A DR Horton sign stands in front of a home under construction at the Eastridge Woods development in Cottage Grove, Minnesota.
Daniel Acker | Bloomberg | Getty Images
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DR HortonThe nation’s largest home builder is leveraging artificial intelligence tools from Portland, Oregon-based startup Prophetic to build more homes and address the nation’s housing shortage.
The chronic construction shortage since the Great Recession has created a housing shortage of about 4 million units, according to analysis from multiple sources including Zillow. The imbalance between supply and demand has pushed prices up more than 50% from pre-pandemic levels.
Home builders are trying to respond, but say construction costs are making it difficult, along with the difficult and expensive process of acquiring and developing buildable land.
“One of the biggest challenges in providing affordable housing is identifying, acquiring, and entitlement to land suitable for development. We believe the insights Prophetic provides will help expand homeownership opportunities for hardworking American individuals and families,” Jason Jones, vice president of data analytics at DR Horton, said in the release.
Prophetic has developed an AI-native platform for land acquisition and development analysis. Prophetic’s software retrieves all zoning manuals from every city and county in the state for potential land parcels. It currently operates in 25 states and is expected to be operational in all 50 states by June.
“Collecting tens of thousands of these zoning documents and distilling the rules in a way that is not only efficient but accurate is an incredibly large, tedious, and detail-oriented process,” said Oliver Alexander, founder and CEO of Prophetic.
Among other things, the system looks at minimum lot sizes and minimum or maximum density setbacks, which vary by municipality and zone. These are updated quarterly.
“Then you know where that information is coming from, which is a key differentiator,” Alexander explained. “Having the title of that section and its original page builds trust and makes it very efficient, allowing you to analyze development potential in 30 seconds instead of 2-3 hours.”
Alexander said that in the states analyzed by Prophetics, there are just over 440,000 ways to describe what you are allowed to do on the ground. Developers need to look at all that information and decide whether they can build single-family or multi-family housing on it.
AI analysis based on large-scale language models of these documents can answer questions and feed them into search AI. Alexander calls this a “major unlock.” So it’s a combination of search and zone AI information. At the ground level, this AI allows builders to understand what, where, and how much they can build at a much faster pace, making them more competitive with landowners.
“When you have that advantage in speed to decision-making, you effectively control the entire market because you lock it up before anyone else makes a decision,” Alexander said.
