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Rep. Maxine Waters of California, the top Democrat on the House Financial Services Committee, has sent a letter to the Honorable Eugene Dodaro, Comptroller General of the U.S. for the Government Accountability Office (GAO), expressing concerns about instances in which the use of Artificial Intelligence (AI) and other housing and property technology (proptech), such as automated valuation models (AVMs), online housing platforms, tenant screening companies, and rent-setting companies, have been shown to lead to increased housing costs, discrimination, and other barriers to fair and affordable housing.
Ranking Member Waters requests that the GAO study and assess the impact of AI and proptech on consumers and the nation’s housing market, and report to Congress their findings, as well as any policy recommendations if necessary.
“Many point to technological developments as a source of innovation and efficiency in the housing market. However, there is nothing innovative about technologies that generate corporate profits while neither improving consumer affordability nor increasing access to housing for all,” said Rep. Waters. “In light of these mounting concerns, and the lack of transparency among many of these companies, I ask that GAO analyze the effect these entities may have on consumers and the U.S. housing market and report to Congress. I also request that in its reporting, GAO provide policy recommendations, as appropriate, for relevant Federal agencies and Congress to consider in addressing these effects, as well as any gaps in federal data, oversight, and regulation.”
In her letter, Rep. Waters notes that many online platforms rely on algorithms, as well as machine learning, to scale up their business services that help advertise housing, determine home values through Automated Valuation Models (AVMs), and make loan pricing decisions.
“However, it is not always clear how the algorithms come to the decisions they make or whether the algorithms are furthering bias,” noted Rep. Waters. “In some cases, the use of such algorithms and other company policies and practices have been demonstrated to have discriminatory outcomes. A 2022 redlining and housing discrimination lawsuit against Redfin demonstrated how an online real estate services company offered disproportionately fewer or no services in zip codes with predominately non-White residents compared to zip codes with predominately White residents due to company policies, such as offering services based on a minimum housing price. This shows why it is integral that when entities rely on artificial intelligence, the development and implementation of these technologies are evaluated for transparency, explainability, privacy, and fairness.”
Rep. Waters cited research from a team at Berkeley from a paper titled “Consumer-Lending Discrimination in the FinTech Era.” The team from Berkley found that both face-to-face and fintech lenders charge Latinx/African-American borrowers 6%-9% basis points higher interest rates for purchase mortgages, consistent with the extraction of monopoly rents in weaker competitive environments, and from profiling borrowers on shopping behavior. In aggregate, Latinx/African-American paid $750 million per year in extra mortgage interest. The research Waters cited found that fintech algorithms have not removed discrimination, but two silver linings emerged, as algorithmic lending seems to have increased competition or encouraged more shopping with the ease of applications, and while face-to-face lenders discriminated against minorities in application rejection, there were reasons to believe fintechs may discriminate less.
“I am also concerned about skyrocketing housing costs that are often a cause of evictions and homelessness,” said Rep. Waters in her letter. “Today, median rents are topping $2,000 per month, and the average U.S. renter is paying more than 30% of their income on rent, the highest levels recorded. Meanwhile, recent reporting has highlighted the concerning role that rent setting algorithms, like those offered through RealPage’s YieldStar software, may play in using private data to artificially inflate housing costs in ways that may also pose anti-trust concerns.”
And despite the GSEs’ use of their own proprietary tech tools, Rep. Waters is still imploring the GAO to dig deeper into the tech tools utilized in the housing space.
“I am pleased that the CFPB and FRealPage’s YieldStar softwareare investigating these issues and have sought public feedback, but there is more that can be done,” added Rep. Waters. “Many point to technological developments as a source of innovation and efficiency in the housing market. However, there is nothing innovative about technologies that generate corporate profits while neither improving consumer affordability nor increasing access to housing for all. In light of these mounting concerns, and the lack of transparency among many of these companies, I ask that GAO analyze the effect these entities may have on consumers, and the U.S. housing market and report to Congress. I also request that in its reporting, GAO provide policy recommendations, as appropriate, for relevant Federal agencies and Congress to consider in addressing these effects, as well as any gaps in federal data, oversight, and regulation.”
Click here to read Rep. Waters’ full letter to the GAO.
