Real Estate, Meet the Bots. Not Everyone’s Amused.

Digs, a purveyor of software for home builders and managers, is doing what many companies are doing these days. It’s revving up the artificial intelligence (AI) tools on its platform. 

With Digs, home builders and deed holders collaborate and store information. They make digital twins to simulate touring or working in the actual homes. Builders, buyers, and homeowners can get information on appliances and their warranties with just a click. A virtual assistant quickly produces detailed responses to spoken questions. 

Expect this kind of building tech to become ever more intuitive to use. Harvard researchers are now looking to developmental psychology to advance AI in building design.

Cool, right? But there’s also the unmercifully profit-focused side of AI. Take a look…

AI Bots Collect Rent

Owners of investment properties famously have to deal with the three Ts: toilets, trash, and taxes.

As Warren Buffett once said: “I always recognized the value of collecting rent checks from tenants, especially when they kept me away from the 3-T’s.”

So it comes as no surprise to see the emergence of AI for handling rental property issues. Recently, The New York Times reported on the growing numbers of investment property owners putting robotic communications (chatbots) to work in real estate management. The “robot landlords” deal with maintenance requests and pester renters to pay on time.

In short, deep-pocketed investment firms are delegating property management tasks to artificial intelligence. The AI trend in rental property automation helps Wall Street investment firms control an increasing share of what used to be called starter homes.

Large institutional investors often claim they control only a sliver of the housing market. But in some areas, these companies have found a foothold to concentrate their control. Real estate data company Redfin showed 26% of available homes going to corporate buyers at the end of 2023.

Meanwhile, homelessness hovers at a record high, as acquiring deeds or making rent payments becomes harder for ordinary people, according to new reporting in The Washington Post.

What the Housing Crash Spawned

After 2008 — when the mortgage market crashed — big data companies started created heat maps of foreclosures. Investor firms could pay rock-bottom prices for those foreclosures. The new online tools helped investment firms find distressed houses to fix and rent out to the legions of people left out of homeownership in the midst of financial turmoil. 

Fast-forward to today. The giant rental firm Invitation Homes controls the income generated by tens of thousands of small houses in and around 16 major cities. The huge financial firm Blackstone Inc. is responsible for taking over existing businesses and merging them into Invitation Homes in 2012. The firm, whose shares are traded on the New York Stock Exchange, rather flippantly says: “That mortgage thing? Yeah, forget that!” and casts itself in a rosy light by adding:

Our founders dreamed of a company that could deliver a consistent, worry-free leasing lifestyle to its residents.

American Homes 4 Rent also controls small houses by the tens of thousands. And Imagine Homes Management, which controls hundreds of houses, keeps buying up inexpensive houses in Pennsylvania, Minnesota, and Ohio. They’re able to pick out areas where jobs and incomes are reliable, yet local populations struggle to measure up to mortgage lenders’ requirements. 

Ever-opportunistic, the company buys cheap houses with high bids, incentivizing sellers to make fast deals. And now, an automated real estate investment firm can use cutting-edge software to find houses, while calculating repair costs versus future returns on the investments. They can make their purchase based on AI analyses of demand for the area.

Wall Street-backed companies don’t have an emotional stake in a house for sale. If the bots say buy, they make offers the current title holders can’t refuse. This creates a feedback loop where ordinary wage earners stay sidelined from buying.  

Indianapolis and Columbus, Ohio are among commercial investors’ top target markets, along with St. Louis, Kansas City, Atlanta, and a number of cities in the U.S. Northeast.

Renters’ Experiences With the Bots

Imagine Homes rents out compact houses through listing websites. Imagine uses data tools to minimize the need for on-site employees. This is just one example of the new breed of tech-enabled companies that buy up rental houses as investment opportunities.

So, how does it feel to rent from them?

Millions of renters across the United States are talking to bots with names instead of real people, as their primary means of communicating with their companies. There’s a mobile app for rent payments. Applications, leases, and work orders are generated online.

Renters at heavily automated properties have told reporters that they don’t personally know anyone at their companies. The residents might see outsourced repair technicians on home visits and that’s about it.

Companies like this needn’t even maintain physical offices in the cities where they rents out homes. Apartment showings become self-guided tours. New residents find information packets on their counters. For many properties, there are no keys — just codes.

In Dayton, Ohio, county housing expert Adam Blake says renters at some other investment properties say they haven’t seen a property manager in years. Blake adds:

A couple of the houses had literally burned down. Some of them had systemic water in the house, and other issues that impacted the residents’ health. But they were still paying the rent because they had to.

Fed-Up in Ohio, Cities Push Back

Cincinnati is fed-up with distant companies buying properties to rent out, and then doubling or even tripling residents’ monthly rental payments. The city itself is now buying out commercial investors to create affordable homes. In 2022, the Port of Greater Cincinnati Development Authority (“the Port”) paid $15 million to a California firm for 194 houses. It’s selling them for under $150K, after investing about $88,000 per renovation.

Dayton, too, has bought up investors’ rental homes to help renters make the transition to deed holders.

Investment firms control at least 9,000 properties throughout Cincinnati and Dayton alone. Ohio is far from done with them. The state is busy preparing for serious legislative moves:

• Senate Bill 334 would impose a 45-day waiting period if a business has the highest bid — allowing renters time to try to match it.

• The Stop Predatory Investing Act would end tax benefits on interest and depreciation for controllers of 50+ single-unit homes. It would also reward businesses that sell back into local communities.

Such ideas have been picked up nationally.

Keep Pushing…

It’s an oft-stated truism that tech is a double-edge sword. Renters are increasingly feeling the pain of being on the impersonal edge. Cities need to follow Cincinnati’s lead, and push back.

Not all cities are in the position to buy out the bot brigade. But at least they should be putting caps on the rentals, and creating support systems for local home buyers.