U.S. Senator Richard Blumenthal is introducing two bills to prevent landlords from unfairly raising rents nationwide. He claims these landlords are using shared software platforms to work together and inflate prices, which he calls price gouging.
Blumenthal is a co-sponsor of both bills – Preventing Algorithmic Collusion Act (S.3686) and the Preventing the Algorithmic Facilitation of Rental Housing Cartels Act (S.3692).
Addressing Rent Increase Through Legislation
Both bills target various ways to stop rent increases for tenants. Blumenthal stated in a release that landlords are involved in algorithmic “price-fixing” using a shared software system where they report rental information and increase rent across the nation.
The Preventing Algorithmic Collusion Act aims to fix a gap in the antitrust laws and stop landlords from misusing software. Here’s what you should know about this proposed law.
Real Estate’s Price-Rise Software
Senator Blumenthal’s official statement explains that companies like RealPage and Yardi, which promote their products as “property management software,” assist landlords in setting prices together and raising rents in the market.
Real estate software is widely used by landlords to gather data on nearby rents and suggest rental prices or increases.
Blumenthal: Rental Price Gouging Affects All
However, Blumenthal argues that this practice affects all renters, not just those in buildings where landlords use the software.
“Potentially every renter in Connecticut is paying more, because some significant proportion of property owners and landlords are benefitting by this rental price gouging,” Blumenthal said in his release.
CT Report: Lawyer Warns of Software’s Rent Impact
According to a report from CTpublic, Tom Freeman, a lawyer with Greater Hartford Legal Aid, talked about how software-driven price increases harm neighborhoods in Connecticut.
Freeman explained that local housing advocates have noticed that people feel worried when their lease is ending because they anticipate the rent going up by a specific amount.“We see those downstream effects all the time of the rents just continually rising,” Freeman said in the report.
Blumenthal’s Crusade: Halt Rent Inflation
There’s a lawsuit against Graystay Partners Rental in Connecticut, claiming they used software to increase rent prices unfairly. The Preventing Algorithmic Collusion Act wants to prevent companies and landlords from teaming up with algorithms to raise rent.
Blumenthal says it’s against the law to manipulate prices or work together to do so, but using computer programs to set prices isn’t specifically covered by these rules.
Proposed Solutions: Combating Algorithmic Price-Fixing
So, he suggests some changes to the law to fix this problem. First, the law will make it clear that using computer programs to set prices unfairly is against the rules. This will help police stop these practices early on. Also, companies that use computer programs to decide prices would have to tell everyone about it.
Moreover, the government will be allowed to check these computer programs to make sure they are fair and easy to understand. The law will also stop companies from getting secret information from their competitors to help set their prices.
No Different From Doing It Over Cigars And Whiskey
The second act, “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). “Setting prices with an algorithm is no different from doing it over cigars and whiskey in a private club,” Wyden said in a statement.
He added that high rents are already putting pressure on American families in Oregon and throughout the country and that renters don’t need housing cartels adding to that.
RealPage And Yardi Accused In Rental Housing Cartel Allegations
The press release talking about the new law mentions two software companies, RealPage and Yardi, as the main ones behind the alleged cartel. It accuses them of helping landlords work together to raise rental prices in the same area.
These companies give landlords instant updates on rent prices, and lease details, and recommend raising prices. RealPage even brags about helping its customers increase their tenants’ rent by 5 percent to 12 percent.
Bill Will Ensure Market Forces Determine Rents
If the law is passed, it would be against the rules for property owners to use any service that helps them coordinate rental prices. It would also be illegal for two or more property owners to work together to set rental prices.
“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.”
RealPage Facing Two Class Action Lawsuits
RealPage, one of the main focuses of the new law, is also being sued in two class action lawsuits. These lawsuits claim that RealPage helped landlords raise rents artificially.
Other companies named in the lawsuits 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.
Second Lawsuit Blames RealPage For Record-High Rent In Some States
The second lawsuit blames RealPage for the record-high rent increases in Miami, Orlando, Jacksonville, and Tampa. Miami’s rents jumped by 41% from March 2021 to March 2022. While rent has gone up since 2020, the increase slowed to 3.3% in 2023.
The proposed law and lawsuits followed a report by ProPublica, which looked into how the property management software YieldStar works.
RealPage Counters ProPublica’s Story
After the report was released, 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.”
NAA’s Call To Action
If the proposed legislation passes, the Federal Trade Commission will conduct a thorough examination of pricing algorithms and their effects on competition. In response, the National Apartment Association (NAA) emphasizes the responsible use of technology to manage property supply and demand.
They underscore the severity of the housing crisis, attributing it to the insufficient variety of available housing. According to NAA, addressing this crisis will require the construction of 4.3 million new rental homes by 2035 to meet demand and rectify the housing shortage.
