Report comes during shocking housing affordability crisis and Trump Administration actions to make housing more expensive
Government watchdog report highlights how the real estate industry’s use of artificial intelligence and PropTech can distort housing prices, perpetuate housing discrimination, reduce market transparency, and limit access to credit.
Full Report (PDF)
WASHINGTON, D.C. - Today, the Government Accountability Office (GAO) released a new report, Property Technology for Homebuying: Products Present Benefits and Risks Amid Evolving Federal Oversight. The report reviews the impact of online real estate platforms, automated valuation models, automated underwriting systems, and electronic closing products on homebuyers. This is the second report GAO has published in response to the call from Congresswoman Maxine Waters (D-CA), Ranking Member of the House Financial Services Committee, and Senator Elizabeth Warren (D-MA), Ranking Member of the Senate Banking, Housing and Urban Affairs Committee, for GAO to investigate the effects that artificial intelligence (AI) and property technology (PropTech) may have on the housing market and consumers’ access to fair and affordable housing.
Today’s report comes a week after the Trump Administration settled with RealPage in a sweetheart deal that the company called an “endorsement of its existing product.” RealPage has been accused of anti-competitive practices that help landlords illegally raise rents using black box algorithms.
To address the threats from PropTech, GAO called for “The Director of FHFA [to] provide written direction … clarif[ying] FHFA’s expectations for how [Prop Tech firms] are to comply with fair lending requirements and how FHFA will supervise their compliance in light of rescinded supervisory and compliance guidance related to fair lending laws.” The Trump Administration rescinded key fair lending regulations earlier this year.
GAO’s report outlines the risks different PropTech products pose to potential homebuyers and the wider housing market:
- Online real estate platforms pose risks to consumer privacy and can violate fair housing laws: Online real estate platforms like Zillow and Redfin’s use of automated valuation tools can create a feedback loop that distorts housing market prices. Online real estate platforms also pose risks to sensitive consumer data, and their use of AI models can violate fair housing laws by illegally steering consumers of a certain race or other protected class toward or away from certain listings.
- Automated valuation models can be unreliable, perpetuate discrimination, and lack transparency: In addition to distorting house prices, automated valuation models (AVMs) provide almost no insights to consumers on the data and methodology used to compute housing prices. Where data gaps exist, AVM outputs are less reliable. Such models may also perpetuate discrimination by relying on historical housing price data that undervalues housing in communities of color.
- Automated underwriting systems that use AI can perpetuate discrimination in mortgage lending: Automated underwriting that relies on AI models can perpetuate discriminatory practices and biases in mortgage lending, which limits access to credit for borrowers of color. Unlike traditional mortgage lenders, AI models lack transparency and do not disclose their reasons for denying a loan application to applicants.
- E-Closing Tools can pose elevated fraud risks and loss of benefits for borrowers, according to federal agencies and advocates: The GAO found less risks associated with e-closing tools that promote more secure and convenient home purchase closings. However, officials from the CFPB and FTC, as well as consumer advocates, cautioned against increased risks for wire fraud and diminished assistance for borrowers who may benefit from more personalized interactions with lenders.
GAO published its first report on the use of PropTech in the rental market in July titled Rental Housing: Use and Federal Oversight of Property Technology.
While the Trump Administration has worked to dismantle enforcement mechanisms across the federal government, including civil rights enforcement, both reports conclude that more proactive federal oversight and regulation of AI and other PropTech products are needed.
Read the full PropTech homeownership report HERE.
Read the full PropTech rental report HERE.
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