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Are soaring rent prices making your apartment hunt a nightmare? You’re not alone. Many landlords utilize software from a single company, RealPage, which employs algorithms and proprietary lease data to determine rent prices. This practice, deemed an “unlawful information-sharing scheme” by federal prosecutors, is facing pushback from lawmakers across California. San Diego’s city council president is spearheading efforts to ban the use of this rent-setting service, arguing it fuels escalating housing costs.
San Diego Leads the Charge Against Algorithmic Rent Setting
San Diego’s proposed ordinance follows San Francisco’s groundbreaking ban on using algorithmic tools to set rents and manage occupancy levels for residential properties. San Jose is also exploring similar measures. This trend extends beyond California, with Philadelphia passing a ban on algorithmic rent price-fixing and New Jersey considering similar legislation.
Alan Pickens and his wife
The DOJ Takes on RealPage
The Department of Justice, along with eight states’ attorneys general, filed an antitrust lawsuit against RealPage, alleging the company exploits landlords’ sensitive data to inflate rents, benefiting itself and participating landlords at the expense of renters. RealPage, however, maintains its software is legally compliant and promotes competition. The company blames the housing shortage, not its technology, for rising rents, claiming its products benefit all stakeholders in the rental market.
How RealPage’s Algorithm Works
RealPage’s YieldStar and AI Revenue Management software historically relied on landlords providing private data, including rent prices, lease details, and occupancy estimates. This data is aggregated and processed through forecasting algorithms to generate pricing recommendations. While recent changes allow landlords to share only public data, concerns about potential manipulation remain. San Diego’s council president likens the practice to a backroom deal where companies collude to fix prices.
RealPage’s Impact on Renters
The impact of these algorithmic pricing practices is felt acutely by renters like Alan Pickens, a Navy veteran who relocates almost annually due to unaffordable rent increases. He and his wife live in a San Diego area identified by the DOJ as being negatively affected by information-sharing agreements between landlords and RealPage. San Diego’s average rent has skyrocketed, significantly exceeding the national average.
San Diego Skyline
California’s Housing Crisis Exacerbated
California, with a higher percentage of renters than most other states, is particularly vulnerable to these rent hikes. The California Justice Department accuses RealPage of artificially inflating prices, further burdening residents already struggling with high housing costs. This disproportionately impacts low-income residents, who are forced to spend a growing percentage of their income on rent.
Conflicting Interests: California’s Investment in RealPage
Ironically, California public pension funds, including CalPERS and CalSTRS, have invested in Thoma Bravo, the private equity firm that acquired RealPage. This raises concerns about potential conflicts of interest and the impact on pensioners.
Challenging the Algorithm’s Authority
While RealPage claims landlords can reject its pricing recommendations, the DOJ alleges doing so involves a complex process, with RealPage advisors actively discouraging rent reductions. Renters like the Pickenses are forced to make significant sacrifices to stay in San Diego, highlighting the urgent need for solutions to the housing crisis.
Conclusion: The Fight for Affordable Housing Continues
The battle against algorithmic rent-setting is gaining momentum as cities and states grapple with the consequences of escalating housing costs. The outcome of the DOJ lawsuit and the success of local bans will have significant implications for the future of affordable housing. The ongoing debate centers on balancing the use of technology in the rental market with the need to protect renters from potentially unfair pricing practices.
Originally published on The Markup and republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.
