Senator asks FTC to probe rent-setting algorithms for issues

A US senator has urged the FTC to review the algorithms used to calculate the optimal rent for properties, over concerns that the software could allow landlords to illegally collude in cities with housing shortages.

Sen. Sherrod Brown (D-OH), who chairs the Senate Banking, Housing and Urban Affairs Committee, wrote a letter [PDF] to FTC Chairman Lina Khan this week, asking her to “review the current use of price optimization software used by landlords to set rents.”

The note comes after five tenants spear a lawsuit against RealPage, maker of rent-pricing software, and nine real estate giants, claiming RealPage’s YieldStar tool helped landlords form a rent-setting “cartel.” Landlords are alleged to have worked with RealPage to collude and artificially inflate people’s rent.

A survey by ProPublica indicated that YieldStar calculates apartment rent based on factors such as location, surrounding demand, and the price of nearby rented homes. The algorithm then comes up with a recommended optimal amount to charge tenants: not too low that the market won’t support it and people move to other landlords, and not too low that landlords lose profit. It is claimed, however, that YieldStar was used to ensure that no landlord undermined another in a city or town, thereby keeping rent for people high.

Top ten multi-family property management companies use software from RealPage, according to a Securities Exchange Commission filing of the company.

Senator Brown drew attention to another facet of the lawsuit: that RealPage allegedly helped landlords, through a flow of information, to maintain an optimal number of vacant properties at all times in order to avoid oversupply and drive up demand and therefore prices. That wouldn’t be very fair, the senator said.

“For single-family and multi-family properties, demand for rental housing far exceeds supply,” Brown’s letter read.

“Rental vacancy rates were just 5.6% at the end of 2021, the lowest vacancy rate since 1984. Yet even in this tight rental market, there are reports that RealPage’s algorithm encourages landlords to keep homes vacant or evict tenants to maximize profits… Intentionally keeping homes vacant when there are so few homes available diminishes bargaining power of the consumer and exacerbates the housing shortage.

Brown said nearly 35% of Americans rent their homes, totaling about 44 million properties. He called on the FTC to investigate the impact of automated rental pricing algorithms such as RealPage’s YieldStar on the market, citing concerns about collusion and whether collecting private rental data violates antitrust laws. .

“The FTC’s mission to protect consumers and keep our markets competitive has never been more critical. And that mission has become increasingly complex as advances in technology change the way entire industries operate. .. Tenants should have the power to negotiate accommodation at a fair price, free from illicit collusion and deceptive pricing techniques,” he added.

A RealPage spokesperson said The register“​RealPage is always willing to engage with our political stakeholders to ensure they have the proper facts and context regarding RealPage.” We asked the FTC for comment. ®

Sharon D. Cole