When applied properly, AI can complement rather than hinder compliance initiatives
AI in Screening: An Emerging Concept That Remains Scary to Some
It is no secret that fraud continues to be a key pain point in the multifamily industry. According to recent research from Forrester, 97% of multifamily organizations have experienced fraud in some form.
To the industry’s credit, fraud-detection efforts have become more innovative—particularly after the pandemic—as fraudsters continue to create new ways to take advantage of rental communities.
Effective fraud prevention, naturally, begins with a robust screening process that uncovers any red flags with potential applicants before they are able to utilize fabricated information, synthetic identities, and other illegitimate means to work their way into the walls of a building.
Now, a new wrinkle has been introduced to fraud detection in the form of artificial intelligence (AI). As it has with almost every tech-related facet, AI is becoming an emerging tool to assist with screening and overall cybersecurity.
In its early stages, however, many operators have been reluctant to incorporate AI into their screening processes for a few reasons—the newness of this powerful tool and Fair Housing Act concerns among them.
While multifamily organizations want to create a more effective application process, they also want to ensure that the process is fair and doesn’t discriminate against protected classes.
While it’s understandable to be concerned about potential biases within machine-learning algorithms, the truth is that many operators are already using some form of a rules-based algorithm or a statistically validated scoring model to make decisions around credit worthiness, such as FICO.
Concerns are certainly valid that using AI in the screening process might trigger a Fair Housing issue, but it can only happen when utilizing AI that doesn’t intentionally take these laws into account.
Fortunately, regulatory compliance and AI do not compete with each other but can actually complement one another when applied properly. This underscores the idea that operators can utilize AI and be compliant, but they have to make sure to choose the correct partner.
Selecting the Right AI Partner
When vetting an AI partner, it’s paramount to find one that values both efficiency and equality. It’s equally important to find one with the ability to consistently apply your organization’s approval criteria to every applicant, regardless of age, ethnicity, nation of origin, or any disabilities.
The partner also should be conscious of any potential biases and actively monitor the models to ensure bias and hallucinations don’t creep in. Additionally, the partner must demonstrate that they have built their models to be aware of and incorporate any compliance obligations.
With that, you’ll want to make sure that the provider is only using data of the highest quality to incorporate into their screening algorithms. AI is only as good as the data it’s trained on, but it’s also only as good as the data you have to pull from.
Free Rental Application
Get 20 Rental Forms for FREE, including a rental application.
When building your database, it is paramount to make sure the data is consistent, accurate, complete, current, relevant, standardized, and follows data governance and security policies. If any of these areas are lacking, it could hamper your ability to make correct decisions for your business.
While it can be unsettling to let technology be in control, AI used with the right intent and built in such a way to eliminate biases against protected classes outlined in Fair Housing can significantly accelerate the application process and save time for your team members. It can create an end result that is at once equitable and efficient.
Keep in mind that you don’t have to relinquish total control to AI. It’s highly recommended to implement a “driver-assisted” model, in which your team sets the rules and can jump in and take over for AI at any point in the leasing journey.
AI-Related Screening Benefits
Many operators understand that AI can assist in the screening process but find the potential capabilities somewhat ambiguous. They want to know precisely how AI can help.
For starters, look at the time-consuming processes that can be eliminated, just as you would when determining how AI can assist with traditional leasing. In the screening process, look at manual, time-consuming processes such as analyzing rental and criminal history criteria, verifying identity, and examining financial factors beyond income verification, such as debt-to-income ratio.
Pairing AI with existing fraud tools, such as identification software, can help uncover whether someone is using an incorrect name, address, Social Security number, or is falsifying pay stubs. Essentially, it’s the same things you are looking for in your normal fraud prevention efforts, but AI can make it a faster process and help identify potential fraudsters as early in the funnel as possible.
Some of the older systems were able to catch some of these discrepancies—but not everything—and AI enables any fraud to be detected earlier and makes the entire system more efficient and accurate than ever.
Gaining Steam
While using AI to screen residents for factors beyond credit worthiness remains in its infancy, AI in itself is hardly a new concept for the industry. Chatbots are powered by AI, as are many of the marketing automation tools that have become something of a must-have for many organizations.
As with these concepts, AI as a screening tool will only gain traction. While it’s understandable that some operators have some pause about taking the leap, hopefully many fears about partnering with AI providers have been alleviated.
AI can vastly improve the application process, saving countless hours of busywork spent by teams reviewing applications, and it can increase satisfaction among applicants by reducing much of the friction associated with signing a lease.
When deciding to move forward, don’t forget to be thoughtful about the partners you choose to build your screening algorithms. Make sure they consider the various factors surrounding Fair Housing regulations and incorporate all criteria you deem important.
With that criteria applied consistently to every applicant, you won’t have to worry about whether or not you’re violating Fair Housing regulations. Subsequently, the number of fraudulent applicants who sneak through the cracks will be significantly reduced.
Source: Multifamily Executive
Accessibility