Free Market

An Innovator’s Perspective on Utah’s Regulatory Sandbox

Running a business is hard. But running a business in an uncertain regulatory environment can be near impossible. For better or worse, some of the laws and regulations at the state and federal levels can be hindrances to innovation and consumer welfare.

That’s where regulatory sandboxes come into the picture.

Regulatory sandboxes create unique regulatory environments that temporarily waive specific regulations for the purpose of experimentation. Regulatory sandboxes enable innovators—both big and small, old and new—to work with regulators and legislators in trialing new products, services, and business models.

Utah has been a leader in the regulatory sandbox movement, creating one of the first universal regulatory sandboxes in the nation. But sandboxes are still new in the US, and stories from businesses participating or applying to participate in the sandbox are scarce. 

That’s why stories like Homie, the Utah sandbox participant co-founded by CEO Johnny Hanna, are crucial gems for informing innovators and making the sandbox better.

Homie, the First Company to “Sandbox” in Utah

Homie is a disruptor in the real estate market. It is a software company whose aim is to help customers buy and sell their homes for a fraction of the commission cost. At the heart of Homie’s decision to apply for Utah’s sandbox is the regulation governing their affiliated real estate brokerage and title company businesses. 

Before 2019, Utah regulations prohibited affiliated businesses from merging with title companies and real estate brokerages. However, in 2019, Utah passed a law that created the “30/70 Rule.” In essence, the 30/70 Rule allows a merger between title companies and affiliated real estate brokerages so long as at least 30 percent of the title company’s business comes from unaffiliated business. 

Soon after this rule was passed, Homie entered the title insurance business by acquiring Investors Title Insurance Agency. But the merged company discovered it couldn’t find enough competing realtors to do business with the new title company, meaning Homie couldn’t come into compliance with the 30/70 Rule. 

As Hanna put it, “We worked as hard as we could to get realtors to send business to our title company. Not a lot of realtors wanted to send business to Homie Title. We got up to 20%, but after a while they… decided not to support Homie, who’s taking their commissions and giving them back to consumers, and that’s understandable.”

What the Sandbox Means for Homie and Consumers

Now that Homie is participating in Utah’s regulatory sandbox, the merged real estate company and title company can show its effect on consumers. According to Mr. Hanna, this data will show that Homie’s business model is not a threat to consumers, as the director of Utah’s Division of Real Estate expressed earlier this year

“Now we’ll have 3 years of history to show that we’ve only done good by the consumer: the year we tried to comply with the 30/70 law, the first year in the sandbox, and potentially a second year if our extension is successful.”

More Work to Be Done in the Sandbox

Although Utah leads the nation in offering innovative regulatory solutions, there is always room for improvement to welcome diverse and innovative ideas to the consumers of the state. As the first participant in the sandbox, Mr. Hanna had two succinct suggestions: 

The first is transparency in the application process. “Transparency is a powerful deterrent to harmful industry lobbyists because it allows the public to learn for themselves what’s going on. I thought the sandbox was great. If the process was more transparent and the public could have come… I would have loved it.” 

Second, Mr. Hanna suggests “a mechanism for reassessing the waived law near or at the end of the sandbox participation period.”

For now, Homie is one of the rare examples of a business working with regulators to test out innovative ideas in a sandbox environment. In the future, as the sandbox is improved through collaboration with companies following Homie’s lead, sandboxes could be a powerful tool for merging innovation with adaptive regulation.

That’s a welcome prospect for innovators, small businesses, and consumers alike.