The rental real estate market has been one of the fastest adopters of AI tools and technology. In just a few short years, a formerly personal, human-to-human process has largely moved online and is now driven by AI. The days of calling or emailing a landlord about a property, trying to make a good impression at a private showing and filling out a paper application are largely a thing of the past.
Today’s real estate rental process is streamlined and efficient, but also highly impersonal and transactional. Ahead, learn about the different ways AI is being used in the rental process — and ways it’s making things more complicated — with help from three real estate professionals.
Automation of the Rental Process
In today’s rental market, most, if not all, of the rental process is automated using AI software. “Property marketing can now be done at a much bigger scale, faster with the help of AI tools,” Johana Williams of Utopia Management in San Diego says. “Uses include generating rental descriptions, writing listings and marketing copy, AI staging, virtual tours and 24/7 customer service chatbots.” Automation certainly streamlines the rental process for both tenants and landlords, but leaves little room for nuance or personal circumstances, putting tenants at a disadvantage. AI tools are also often used to screen tenants and accept or deny applications based solely on income and credit scores.
Algorithmic Pricing and Rent Setting
AI pricing tools analyze competitor prices, occupancy rates, and tenant demand to determine what it considers a fair market rate. AI-generated prices are convenient and lucrative for landlords, but leave no room for tenant negotiation. “In the past, a landlord might lower rent slightly for a strong applicant or long-term tenant,” Patrick Connelly of The Connelly Team says. “When pricing is steered by software, these types of adjustments typically occur less often. As AI-assisted pricing becomes more commonplace, renters may also see rents adjust more frequently to changing market conditions.”
Another concern is when multiple owners with large holdings use the same or similar pricing tools in the same market; they could inadvertently and artificially drive up rental rates.
“Early last year, San Diego and other major market cities passed ordinances banning algorithmic rent-setting, backed by the argument that algorithmic pricing facilitates coordinated pricing among landlords, putting tenants at a disadvantage,” Williams says. “I think it was a good move.”
Reduced Human Contact in Leasing
As more of the rental process is automated by AI-driven software, tenants may complete it without human interaction. “The listing is generated automatically, the apartment is shown via a virtual tour, and the application is evaluated by an algorithm. This saves time for owners, but the downside for tenants is that the system can make a decision without explanation or the opportunity to discuss their situation,” real estate investor Shawn Zar says.
Instead of speaking to a landlord or property manager to ask questions, renters are limited to the answers an AI chatbot can provide. Virtual tours are a convenient way to view an apartment, but fail to give renters a true feel for the property, neighborhood and landlord. This over-reliance on technology can also be difficult for elderly renters to navigate.
AI-Induced Market Noise & Scams
Property managers and landlords may love how easy AI software makes it to quickly generate and distribute listings across multiple platforms, but scammers do too. AI-generated photos and fraudulent listings are becoming more commonplace, making it increasingly difficult for renters to distinguish between real and fake listings. AI marketing software can also bombard renters with advertisements and listing information, increasing online market noise that follows them wherever they go online.
Algorithmic Bias and Discrimination Concerns
“There are concerns that AI tools are unfairly rejecting applicants based on certain characteristics because they don’t take all individual nuances to account,” Williams says. This can include issues with credit scores or income, as well as eviction and criminal history. A 2022 Consumer Financial Protection Bureau report found that AI-generated background checks often contain unsubstantiated, outdated or incorrect information that is then used to deny an applicant.
Furthermore, applicants have no way to correct this misinformation or even know that it’s been used against them. The report also found that the applicant criteria used by AI-assisted screening tools often target applicants from marginalized communities.
FAQ
Is AI contributing to higher rents?
There is concern in larger markets that AI rent generators are contributing to higher rents, especially given that most management companies use the technology.
Can renters opt out of AI-driven processes?
Seek out smaller mom-and-pop landlords for the best chance of a personal, human-based interaction and application process.
About the Experts
- Patrick Connelly is a licensed real estate salesperson with The Connelly Team in Hampton Bays, NY.
- Johana Williams is regional manager for Utopia Management, a property management company based in San Diego.
- Shawn Zar is a cash homebuyer and investor with sell-my-house-fast.com.
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