Dear Editor,
Back in February 2024, Vermont Sen. Peter Welch (D-Vt.) and Sen. Ron Wyden (D-Ore.) introduced a bill, “Preventing Algorithmic Facilitation of Rental Housing Cartels.” What does the bill’s name translate to in plain English? Rent-fixing.
In a press release dated Aug. 23, 2024, the U.S. Dept. of Justice (DOJ) announced it, along with seven attorneys general, was filing a civil antitrust complaint alleging price-fixing within the residential real estate industry to keep rents artificially high across states and regions. The announcement followed two years of investigation after a post by Pro Publica Oct. 15, 2022 alleged that software developer RealPage had developed an algorithm tool to price rents uniformly and had been selling it to rental management companies and landlords. Normally rents would vary depending on local economies.
On Jan. 7, 2025, DOJ filed an amended complaint against six major landlords, who control at least 1.3 million rental units throughout 43 states and the District of Columbia, for sharing the algorithm, which uses competitors’ data, to set rents.
Right away the bill was strenuously challenged by the real estate industry, which argued that merely purchasing a service that posts rents based on an algorithm, even if thousands of property managers purchase it, is not price-fixing in the FTC definition.
However, the algorithm is not nearly as objective at setting rental rates. Texas-based RealPage’s website claimed that the company “provides property management software, data analytics, and services to efficiently manage rental properties and real estate.” But when Pro Publica dug deeper, it found that RealPage in fact gathered rent data from “clients, including private information on what nearby competitors charge.”
Pro Publica’s inside sources said that the algorithm gets around the “temptation” to negotiate rental rates with tenants. One of the architects of the software, Jeffrey Roper, told Pro Publica, “There’s way too much empathy going on here. This is one of the reasons we wanted to get the pricing off-site. … If you have idiots undervaluing, it costs the whole system,” he added.
Pro Publica also learned that, rather than agree on a rent the tenant can actually meet, RealPage encourages landlords to keep a unit unrented.
This finding led Pro Publica to the startling discovery that, counterintuitively, in the high-stakes residential rental real estate world, rental vacancies are desirable. One CEO said, “The net effect of driving revenue and pushing people out was $10 million in income. … I think that shows keeping the heads in the beds above all else is not always the best strategy.”
Why is all this important? Because of the way artificially manipulating rental rates can influence not only open market rates but also how much the federal government will pay landlords for units that qualify for Section 8 housing. The result is what HUD calls “Fair Market Rent,” which it defines as “an estimate of the amount of money that would cover gross rents (rent and utility expenses) on 40 percent of the rental housing units in an area.”
This means that the tail is wagging the dog: the only true source of rent data is the rents that are actually charged by landlords, through their property managers. … and now, analytics.
Julia Purdy, Rutland
