HUD Issues Guidance on AI Usage

The U.S. Department of Housing and Urban Development (HUD) has released guidance addressing the application of the Fair Housing Act to two areas in which the use of artificial intelligence (AI) poses particular concerns: the tenant screening process and its application to the advertising of housing opportunities through online platforms that use targeted ads.

HUD’s announcement on AI is in accordance with President Joe Biden’s Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence, released in October 2023, which called on HUD to provide guidance to combat discrimination enabled by automated or algorithmic tools used to make decisions about access to housing and in other real estate-related transactions.

“Under this Administration, HUD is committed to fully enforcing the Fair Housing Act and rooting out all forms of discrimination in housing,” said HUD Acting Secretary Adrianne Todman. “Today, we have released new guidance to ensure that our partners in the private sector who utilize artificial intelligence and algorithms are aware of how the Fair Housing Act applies to these practices.”

Digital applications in the screening process

HUD’s “Guidance on Application of the Fair Housing Act to the Screening of Applicants for Rental Housing” describes fair housing issues created by tenant screening practices, including the increasing use of third-party screening companies to aid with tenant screening decisions and the emerging use of machine learning (ML) and AI. The guidance also suggests best practices for fair, transparent, and non-discriminatory tenant screening policies, for both housing providers and companies that offer tenant screening services.

“The Fair Housing Act prohibits discrimination on the basis of race, color, national origin, religion, sex (including gender and sexual orientation), disability, and familial status,” said Demetria McCain, Principal Deputy Assistant Secretary Fair Housing and Equal Opportunity. “Housing providers, tenant screening companies, advertisers, and online platforms should be aware that the Fair Housing Act applies to tenant screening and the advertising of housing, including when artificial intelligence and algorithms are used to perform these functions.”

Housing providers and tenant screening companies both have a role to play in ensuring that tenant screenings are transparent, accurate, and fair. The tenant screening guidance makes clear that use of third-party screening companies, including those that use AI or other advanced technologies, must comply with the Fair Housing Act, and ensure that all housing applicants are given an equal opportunity to be evaluated on their own merit.

Advertising compliance with the Fair Housing Act

HUD’s “Guidance on Application of the Fair Housing Act to the Advertising of Housing, Credit, and Other Real Estate-Related Transactions through Digital Platforms” notes that violations of the Fair Housing Act may occur when certain ad targeting and delivery functions unlawfully deny consumers information about housing opportunities based on the consumers’ protected characteristics. Violations of the Act may also occur when ad targeting and delivery functions are used, on the basis of protected characteristics, to target vulnerable consumers for predatory products or services, display content that could discourage or deter potential consumers, or charge different amounts for delivered advertisements.

HUD’s guidance outlines how ad platforms have provided a range of tools for advertisers to select their intended target audience for ads, including audience categorization, custom audience, and mirror audience tools.

“Audience categorization tools” refers to tools that ad platforms offer advertisers to segment and select potential audiences by category, such as gender, age, income, location, interests, activities, or connections. These audience categorization tools may take different forms, such as drop-down menus, toggle buttons, search boxes, or maps, and may allow both inclusion and exclusion functions.

“Custom audience tools” deliver ads to an audience specified by an advertiser. These tools may function by prompting an advertiser to upload a list of identifying information such as phone numbers, emails, or names, and then delivering ads only to members of that audience. Advertisers may acquire these lists from existing customer databases, data brokers, or other sources. Custom audience tools may also function by identifying consumers who have taken a specific action tracked by an advertiser or ad platform, such as visiting a particular website, making a particular purchase, attending a particular event, or interacting with a particular person or organization.

“Mirror audience tools” are designed to find consumers who are similar to or mirror consumers on a customized list—also called a ‘source audience.’

According to HUD’s guidance, the use of custom and mirror audience tools for housing-related ads may violate the Fair Housing Act when the source audience is limited by protected characteristics, and when mirroring functions to introduce, replicate, or enhance such limitations.

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Eric C. Peck

Eric C. Peck has 25-plus years’ experience covering the mortgage industry, most recently serving as Editor-in-Chief for National Mortgage Professional Magazine. He graduated from the New York Institute of Technology, where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books, and has served as Copy Editor for
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