Race, profit, and algorithms: Neighborhood-level analysis of iBuyers’ profit margin
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Race profit and algorithms Neighborhood-level analysis of iBuyers profit margin.pdf
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1.81 MB
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Adobe PDF
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Author(s)
So, Wonyoung
Date Issued
October 29, 2024
Journal
Journal of Urban Affairs
Publisher
Taylor & Francis
Citation
So, W. (2024). Race, profit, and algorithms: Neighborhood-level analysis of iBuyers’ profit margin. Journal of Urban Affairs, 1–21.
Version
Final published version
Abstract
iBuyers are firms that use automated valuation models (AVMs), streamline home buying processes, and provide all-cash offers to purchase homes. Although the previous literature has explored the roles and limitations of iBuyers in the housing market, empirical research on the racial implications of these algorithmic home buying processes remains understudied. Using a spatial lag model, this study shows the spatial clustering of iBuyer profit margins, that iBuyers gain more profits when they resell to individuals than institutions, and that some iBuyers have a statistically significant correlation between their profit margins and the proportion of marginalized racial groups within a census tract, while controlling for individual housing characteristics, neighborhood housing quality and demand, and neighborhood amenities and socioeconomic factors. These findings suggest that the more adeptly iBuyers can forecast housing values, the greater the potential to maximize profits from homeowners in communities of color. Consequently, this research contributes to the understanding of how technological mechanisms operate within a purportedly race-neutral framework and advocates for the development and deployment of algorithmic systems guided by the principles of antisubordination, rather than relying solely on notions of “fairness” and anticlassification.
MIT Department
Massachusetts Institute of Technology. Department of Urban Studies and Planning
Terms of Use
Creative Commons Attribution
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DOI of Published Version
https://doi.org/10.1080/07352166.2024.2415936
