Meet James M. Nelson

An Expert on the Housing Industry and Economics

James M. Nelson

…has nearly 40 years’ banking experience, including work as a Federal Banking Regulator, agricultural and commercial lending, and ultimately owning his own banking services company. With nearly as much real estate experience, Nelson’s work as a licensed commercial broker has included many multifamily projects.

about the books

To understand the housing crisis more fully, an economic four-part study was completed covering all stages of the property life cycle. The broad research provided a clearer picture of what is happening in the markets and the industry and how the various segments interact to create our current affordable-housing crises. The four-part study underpins the two books. Between late 2018 and August 2022, the author spent over 5,500 work hours on its production. It includes over 2,500 cited references from over 10,000 pages of documents and nearly 500 quotes from industry insiders. The first three parts are summarized in Book 1, and the remainder in Book 2. For additional information on each of the studies, see each book below.

Book 1, Stealing Home, How Artificial Intelligence Is Hijacking the American Dream

Study 1, HUD’s Lending Practices
The first study’s objective was to determine whether the Department of Housing and Urban Development (HUD) and, more specifically, the Government Sponsored Enterprises (GSEs)—Fannie Mae and Freddie Mac are administering their underwriting programs for loans following HUD regulations, policies, and procedures. Additionally, we looked into the Shadow Banking industry, which processes two-thirds of all housing transactions and is unregulated--no one is watching, and no one is listening. Additionally, the study examines whether HUD fulfills its mission statement for affordable housing.
Study 2, HUD’s Regulators
The second study examines the regulator, The Consumer Financial Protection Bureau (CFPB). Who are they, what is their purpose, and why are they essential to the American Taxpayer and consumer? Also, the Federal Housing Finance Agency (FHFA), conservator and regulator of the GSEs and its [FHFA] Office of Inspector General (OIG), and their more than 425 records weigh in on the matters.

Study 3, The New Breed of Investors and the Changes they are Pushing on HUD
The third study centers on HUD's current status and the industries' drive to privatize its lending arm, Fannie Mae and Freddie MAC [however, the effects of COVID-19 have impacted this timeline]. HUD is acquiring the same AI technology (RealPage) property managers utilize in the multifamily housing markets. HUD Secretary Ben Carson personally managed the AI implementation process; however, he used third parties. We investigated those implementing the technology and what they aimed to accomplish. The study also examines HUD’s decision to change the disparate impact rule, a move that fair housing advocates claim is part of the GOP’s effort to “gut” federal protections against housing discrimination. Did HUD Secretary Carson intend to grant qualified immunity to the Platform?

Book 2, The New Landlord, Powered by Big Data and Artificial Intelligence

Book 2 (Short intro)

Coming Soon

The new Digital Operating Platform (DOP) Changed our Economy

The introduction of AI-powered technology ushered in the transition from an oil-driven economy to a data-driven economy representing the largest economic development in the last 100 years. It was introduced to the rental industry in 2002; they use the RealPage DOP (referred to as Platform). Through the Platform, landlords access and share all data on their applicants, tenants, and properties. They jointly employ numerous algorithms that use the shared data to price their rental units for them, thus suppressing competition. It provides a 50% advantage over its non-using competitors. This book details how they implemented the data-driven economy in the rental housing industry.

The RealPage and Experian Two-Sided DOP Connection

In 2019, RealPage acquired a dedicated AI-based screening algorithm. It's uniquely supported by a two-sided DOP with Experian. Two-sided platforms solve a transaction-cost problem that makes it difficult for agents in different industries to get together—in this case, renters, landlords, and Experian, to exchange massive amounts of near-perfect in-real-time data. Although its original purpose was to gather and obtain tenant data for the pricing algorithm, their relationship now extends much deeper into all phases of the tenant life cycle. It provides its users an enormous advantage by decreasing losses by 80% while doubling their profits. However, the Platform and its third-party providers have assumed broad authorization and permission to access the data. Failing to adequately disclose how they collect tenant data, use it, and disseminate or share it. However, at what point does unregulated data gathering become an invasion of privacy?

They use the Economic Occupancy Program to Price their Rental Units

They use economic occupancy, the effective rent rate, and the total revenue generated on a property. The goal of the pricing algorithm is generally referred to as the 'Optimum Mix Equation,' i.e., the highest revenue combination of rents and ancillary revenues vs. the lowest occupancy possible. It's a program that focuses on balancing supply [housing units] and demand [the tenant], i.e., market manipulation. They claim they can incrementally increase rents indefinitely when the market is balanced. It parallels the pre-1960s bait and switch program used in the banking industry, which artificially increases the spread between the effective rate of return over the stated rate. However, until now, the program lacked the AI-driven power to adequately harness its ancillary generating potential. The study concluded that they could increase that spread by up to 35% over the advertised rate of rent. However, the initial calibration studies discovered that maximizing profits requires them to price out the poorest 15% of households. Therefore, one of the questions we set out to answer was, is the Platform responsible for the homeless crisis?

