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We Found That Landlords Could Be Using Algorithms to Fix Rent Prices. Now Lawmakers Want to Make the Practice Illegal. – Heather Vogell

We Found That Landlords Could Be Using Algorithms to Fix Rent Prices. Now Lawmakers Want to Make the Practice Illegal.

by Heather Vogell

ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for The Big Story newsletter to receive stories like this one in your inbox.

Series: Rent Barons:Who Is Behind Rising Rents in America?

Powerful interests, including a real estate tech company and private equity firms, are contributing to soaring rents.

A group of senators are set to introduce legislation Tuesday that would make it illegal for landlords to use algorithms to artificially inflate the price of rent or reduce the supply of housing.

The proposed law follows a ProPublica investigation that found software sold by Texas-based RealPage was collecting proprietary data from landlords and feeding it into an algorithm that recommended what rents they should charge. Legal experts said the arrangement could help landlords engage in cartel-like behavior if they used it to coordinate pricing.

The software is widely used by competing landlords. In Seattle, for example, ProPublica found that 10 property managers oversaw 70% of all multifamily apartments in one neighborhood — and every single one used pricing software sold by RealPage.

“Setting prices with an algorithm is no different from doing it over cigars and whiskey in a private club,” said Sen. Ron Wyden, D-Ore., one of the leading sponsors of the new bill. “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.”

Lawyers for RealPage and other defendants have called the idea that the company and landlords formed a conspiracy “implausible.” In legal filings, they pointed to a company FAQ that said the recommendations from the software “may be followed, modified, or ignored by an apartment provider.”

After ProPublica’s investigation ran in 2022, tenants filed dozens of federal lawsuits against scores of the nation’s biggest landlords alleging violations of antitrust law. Congressional lawmakers called for an investigation by the U.S. Department of Justice, which later backed the tenants’ lawsuits. At a Senate hearing in October 2023, a former federal prosecutor encouraged lawmakers to consider antitrust enforcement reforms to close gaps that have occurred as technology has evolved.

The bill set to be proposed Tuesday, sponsored by Democrats including Wyden, Peter Welch of Vermont and Amy Klobuchar of Minnesota, would make it illegal for property owners to contract with companies that coordinate rent prices and housing supply information. The legislation would also bar two or more rental owners from coordinating on such information. Mergers between two information-coordinating companies that reduced competition would also be banned.

A statement released by Wyden’s office called out RealPage and a second property management technology company, Yardi, by name.

“Companies like RealPage and Yardi brand themselves as providing ‘property management software,’ but in reality they facilitate collusion by landlords to charge above-market rent,” the statement said. “This is exactly how a price-fixing cartel operates, but instead of using code names and secret meetings, the price-fixing is offered as a service.”

Algorithms are helping housing providers collude in the midst of “a crisis of housing availability and affordability” in which rents have risen by double digits since 2020 and homelessness is up, according to the statement. It said the proposed law — dubbed the Preventing the Algorithmic Facilitation of Rental Housing Cartels Act — would strengthen future legal cases, as well as prevent mergers that could push rents higher.

RealPage and Yardi did not immediately respond to requests for comment.

The tenant lawsuits have been consolidated in federal court in Nashville, Tennessee, into a case that involves nearly 50 large landlords. RealPage and the other defendants have said that the complaint doesn’t show direct evidence of a conspiracy, such as “smoking gun” documents or recorded phone calls. “In sum, Plaintiffs have not alleged a plausible horizontal price-fixing conspiracy,” their legal filing said.

RealPage and the other defendants sought to have the cases dismissed. The court in December agreed to allow the main case involving rental apartments to proceed, but dismissed a related complaint involving student housing.

Diane Yentel, president and CEO of the National Low Income Housing Coalition, said in a statement that if enacted the proposed law would “provide an important tool to stop predatory landlords from colluding with one another by using rent-setting software and algorithms to further inflate rents.”