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What If Housing Affordability Isn’t The Problem?

The answer to the housing affordability crisis may just be in your own pocket. A new app wants to fix the housing shortage by streamlining the financing and building of new homes.
Isaac Lidsky from ODC Construction and team at a groundbreaking for new property development

Isaac Lidsky, founder of startup app Rigor, aims to solve liquidity crisis and a work coordination crisis.

For the past couple of years, there’s been a torrent of talk about the nation’s housing affordability crisis. But Isaac Lidsky, founder of recent tech startup Rigor, thinks that’s a misnomer. 

“I don’t think it’s an affordability crisis,” he says. “I think it’s a combination of a liquidity crisis and a work coordination crisis. We’re pretty lousy at building homes and financing them.”

Lidsky’s startup, Rigor, aims to solve both problems. Its platform helps finance and project manage the construction of new homes.

ONE OF FEW APPS FOR CONSTRUCTION MANAGEMENT

Rigor leverages decentralized finance (or DeFi, as it’s called): an as-yet largely unregulated use of blockchain-based smart contracts to execute financial transactions without having to take loans from traditional banks. DeFi creates what Lidsky calls public finance infrastructure: groups of lenders—which can comprise traditional banks but also, critically, individual investors—enter into agreements with builders to fund home construction projects.

“It used to be you had to be a highly regulated bank to be in the loan-making business. Now, anyone with a computer can go online and invest using decentralized finance and engage in the same financial transactions,” Lidsky says. “Rigor brings that to the homebuilding market.”

On the project management side, homebuilders use the Rigor app to create a plan that lists all the construction activities and their budgets, and assign the tasks to subcontractors and vendors. The builders present that plan to the project’s lender group, which can then advance funds directly to the project. “Those last three words—‘to the project’—change everything,” Lidsky says.

That’s because of how Rigor’s process differs from the conventional financing system, Lidsky explains. Traditionally, financial institutions make loan payments to builders in a series of installments, or 'draws,' that get issued at certain milestones determined by the banks. Builders can pay their subcontractors only after the banks pay them—which happens only after the builders jump through various administrative hoops to the banks’ satisfaction.

 

When tasks are completed by the homebuilder’s team and verified by parties the lender empowers, Rigor releases the escrowed funds budgeted for the tasks, delivering digital payment directly to the subcontractor or vendor who completed the work
When tasks are completed by the homebuilder’s team and verified by parties the lender empowers, Rigor releases the escrowed funds budgeted for the tasks, delivering digital payment directly to the subcontractor or vendor who completed the work.

 

“That creates horrendous pay-when-paid dynamics,” Lidsky says. 

As a result, subcontractors have to wait months to get paid for work they’ve done. And those delays create a massive disincentive for them to return to sites and finish the job. “It’s just a total disaster,” Lidsky says of construction’s current state of affairs.

With Rigor, the lender group doesn’t hand the builder a large check and hope that the money gets properly dispersed to the subcontractors who are supposed to get it. Instead, the lender group’s funds first go into an escrow. When subcontractors complete a task, they upload photos, videos, or other documentation on the Rigor app to show they’ve met the plan’s specifications and request payment. Once the builders and general contractors sign off, the funds then go from the escrow directly to the subcons, minus all the paperwork.

“That literally could mean the difference of months in the amount of time it takes to get paid,” Lidsky says.

IS THE DREAM OF HOMEOWNERSHIP A FANTASY? 

If successful, Rigor, which takes 0.5% of the funds loaned through its platform, could not only streamline the financing and building of new homes, but may also increase the amount of available investment dollars. That could be a boon to small-to-midsize builders, Lidsky says. Even as business is booming for many of these builders, “they have a hard time getting the liquidity they need to grow their business,” he says.

Lidsky isn’t placing all the blame on traditional lenders, he adds. “They don’t have the coordination tools or the visibility into projects to feel comfortable to lend more.”

For all its high-tech underpinnings, Rigor has a real-world objective: “creating more homes for people to live in,” Lidsky says. With almost 7 million houses short of demand in the US, “the dream of homeownership is becoming a fantasy,” he says. That’s especially true, he adds, for entry-level buyers.

“With Rigor, the constituents of homebuilding, including lenders, stand to be more profitable, even as, most fundamentally, we bring down the costs of homes,” Lidsky says.

To put that theory in action, Rigor has vetted and gathered a group of lenders, builders, and contractors. This beta group will build Rigor’s first 100 homes in Central Florida—and at that point, if not earlier, Rigor will publicly release its product. The beta group will test the platform so that Rigor can improve it and measure its impact. Lidsky says the construction cycle time should come down by two or three weeks—and the payment gaps should be fully closed. So far, Rigor has seven new home builds.

Rigor team at groundbreaking for new development
Rigor team at the groundbreaking of new development, Ocala. Pictured left to right: Erich Wasserman—Founder & President, Rigor Build; Isaac Lidsky—Founder & CEO, Rigor Build; Dohyun Kim—Founder & CEO, FL Pro Builders; Zephyr Davis—COO, ODC Construction; Brian Montgomery—President, Commence Logistics; Jason Sirounis—Founder & COO, FL Pro Builders; and John Starr—Private Investor.

Lidsky, who describes himself as a serial entrepreneur, has taken a circuitous route to construction tech. In 1993, at age 13, he played Weasel on the first season of Saved By the Bell: The New Class. Also at that time, he began losing his sight due to a degenerative eye disease, which he later wrote about in the 2017 bestseller Eyes Wide Open. In 1999, at age 19, he graduated from Harvard, and soon afterward he founded an advertising tech company (which, in 2014, sold for $230 million). He went back to Harvard to earn his law degree in 2004, then clerked for US Supreme Court Justices Sandra Day O’Connor and Ruth Bader Ginsburg.

A decade ago, Lidsky and his college roommate, Zac Merriman, bought ODC Construction, a then-struggling residential contractor business in Orlando, Florida. Today, it makes $215 million in annual revenue, Lidsky says. With ODC, he says, “we saw firsthand what great software and workflow protocols can do for the construction process.” 

That experience led him to form Rigor in January 2020. “Rigor was the obvious next step to take to transform this industry and solve this so-called affordability crisis.”