Authors David Luberoff and Chris Herbert discuss digitalization—or the strategic use of technology to collect, create, process, organize, analyze, use, and monetize data—in a new series of new research papers from the Joint Center of Housing Studies at Harvard University.
According to the authors, the recent digitalization changes have the potential to advance efforts to address challenges related to affordability, equity, resiliency, and livability. The authors note that the recent digitalization push comes with about $100 billion in venture capital funding that started occurring in 2019 and continued through the pandemic.
The changes are already prevalent in some areas such as how investors are finding, buying, leasing, and managing single-family homes, or how consumers search for homes using new digital tools like OpenDoor and Zillow.
Less visibly, automated underwriting tools used by entities like Fannie Mae and Freddie Mac have transformed how mortgages are reviewed and approved.
The research paper makes 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. Such is the cases with tools used by investors to snap up single-family homes, exacerbating affordability challenges experienced by homeseekers.
“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,” Luberoff said. 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,” Luberoff continued. “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.”
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