Consolidations and Deep Interconnections Created Market Power

The Seattle Concentration Study concluded that property managers price up to 95% of all rental units through the Platform. This group is considered profoundly interrelated and interconnected. For example, roughly half of all rental units are priced by a small group of managers (13) who originate from a single company. Thus, these culturally connected companies, integrated with deeply connected communications and cooperation through the Platform, are powerful proof of a cartel. Additionally, the research provided insight into the ability of their market power to manipulate rental rates. For example, in 2014, membership achieved a 16.42% growth rate in rental units priced on the Platform, driving a 40% increase in rents. Powerful proof that a direct correlation between market share and the ability to influence pricing exists.

The Platform was Designed to Circumvent Fair Housing Laws

It isn’t news to anyone that systemic racism is an issue in America. What might surprise people to hear, however, is that new, modern AI technology is being used to further cement racism into our current housing system. So, what exactly is happening here, and just how widespread is this practice? In 2016, there were 28,181 registered housing discrimination complaints left unanswered. Also, 91.5 percent of all acts of housing discrimination occur during the prescreening process [all hidden within the algorithms]. Chapter 9 details that rather than change its perspective on Fair Housing and Civil Rights, the Platform is embracing qualified immunity as the means to avoid fines for breaking the law.

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Book 1 (Short intro)

Stealing Home: How AI is Hijacking the American Dream

The Government Sponsored Enterprises (GSEs), Fannie Mae, and Freddie Macs’ Risky Lending Practices

The Office of Inspector General (OIG) concluded that the Federal Housing Finance Agencies' oversight of the GSEs was weak. Directors responsible for approving the quality and types of loans had been purposefully kept out of the decision-making process. In one transaction, the FHA, through its approved lenders, insured more than 9,500 illegal loans worth $1.9 billion. The research concluded that the GSEs had not strengthened their underwriting criteria since the 2008 market crash. Even more troubling is the enormous risk from the Shadow Banking System, which processes over two-thirds of all housing transactions. They remain unregulated and, worse, uninsured from financial crashes--no FDIC insurance here. Yet, the Taxpayer remains the guarantor to that $7 trillion housing debt, much of which consists of nonrecourse loans to billionaires. Further, many of the loans are based on subprime qualifications. Risk is growing exponentially within the financial bubble.

The Investors have Pushed FHFA into Chaos

Additionally, HUD played a significant role in the 2008 Great Recession. Fannie Mae and Freddie Mac, The Enterprises, were reportedly the recipients of $191.5 billion in taxpayer bailouts. Do we see a repeat of HUD’s role in another pending economic crash, or has HUD been tamed? Prudent policy and procedures have been bypassed and overlooked, as pointed out repeatedly by the OIG. The most basic functions, such as internal audits and exams to ensure the organizations adhere to policies and procedures, haven’t been completed in years. The internal audit program established for the regulator FHFA, at the cost of over $7.7 million to the Taxpayer, sits in shambles.

Additionally, the GSEs haven’t been able to balance their books following GAAP for more than five years. Worst yet, the GSEs’ Allowance for Loan and Lease Losses was deemed unreliable by the OIG as of September 2018. More troubling yet, to this day, the FHFA’s management cannot account for those who have access to the new AI-driven system platform—passcode holders and, more critically, those who hold the highest levels of clearance to all online activity and databases.

AI Technology Powers HUD and its affiliates

The process began with an Executive Order on Maintaining American Leadership in Artificial Intelligence issued on February 11, 2019. On August 14, 2018, Secretary Carson announced that the position of HUD’s chief information officer (CIO) would report directly to him. Chapter 8 details the chronological timeline of the implementation of AI technology, the urgency of the Trump Administration to control it, and the group in charge of implementing it. Furthermore, we answer the question, was it implemented fairly and equitably or based on discriminatory practices?

The Affordable Housing Crisis.

There is a significant financial crisis in the market for affordable housing in this country, with debt backed by the government's guarantee reaching over $7 trillion-the most in US history and far more than in 2008. Compare that to the fact that America has a crippling shortage of over 7 million affordable housing rental units. The book also details that homelessness is a ten-step process engineered by landlords to maximize property owners' profits. The book answers why the crisis exists, who and what is responsible, and what we can do about it as consumers, tenants, and concerned citizens.

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Current Blog Post

The CMBS and the Fed…is there a crisis brewing in the Rental Housing Industry? The Good, the Bad, and the Ugly…

By James M. Nelson | Apr 2, 2021

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“Stealing Home is a brilliantly researched book into why rental prices are escalating throughout the country. We must demand answers from those who can fix this crisis. Nelson shows us what we can and must do to fix this. Reporters, please read and investigate this. Now!”
Julie Blacklow
Former KING-5 Seattle Investigative Journalist

“James Nelson has done the movement for affordable housing a huge favor by writing this explosive new book about Artificial Intelligence technology. Tenants threatened with evictions can fight back against landlord’s greed. Nelson’s research justifies a thorough investigation by the responsible public officials.”
Mike Withey
Human rights lawyer, former president of the Public Justice Foundation

“Nelson’s compelling research correlates artificial intelligence, rising rental prices, and in many cases, discrimination within AI algorithms during a time when we need answers and accountability for sky-rocketing multifamily rental rates.”
T’wina Nobles
President, and CEO, Tacoma Urban League