New Legislation Aims To Ban Algorithmic Pricing Of Rents

Key Takeaways:

– The “Preventing the Algorithmic Facilitation of Rental Housing Cartels Act” is set to be introduced in the U.S. Senate.
– The bill aims to make it illegal for landlords to use algorithms to inflate rent prices or reduce housing supply.
– U.S. Senators Ron Wyden and Peter Welch are expected to introduce the legislation.
– The bill is intended to crack down on companies like RealPage and Yardi, which allegedly help landlords coordinate rent prices to raise rates.
– The legislation would make it illegal for property owners to hire services that coordinate rental pricing and for multiple property owners to coordinate pricing.
– RealPage is also facing two class-action lawsuits accusing it of artificially driving up rents.
– The legislation and lawsuits come after an investigative report by ProPublica on the property management software YieldStar.
– Rent prices have been increasing, and the bill aims to let market forces determine rents rather than algorithms.

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The “Preventing the Algorithmic Facilitation of Rental Housing Cartels Act” is expected to be introduced in the U.S. Senate this week.

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A group of United States Senators are set to introduce legislation this week that would make it illegal for landlords to use algorithms to inflate the price of rent or reduce the supply of housing.

The “Preventing the Algorithmic Facilitation of Rental Housing Cartels Act” is expected to be introduced this week by U.S. Senators Ron Wyden (D-Oregon) and Peter Welch (D-Vermont). The senators say the bill is intended to crack down on companies that help landlords raise rents, which they say amounts to collusion and a violation of antitrust laws.

“Setting prices with an algorithm is no different from doing it over cigars and whiskey in a private club,” Wyden said in a statement. “Although it’s my view that these cartels are already violating existing antitrust laws, I want the law to be painfully clear that algorithmic price fixing of rents is a crime. High rents are already squeezing American families in Oregon and across the country — the last thing renters need is housing cartels getting in on the game.”

The press release announcing the legislation specifically names the property management softwares RealPage and Yardi as the chief perpetrators of the alleged cartel, accusing them of helping landlords coordinate their prices to inflate rental rates in the same market.

The companies provide landlords with real-time rent price and lease information and suggest price increases. RealPage has itself boasted of helping clients raise their tenant’s rent by between 5 percent and 12 percent.

“When landlords delegate pricing decisions to algorithms, renters lose out on the benefits of competition and are faced with higher rates, while some homes are priced so high they sit vacant,” said Senator Amy Klobuchar, a cosponsor of the bill. “This bill will ensure rental property owners abide by antitrust law and let market forces determine rents.”

If enacted, the law would make it illegal for property owners to hire any service that coordinates rental pricing services and make illegal the practice of two or more rental property owners coordinating over pricing.

RentPage, in addition to being one of the primary targets of the legislation, is also the plaintiff in two class action lawsuits that accuse it of helping landlords to artificially drive up rents. Other defendants in that lawsuit include Greystar Real Estate Partners, Lincoln Property Co., FPI Management, Mid-America Apartment Communities, Avenue5 Residential, Equity Residential, Essex Property Trust, Thrive Communities Management and Security Properties Inc.

The second class action lawsuit accuses RealPage of being directly responsible for the historically high rent increases that took place in the markets of Miami, Orlando, Jacksonville and Tampa.

Miami saw rent prices increase by 41 percent between March of 2021 and March of 2022. Rent prices have increased substantially since 2020, but price growth slowed to 3.3 percent in 2023.

The legislation and the lawsuits came after an investigative report by the investigative journalism outlet ProPublica, which detailed the inner workings of the property management software YieldStar.

At the time the report was published, RealPage claimed ProPublica’s story “contains inaccuracies and is misleading.”

“Rent prices are determined by various factors including supply and demand as well as each property owner’s unique circumstances,” the company said in a statement in 2022. “There is a housing supply shortage and that alone drives prices higher. Occupancy has been at an all-time high.”

RealPage and Yardi did not respond to requests for comment on the proposed legislation.

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Property Chomp's Take:

The "Preventing the Algorithmic Facilitation of Rental Housing Cartels Act" is set to be introduced in the U.S. Senate this week. This legislation aims to make it illegal for landlords to use algorithms to inflate rent prices or reduce the supply of housing. The bill is being introduced by U.S. Senators Ron Wyden (D-Oregon) and Peter Welch (D-Vermont) and is intended to crack down on companies that help landlords raise rents, which the senators argue is collusion and a violation of antitrust laws.

The legislation specifically targets property management software companies RealPage and Yardi, accusing them of facilitating rental housing cartels by coordinating and inflating rental prices in the same market. RealPage has been accused of helping clients raise their tenants' rent by 5 to 12 percent. The proposed law would make it illegal for property owners to hire any service that coordinates rental pricing services and would also outlaw the practice of two or more rental property owners coordinating over pricing.

The introduction of this legislation comes in the wake of two class action lawsuits filed against RealPage. The lawsuits allege that the company has helped landlords artificially drive up rents. One lawsuit accuses RealPage of being directly responsible for historically high rent increases in Miami, Orlando, Jacksonville, and Tampa.

The legislation and lawsuits follow an investigative report by ProPublica, which detailed the inner workings of the property management software YieldStar. RealPage responded to the report by claiming it contained inaccuracies and was misleading. The company argued that rent prices are determined by various factors, including supply and demand, and that there is a housing supply shortage driving prices higher.

The proposed legislation aims to ensure that rental property owners abide by antitrust laws and allow market forces to determine rents. If enacted, it would provide legal protection against the use of algorithms to artificially inflate rent prices and reduce housing supply.

RealPage and Yardi have not yet responded to requests for comment on the proposed legislation. It remains to be seen how the bill will be received in the Senate and whether it will gain enough support to become law. However, it represents a significant step in addressing concerns about the use of algorithms to manipulate rental prices and the impact on affordable housing.

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