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Housing Perspectives

Research, trends, and perspective from the Harvard Joint Center for Housing Studies

Bringing Digitalization Home: Can Technology Help Address Housing-Related Challenges?

Digitalization—the strategic use of technology to collect, create, process, organize, analyze, use, and monetize data—is changing how housing is produced, marketed, sold, financed, managed, and used. As Chris Herbert and I discuss in a new working paper, these changes are important because they have the potential to advance efforts to address challenges related to housing affordability, equity, resiliency, and livability. However, securing these benefits–as well as limiting changes that could exacerbate existing problems–will require carefully designed public policies, including many designed to spur action by private and civic actors.

Our paper is the first in a series of papers that were presented at the Center’s March 2022 symposium, Bringing Digitalization Home: How Can Technology Address Housing Challenges. The symposium papers, which the Center will publish over the next few months, focus on changes in five areas: how housing is designed and built; how investments are made in housing; how households search for homes and secure mortgages; how homes are used; and how housing is planned, reviewed, and regulated.

As we note, dramatic changes have already come to many of these areas, spurred in part by over $100 billion in venture capital funding since 2019. Illustratively, a growing number of investors are using digital technologies to find, buy, rent, and manage single-family homes, a shift that has dramatically affected many real estate markets. Platforms like Zillow and OpenDoor have not only changed how people search for homes but also are trying to change how those homes are sold and financed. Less visibly, automated underwriting tools used by entities like Fannie Mae and Freddie Mac have transformed how mortgages are reviewed and approved. And, of course, tools like Alexa, Google Home, and Siri are changing how we live in our homes.

Taken as a whole, the papers from our symposium make it clear that some digitalization-driven changes have advanced efforts to address housing challenges; some seem to be exacerbating problems; and some have the potential to either address or exacerbate challenges. For example, tools like smart thermostats and improved monitoring devices can play a role in efforts to both reduce greenhouse gas emissions from homes and allow more people to age-in-place. In contrast, the increased use of digital tools by investors buying single-family housing appears to be exacerbating affordability challenges and, in some cases, hampering efforts to close the large racial homeownership gap. Outcomes are less clear in other areas, such as whether AI and machine learning can significantly reduce biases in mortgage underwriting. And digitalization has yet to spur significant changes in some areas, such as facilitating increased use of offsite construction techniques that could reduce the cost of building new housing.

Since the impacts of digitalization vary across sectors, different approaches are needed to ensure that these changes not only benefit those who develop and fund them but society as a whole. While these approaches will likely involve the public, private, and civic sectors, the public sector will have to play a central role. Notably, regulatory approaches will be needed in areas where changes seem likely to exacerbate problems. The public sector could, for example, continue and expand efforts such as the recently settled US Department of Justice suit contending that Meta (the parent company of Facebook) had “enabled and encouraged advertisers to target their housing ads by relying on race, color, religion, sex, disability, familial status and national origin.”

By contrast, in areas where public and private goals were more closely aligned, a combination of regulation, investment, education, and incentives might spur and guide private investment. For example, targeted investment might help the Federal Housing Administration develop better tools for assessing mortgage applications while regulations could ensure that entities like Fannie Mae and Freddie Mac do the same. Increasing access to data about investors and investment patterns could improve civic discourse about new housing developments. Targeted grants, education programs, and collaborative standard setting might help spur the growth of offsite construction in housing. Moreover, such incentives could be designed in ways to ensure that the benefits are distributed in equitable ways.

The wide range of potential impacts underscores the need to carefully assess the nature and effect of digitalization-driven changes in housing. While much work is needed before most of these measures can be put in place, we believe the papers produced for our symposium can help lay the groundwork for this important work.