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Using AI in Tenant Screening Faces Growing Backlash

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Franco Faraudo & Holly Dutton
October 14, 2024

Presented by Elevated Living

Propmodo Focus

Greetings!

Today’s email is brought to you by Elevated Living. Learn to save money and simplify multifamily operations by consolidating 7+ resident apps, vendors, and services.

The multifamily industry has had a good run for the last few years. Unlike other asset types like office multifamily has seen consistent demand that has fueled continued rent growth. Rising interest rates did not spare multifamily owners, though. Many are feeling the burn of cap rate compression, particularly if they had purchased the buildings when cap rates were at all time lows during the pandemic.

The silver lining to the rising interest rates is that it has slowed down the amount of new multifamily slated to come online. In June of this year, reports came out that multifamily housing starts had plummeted, dropping over 50 percent year over year. This drop in new housing units will keep housing in demand for the foreseeable future but will likely exacerbate the continued housing shortage.

Less housing might mean more rent growth in the immediate future, but it could also set off a chain reaction that could hurt the multifamily industry in the long run. Cities and states are already starting to implement rent control measures that can limit the amount that owners are allowed to raise rent and can even make it harder to evict tenants. There have even been attempts to create a national rent control law that would negatively impact corporate landlords in an attempt to make housing more affordable.

Rental apartment owners have never been a well liked group but (no) thanks to rising housing costs and the ongoing prosecution of pricing algorithms like RealPage’s YieldStart software politicians and regulators are scrutinizing the multifamily industry more than ever.

Now, let’s dig in!

Using AI in Tenant Screening Faces Growing Backlash

AI in tenant screening is increasingly adopted by landlords, with two-thirds utilizing these tools. However, backlash has arisen due to lawsuits claiming discrimination against Black and Hispanic applicants, notably a $2.28 million settlement involving SafeRent Solutions. In response, HUD issued guidance to protect renters from bias in AI algorithms. While industry groups acknowledge AI's benefits in efficiency and transparency, they advocate for oversight to prevent negative outcomes without hindering innovation.

READ ONLINE: https://propmodo.com/using-ai-in-tenant-screening-faces-growing-backlash/

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READ ONLINE: https://propmodo.com/multifamily-buildings-generate-revenue-and-increase-noi-with-resident-services/

Insider Insights

New or nothing
The preference by investors for newer buildings is clear. Recent data from Berkadia shows that over the last two years 80 percent of all of the multifamily buildings over $50 million that have sold have been newer than 2017.

Fear of sharing
Technology companies that supply the multifamiy industry are concerned that the fallout from the RealPage lawsuits will make it harder or even illegal to share important data on their platforms.

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Propmodo Focus is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

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