Transforming Housing Search And Finance: The Impact of Digitalization

Mortgage News May 15, 2023

The rise of big data and data analytics has revolutionized the housing market, providing more opportunities for individuals who were previously shut out of certain markets. However, new research from Harvard’s Joint Center for Housing Studies (JCHS) has shown that while these technological advancements have potential, carefully designed regulations and public policies are needed to ensure that fair housing goals are met.

One working paper, “Digitalization of the Housing Search: Homeseekers, Gatekeepers, and Market Legibility,” found that while online housing searches offer more options, neighborhoods with mainly Black or Latino residents contain less information about the amenities of the units and neighborhoods compared to similar neighborhoods where non-Hispanic whites make up the majority. As a result, the benefits of digitalization concentrate in already-advantaged communities, reinforcing patterns of residential sorting and segregation.

In order to tackle this issue, policymakers, regulators, and practitioners have the option to utilize the data generated to improve their comprehension of market circumstances and create effective strategies to tackle challenges, including affordability. They could also restrict platforms from exploiting personal information to create targeted advertising campaigns or screening requirements that might go against the principles of fair housing. Additionally, they could require that platforms used in housing searches include information about both units and neighborhoods and ensure that disadvantaged communities can easily access the information.

Another working paper, “Algorithms for All: Has Digitalization in the Mortgage Market Expanded Access to Homeownership?” noted that while digital and mobile technologies, digital advertising, big data, and Artificial Intelligence (AI) have the potential to expand access to mortgages, evidence that this is happening is lacking and inconclusive. In some cases, digitalization could even worsen discriminatory practices.

The need for public policies to govern digitalization is crucial to ensure that algorithms produce outcomes that comply with fair housing and anti-discrimination laws and set limits on the use of personal data. However, there is still a need for clarity about key values and goals to combat disagreement about what fairness means for previously redlined neighborhoods and their residents. Through careful consideration and regulation, digitalization could lead to a fairer and more equitable housing market for all.

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