DR Horton signs stand in front of homes under construction in the Eastridge Woods project in Cottage Grove, Minnesota.
Daniel Acker | Bloomberg | Getty Images
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DR Hortonthe country's largest home builder, is using an artificial intelligence tool from Portland, Oregon-based startup Prophetic to build more homes and address the country's housing shortage.
Chronic underbuilding since the Great Recession has led to a deficit of about 4 million homes, according to analyzes from multiple sources, including Zillow. The imbalance between supply and demand has caused prices to rise by over 50% compared to pre-pandemic levels.
Homebuilders are trying to respond, but say construction costs and the difficult and costly process of acquiring and developing developable land make this difficult.
“One of the biggest challenges in providing affordable housing is identifying, acquiring and authorizing properties suitable for development. We are confident that the insights provided by Prophetic will help us expand homeownership opportunities for hard-working American individuals and families,” Jason Jones, vice president of data analytics at DR Horton, said in a press release.
Prophetic has developed an AI-native platform for land acquisition and development analysis. For each potential property, Prophetic's software retrieves every single zoning manual from every city and county in a state. The company said it currently operates in 25 states and expects to be in all 50 states by June.
“It's an incredibly extensive, tedious and detail-oriented process to take tens of thousands of these zoning documents and extract the rules not only efficiently, but correctly,” said Oliver Alexander, founder and CEO of Prophetic.
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The system takes into account, among other things, the minimum lot size and the minimum and maximum density setbacks, which vary by municipality and zone. These are updated quarterly.
“Then you learn where that information comes from, which is the key differentiator,” Alexander explained. “When you have that section title and the page it comes from, it builds trust and then it becomes extremely efficient because you can analyze the development potential in 30 seconds instead of two to three hours.”
Alexander said there are just over 440,000 different ways to describe what you can do on a piece of earth in the states analyzed by Prophetic. Developers must go through all of this information to determine whether they can build a single-family or multi-family home development on it.
AI's large-scale analysis of these documents, based on large language models, can answer the questions and then feed them into search AI, which Alexander calls “the big one” – search plus the zone AI information combined. At the ground level, this AI allows builders to figure out what they can build, where and how much much more quickly, making them more competitive with landowners.
“When you have such a large advantage in decision speed, you effectively control your entire market, because before anyone else can decide, you have them tied up,” Alexander said.