Chris Lehman studied political science and economics at Harvard and has since spent most of his career working on incentive alignment and mechanism design in the healthcare and e-commerce industries. He and one of the other founding team members, Seth Priebatsch, began discussing the challenge of how to design a better currency in 2020, which led to the idea of tokenized real estate ownership and their co-authorship of Groma’s whitepaper. As Groma’s Policy Architect, Chris runs Groma’s external political engagement and works with the rest of the team to develop internal systems geared towards the long-term success of the Groma ecosystem.
Startup Boston caught up with Chris Lehman to learn more about his entrepreneurial journey, how he envisions web3 reshaping the real estate industry and so much more.
Why did you pivot from healthcare and e-commerce to a web3 startup in Boston focused on real estate?
My previous roles at Amundsen and Wayfair were geared towards building a broad analytical skill set and gaining an in-depth understanding of how large institutions develop systems to balance the preferences of different stakeholders. These experiences were valuable, but I wanted to find ways to apply these skills and insights on a broader scale.
After considering a number of different options, it became clear to me that the real estate industry’s combination of poor incentive alignment and sheer scale presented an enormous opportunity to achieve positive change. Many of the industry’s problems stem from a lack of transparency and information available, along with a corresponding inability of participants to coordinate effectively on systemic changes. In other words, exactly the sort of problems that blockchain and web3 were designed to address. The systems that Groma is building will give our investors and the communities in which we operate the tools they need to coordinate more effectively to solve these problems.
Moving forward with a focus on real estate, tokenization, and web3, how do you envision the convergence of these areas reshaping the real estate industry in the coming years?
The housing system is broken in a lot of ways. High-paying jobs are increasingly concentrated in large metro areas, but restrictive land use policies prevent these areas from building the housing they need to accommodate this increased demand. This prevents many people from living in these areas and means that many of the people who do live there, especially among younger generations, pay inordinately high rents and are unable to afford a mortgage to own a home. Homeownership has traditionally been the primary wealth-building tool for the middle class in the US, so this trend could have serious consequences for the economic well-being of millions of people if not addressed.
With the rise of decentralized finance and web3 technologies, how does Groma aim to democratize access to real estate investment opportunities through tokenization?
One of the reasons for the Groma project is to make it easier for people in this situation to build real estate wealth by removing the barrier to entry of a down payment. GromaCoins are fungible ERC-20 tokens that represent fractional ownership shares in Groma’s portfolio of residential real estate. These tokens exist in parallel with traditional REIT shares held by a transfer agent on behalf of their owners. This means that, as shareholders, token holders would receive a share of the dividends produced by these properties in addition to experiencing any net asset value appreciation or depreciation.
While today the GromaREIT is only available to accredited investors, we are testing the waters for a Reg Crowdfunding and we would love to see a world where investors could put in as little as $1, allowing them to start building real estate wealth earlier. Over time, as they accumulate a larger share of GromaCoins, the dividends they earn could be used to partially or fully offset their rent payments. In this way, owning a sufficient amount of GromaCoins could be considered a “Liquid Home.” As with traditional homeownership, you own real estate and have a place to live–they’re just spatially dislocated.
In addition to providing a greater degree of transparency and liquidity for investors, our use of blockchain as the foundation for this system enables a number of other useful features. One of these, the Liquid Mortgage, would give renters the ability to convert their rent payments into GromaCoins using secured loans executed via smart contracts. We also expect to partner with some of the leading DeFi services for a number of reasons, including to provide capital for Groma’s real estate acquisitions and to give stakers a stable, low-risk source of yield.
Can you discuss the regulatory challenges that Groma faces in the real estate tokenization space, and how do you plan to navigate these complexities?
GromaCoins are currently available under a Regulation D 506(c) offering, which means they are available only to accredited investors. We are in the process of testing the waters for a Regulation CF/A+ offering, which would expand GromaCoin access to non-accredited investors as well, with a limit on how many we could accept at that phase in our process.
A core premise behind this regulatory path is that GromaCoins are securities–there’s never been any real doubt about this, as they denominate ownership in GromaREIT, and REIT shares are securities. We’ve had a number of discussions with staff members at the SEC throughout this process to explain our plans, as well as with expert lawyers on these subjects. The goal is to ensure we are taking the right steps forward in a compliant fashion at each phase.
A key part of Groma’s regulatory approach under the current system is that our blockchain infrastructure runs in parallel with existing legal frameworks for asset ownership. Ownership of the properties that make up the Gromabase is recorded in the standard way in local registries of deeds and also with Groma’s property NFTs. Ownership of shares in GromaREIT is recorded with a standard transfer agent and also with GromaCoins, the fungible ERC-20 tokens we use to denote ownership on chain.
Legal ownership is currently based solely on the legacy record systems, but we expect that, in the future, regulatory changes will allow blockchain-based records to serve as the legal source of truth for ownership. Massachusetts is already taking some early steps towards making this a reality–Groma has worked with members of the House Blockchain Caucus to advance H71, which would launch a pilot program to explore the use of blockchain-based registry of deeds records.
As Groma progresses and gains traction, what are your long-term goals in real estate and web3?
Groma’s core goals are to enable more people to own more real estate, create technology to turn rent payments into distributed ownership of real estate and provide a platform for better governance and monetary systems. We believe that the world works better when everyone owns a part of it, and we plan to change the ways in which people interact with real estate and currency in order to make it easier for more people to build wealth and participate in the development of the cities around them. Our existing systems of real estate and currency put people on too unlevel of a playing field, and Groma aims to fix this.
How do you plan to scale your operations to meet the evolving needs of investors and property owners?
As it stands, a huge portion of the productivity gains associated with people’s labor (and their capital too, though that’s relevant to a smaller subset of people) is captured by land rents. This dynamic results in significant incentive misalignment and economic distortion, not to mention basic unfairness. We expect enabling more people to have a financial stake in the modern economy via distributed land ownership will go a significant way towards fixing this dynamic.
Similarly, the US dollar and most other fiat currencies are falling short of being good stores of value–a key part of being an effective currency–because of structural features of the US financial system. High inflation means that anyone who holds cash is effectively being stealthily taxed to benefit parties closer to the “money printer”, i.e. primarily large financial institutions. This is particularly relevant for lower-income people, who are more likely to hold a significant portion of their wealth in cash or checking/savings accounts. We believe it’s important to provide alternative currency options that are more transparent in terms of their governance and less likely on average to depreciate in value.
About the Author - Gabon Williams is a software security engineer who has worked as a venture capitalist, startup CTO, and a web3 developer. He is committed to empowering individuals and imparting compassionate leadership skills through mentorship. He also volunteers to promote technology and financial literacy to underprivileged students. Gabon shares his expertise on a range of topics through his blog, where he focuses on empowering others to achieve their full potential.