Takin’ it leasey… High rents aren’t just caused by property owners thinking of a bigger number: for millions of renters, prices are set by algorithms that suggest rates for renewals and vacancies. Now two companies behind such pricing systems — RealPage and Yardi — are facing lawsuits alleging their algos reduce competition and enable collusion, driving rents higher for millions of Americans.
Discount dearth: Property owners often try to keep vacancy rates low to maximize profits, slashing rents when demand drops. But rental algorithms, one suit says, often determine that raising rents will drive profits, even if vacancies increase.
Open (court)house: The suit against Yardi alleges that the company’s software (formerly called “RENTmaximizer''...) is used to inflate rents. This spring, four US senators called on the Justice Department to investigate RealPage’s software, YieldStar. The DOJ is reportedly weighing whether to take antitrust action on rental algos.
Spacious: A ProPublica report found that in one Seattle neighborhood, just 10 property managers controlled 70% of apartments, and all used RealPage’s pricing software.
Rethinking roomies… Mortgaging a house in America is now pricier than renting, but rents ain't cheap either: they’re up 7% from a year ago. Nationally, rent affordability is at its lowest level in decades. This month, median one-bedroom rents hit $4.3K in NYC, $2.4K in LA, and $2.6K in Miami. Meanwhile, 70% of renters have a household income below the median level, and most Gen Z renters spend at least 30% of their income on rent.
Algos may have to take the stand… From plane tickets to Uber rides from the airport, more stuff is being priced by algorithms. Studies show that rather than trying to price competitively, algorithms avoid lowering prices versus rivals. Regulators are increasingly scrutinizing these systems, from the FTC’s case against Amazon’s ecomm pricing to the DOJ’s case against poultry data company Agri Stats.