In 1960, real estate investment trusts were created in the U.S. with the goal of democratizing real estate ownership. Here’s how Yale professor Robert Schiller described it:

“REITs were created by law in 1960 to democratize the real estate market and make it possible for a broad base of investors to participate in this huge asset class. That was absolutely the right thing to do, because portfolio theory tells us people should diversify across major asset classes, and real estate is one of them.”

But a lot of things have changed since 1960. We now have the internet. 

And one of the things that the internet is very good at is creating peer-to-peer networks that connect supply and demand without the same kind of intermediaries. This could be people who have MP3s with people who want MP3s or it could be people who have real estate with people who are looking to invest in real estate.

So with the advent of crowdfunding in both the U.S. and Canada, I think we are at the dawn of another era of real estate democratization. Already we have seen the first crowdfunded real estate development project and it happened at a much smaller and local scale than is usually the case with REITs.

Similarly, we are also seeing companies emerge – such as HomeUnion in the U.S. – that allow people to build their own rental portfolios by directly investing, either fully or partially, in real estate. Again, there are differences here compared to how REITs typically operate.

When I was in grad school at Penn and Sam Zell used to come in and talk to the students, he used always mention how when he started out in real estate (1960s) the industry was disproportionately controlled by a small number of players. That’s been changing ever since and it looks like that trend will only continue.

Real estate is a local business. And this weekend in Philadelphia really reminded me of that.

Here’s what I mean.

The real estate story in Toronto is condos. We’re buildings lots and lots of condos. When my friend from Chicago recently visited Toronto for the first time, he told me that it feels very similar to Chicago, except that we have modern glass condo towers going up everywhere and they don’t. That’s our story right now.

Low-rise housing in Toronto is becoming increasingly unaffordable (the average price of a detached home is well north of $1M) and so high-rise condos are now what many people can afford. When young people in Toronto talk about buying their first place, that now usually means a condo.

But that’s not the story in Philadelphia.

In Philadelphia, you can buy a 1,600 square foot, 2 storey, 2 bedroom rowhouse in a respectable neighborhood for sub US$400,000. And in speaking with my friends in Philly this weekend, that’s what young people are buying.

This doesn’t mean that Philadelphia isn’t building new high-rise condos and apartments. It is. Obviously nowhere near as many as Toronto. But it is building. Far more than when I lived there before the Great Recession.

However, the condo market is typically more upmarket. The target market isn’t so much first time buyers and the mass market; it’s more people who want full floor apartments in Rittenhouse Square. (I’m exaggerating only slightly.)

Philadelphia is also building more rental towers than condo towers. (Rental has only recently become fashionable again in Toronto.)

One of the most interesting talks that I attended while I was in graduate school at Penn was by John Maeda. 

John operates at the intersection of design, technology, and business, and I find his work fascinating. He’s probably best described as a graphic designer, visual artist, computer scientist, academic, and author. And when I heard him speak in 2008, he was also President of the Rhode Island School of Design.

More recently though, John has entered the world of venture capital by becoming a “Design Partner” at Kleiner Perkins Caufield & Byers (KPCB) in Silicon Valley. But what’s really interesting about this move is that when he joined KPCB in January 2014, he was the first designer to arrive on Silicon Valley’s legendary Sand Hill Road. No other VC firm had a designer in-house.

And that’s because design hasn’t, at least historically, been considered that important. In fact, in some cases it was seen as being detrimental. Brian Chesky – cofounder of Airbnb – has gone on record saying that when they were first starting out,