Artificial intelligence (AI) is transforming nearly every industry, and real estate is no exception. From computer vision analyzing property images to machine learning algorithms predicting home values, AI is being integrated across the real estate sector. As this technology becomes more ubiquitous, the question of ethics comes to the forefront. How can the real estate industry employ AI responsibly and fairly? Examining the role of AI ethics has become vital.

Risks and Biases

Like any technology, AI carries risks if used improperly. AI systems designed for real estate rely heavily on data analytics. Historical data is used to train algorithms to estimate property values, find spatial patterns, automate valuations, and more. However, if biased or discriminatory data is utilized, AI risks automating and propagating prejudice. For example, algorithms could inadvertently discriminate based on racial demographics within neighborhoods when making housing or lending decisions. Identifying and correcting biases is crucial.

Transparency around AI real estate systems is also paramount. If the public lacks an understanding of how an algorithm arrives at a decision like estimating a home’s value, it becomes difficult to contest unfair determinations or inaccurate outputs. There should be accountability and explicability around AI tools, striking a balance between innovation and oversight.

Establishing Principles

To address ethical pitfalls, many companies have worked to establish principles for AI development. Most guidelines coalesce around similar themes - being fair and inclusive, transparent in capabilities and limitations, accountable for decisions and actions, keeping privacy at the center, and being reliable and safe.

Turning these AI-guiding tenets into action starts during the design phases. Companies should implement fairness toolkits to mitigate prejudice, use techniques like data anonymization to protect privacy, quantify uncertainties around predictions, audit algorithms for fidelity, and enable mechanisms for redress in case of disputes. Having humans continuously oversee and validate automated systems adds another layer of vigilance.

Government Action

State and federal policymakers have additionally stepped up to guide the ethical handling of real estate AI and data. In 2019, Congress introduced a discussion draft bill called the Algorithmic Accountability Act which would require entities to assess automated systems for impacts on accuracy, fairness, bias, discrimination, privacy and security. While stalled in the legislature, this bill represented how governments are beginning to recognize the need for AI governance.

More recently in 2022, the state of Vermont signed first-of-its-kind legislation to regulate real estate valuations after racially biased appraisals gained public attention. The law mandates evaluating whether race and ethnicity impact property estimates generated by automated valuation models. It further establishes an advisory board to craft future policies and auditing procedures around such software. As AI permeates across real estate, government authorities will likely continue pioneering AI ethics laws.

Industry Self-Regulation

Aside from government actions, real estate trade groups have advanced voluntary standards around AI fairness. The Appraisal Institute, a global association for appraisers, recently outlined best practices which include auditing algorithms to ensure valuation models do not create or follow discriminatory patterns.

Meanwhile, the National Association of Realtors amended its code of ethics in 2020 to expressly prohibit bias and mandate understanding how emerging tech like AI could adversely impact communities. Other real estate professional societies will need to follow suit in providing AI guidance tailored to their specializations.

Home Buyers and Ethical AI

The onus does not solely rest upon real estate companies and appraisers to ensure ethical AI. Home buyers and tenants should also pay attention to how AI affects their experience. Be inquisitive about what data a realty site uses to recommend listings. Research lenders’ application scoring methods. Review valuations for objectionable inconsistencies.

As public awareness grows around AI transparency and accountability, clients can help drive change by supporting brands that share their AI ethics values. Market demand for ethical systems could further compel the industry to confront biases and improve AI responsibility.

The Way Forward

AI promises to add convenience, analysis and automation across diverse real estate needs from property searches to home inspections. But while innovation plows ahead, deliberation around ethics cannot be left behind. Companies, governments and consumers will need to jointly confront pitfalls like unfair bias while finding ways to equitably integrate AI. Only through collaborative action can the real estate domain truly unlock AI’s potential.

About the writer: Subrao Shenoy is CEO of planetRE that hosts a variety of Generative AI Solutions for Real Estate (Aelo.AI and chocolatechips.ai). He has run a successful proptech company for over a decade with experience of automating millions of transactions across the nation. He also owns seminal patents in CRM, Property Search, and Blockchain /AI .