AI in Construction: Builder Beware
Risks must be met with diligence and oversight.
Multi-housing construction continues to remain steady in 2025, and more than 500,000 new units are expected to be delivered before the end of the year, according to NAIOP. With certain states and regions booming with rental demand and population increases, owners, multifamily builders, engineering firms, architecture firms and other industry professionals have doubled down on the use of artificial intelligence to accelerate projects. Yet fast does not always mean good, and AI “hallucinations” can lead to construction defects and legal problems as teams automate tasks that were previously manual.
AI is unique in that it stimulates human intelligence that not only analyzes information but can create it. Construction industry professionals are using AI in many facets of their daily work to leverage its technology and applications. For instance, contractors and estimators are using AI to create proposals, estimates and blueprints. Engineers and consultants are embracing AI to generate renderings, specifications, designs and plans. AI’s recommendations are then used to accelerate decisions and the delivery of multi-housing projects.
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While AI might be perceived to execute complex projects with ease, compliance checkpoints with human oversight are essential to flag errors that AI could create from skewed plans, incorrect specs, contract risks, cost mishaps, and scheduling discrepancies. As tempting as AI can be for large-scale simulations and improved workflows, multifamily owners, developers and contractors can be held liable for unsupervised document preparation, unverified data and design flaws. Machine learning models are evolving, but builders cannot plug AI into their projects and deem the results risk-free.
AI tools rely entirely on the data they source, and if the information they pull is incomplete, outdated or biased, the answers will be inaccurate and often do not reflect field conditions. AI’s algorithms aren’t disclosed publicly, which reduces visibility into how its answers are generated. When regulatory reviews emerge, or in scenarios of litigation or arbitration, team leaders will be required to demonstrate how they ensure compliance, fairness and proper oversight measures when using AI. AI must be utilized with caution as inaccuracies can be produced.
Multi-housing industry companies are well-advised to establish compliance check teams and processes to identify areas of risk, outline disclosure obligations with clients and implement necessary collaboration touchpoints with legal counsel. This approach helps protect their business and reputation through adequate liability insurance, contract and project disclaimers, and more. Project dashboards that provide visibility into AI risks that have been flagged and addressed, along with training for different roles on best practices to reduce litigation as AI usage increases, are highly recommended. And in the event of litigation, multi-housing focused companies will be required as part of the discovery process to show the AI inputs and responses, including what documents or data the AI tool was trained on or used as inputs.
Owners, contractors, consultants, engineers, and designers must be mindful of the legal, contractual, and operational risks that AI can present. Human oversight is key to complying with building codes, regulatory requirements, change orders, and contract clauses. Outsourcing all our key tasks to AI, which is prone to misinterpretation, can shift risk back to the company, waive its rights, and lead to breach of contract claims and hefty financial repercussions.
AI usage protocols
Companies should clearly define which AI tools are approved platforms, specify the tasks they can be used for, and establish policies for safety and quality assurance before deliverables are presented externally. AI responsibility training at regular intervals can help personnel spot errors, misguided assumptions, and inaccuracies with AI usage. It’s also critical to know when external project partners are using AI to guide their work, and how it can impact project deliverables.
Best practices also include keeping logs of AI work product, such as input and output data, procedures for retrieving this information, and crisis communication plans, should AI cause heightened risks for project viability and brand reputation. AI is not inherently bad, but those who fail to manage it properly put themselves and their companies at elevated risk. With AI poised to grow in market size in the construction industry to $24.3 billion by 2030, according to Mordor Intelligence, now is the time for industry pros and their legal counsel to have proactive conversations. This will help position AI policies and usage guidelines for the best outcomes. As AI continues to grow and become more relied upon, it is essential that companies ensure this evolving tool is utilized properly and in a reliable manner.
AI is poised to revolutionize workforce development and the multi-housing industry in novel ways. As companies move away from legacy systems—whether on the construction, operations, finance, or other sides of the business—to AI-based platforms and workflows, collaboration is key for efficiencies and scaling. For comprehensive enterprise-level planning, custom or “out-of-the-box” AI solutions must be carefully accounted for. The testing and viability of interconnected systems with AI capabilities can propel the industry to the next level.
Proactive decision-making and policies for AI can lessen construction defects and prevent reactive fire drills in the multi-housing sector when problems arise. As AI continues to analyze, automate, and augment projects, multi-housing leaders, professionals, and support staff can spend time on more strategic decisions and planning. Enhanced capabilities can lead to increased creativity, sustainability, innovation and efficiency, benefiting not only the industry but also the people who call multi-housing properties home.
Richard Glucksman is the managing shareholder of the Los Angeles office of Segal McCambridge and co-chairman of its construction litigation department. Daniel Cribbs is a shareholder at Segal McCambridge in the firm’s Los Angeles office.
