Renters In Atlanta, Denver and Dallas paid more than $100 a month more in rent to landlords who used rent-setting software algorithms, according to a report.
A White House report released in December estimates the nation’s renters overpaid by $3.8 billion in 2023.
The White House cited RealPage as the primary provider of rental-pricing algorithms. Companies like RealPage use their tools to suggest optimal rent for landlords to charge.
In order for the algorithm to work, landlords must provide data that they wouldn’t otherwise share with competitors.
Several states joined the lawsuit by the Department of Justice over the rent-setting software, including Colorado, Arizona and others.
Drew Hamrick, general counsel with the Colorado Apartment Association, told Denver7.com, “If you’re trying to figure out what units are going for in a competitive area, figuring out the floor plans, the relevant levels of amenities, the square footage, all the things that factor into how valuable an apartment is, that’s a huge undertaking. And that information, in most cases, is not public.”
The report said, “We find that anticompetitive pricing costs renters in algorithm-utilizing buildings an average of $70 a month. In total, we estimate the costs to renters in 2023 was $3.8 billion. This estimate is likely a lower bound on the true costs.”
The report says “rental-pricing algorithms use extensive market data to predict and recommend profit-maximizing rents. RealPage is the primary provider of rental-pricing algorithms for multifamily housing. Its main pricing software is “AI Revenue Management” (AIRM, formerly “YieldStar”), but RealPage also owns “Lease Rent Options” (LRO), which it acquired from its main competitor in 2017. The two software products are used in at least 10% of all rental units nationally. Using data on software usage from a RealPage report and the American Community Survey, we estimate that in the multifamily housing sector nearly 1 in every 4 rental uses a RealPage pricing algorithm.”
The report released charts showing the top 3 metros where renters paid more due to the rent-setting software. Renters in Atlanta paid $181 more per month, Denver $136 more per month and Dallas $132 more per month.
Highlights of the report
- “When algorithmic recommendations are based on profit-maximizing prices for a set of landlords collectively, the algorithm will recommend prices that are higher than the profit-maximizing price each landlord would set independently.
- “RealPage pushes its software users to turn on the auto-accept setting so that price recommendations are automatically accepted,” according to the Department of Justice complaint.
- “We find that coordinated rents from algorithmic pricing cost renters in algorithm-utilizing units $70 a month, or 4% of rent, on average nationally.
- “In six major metros, the cost exceeds $100 a month,” the report says.
RealPage company spokeswoman Jennifer Bowcock told Axios Houston, “ This administration should stop scapegoating RealPage’s legally compliant technology for housing-policy failures and take care to not stifle the innovation that will strengthen America’s economy, now and in the future.”
In December, RealPage filed a motion seeking to dismiss the DOJ’s claims in the antitrust suit, arguing that the agency hasn’t shown any real anticompetitive effects of its product.
Axios wrote that it is watching “Whether the incoming Trump administration will pursue the suit against RealPage. The analysis looks like the White House’s last push to draw attention to the issue.”
Read the full White House report here.
