to purchase computer equipment and install special software, train personnel to work with new technology, etc. However, it is difficult to call this a minus, since the savings from the introduction of blockchain technology into the housing and communal environment will more than cover the spent resources for its implementation. In addition, large corporations are developing «cloud» solutions for private users and, for example, blockchain‐solutions under the Blockchain‐as‐a‐Service scheme are already available in Oracle and IBM.

There are fears that a network based on blockchain technology will spend a huge amount of electricity if it is a question of using the PoW (Proof of Work) consensus algorithm. But the significance of this issue seems to be deliberately exaggerated by those who are interested in blocking new technologies.

Of course, the blockchain has shortcomings, but are they so significant compared to the advantages? Users in many countries managed to fully realize the effectiveness of the blockchain technology.

Adopt the successful experience of a dozen countries

In 2019, two Australian start‐up companies will complete the development of blockchain projects for the housing and communal services of Australia. Under the leadership of the authorities, who allocated a grant of 8 million Australian dollars, startuppers worked for two years. They conducted a study of the possibilities of blockchain technology in the distribution of electricity and water in communal services in the cities of the country. Project participants were able to develop a «smart system of accounting» and storage of energy in batteries, to ensure efficient energy and water supply between critically distributed infrastructure facilities.

In New York, the Microgrid project has been actively developed, thanks to which households can now buy and sell electricity from solar panels installed on the roofs of their homes. The basis for the management of contracts and payments was the Etherium platform.

Homeowners solve old problems by a new way: they use electricity just where it is produced, and within a day they exchange solar energy with their neighbours, depending on which side of the street is currently better illuminated.

In Austria, the country’s largest supplier of energy services, Wien Energie, is experiencing a blockchain focused on energy trade between communal services.

In Germany, the energy company Innogy launches a pilot project to find out if the blockchain technology can manage the billing process for stand‐alone electric vehicle charging stations.

The Chinese district of Xunxian is also planning to use the technology of blockchain for the housing and communal services sector, public services and economy of the city. Here the urban system plan is developed on the basis of a distributed registry.

Chinese car manufacturer Wanxiang is investing in «smart cities» and blockchain. According to investors, the technology will help to monitor the condition and consumption of car batteries in the urban environment. Batteries will be available for rent, and use of them can be controlled through the blockchain. All this will make it possible to reduce the cost of transport ownership for citizens.

Obviously, the sphere of housing and communal services in other countries also needs global reforms. It will be good if the blockchain becomes an instrument of reforms — this technology, apparently, is capable of solving the basic problems of the housing and communal sphere. Probably, then there will be other problems — for example, support of operability of the equipment or the software. But it’s better to have such problems than the theft of management companies or an emergency in the domestic sewage system.

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