New legislation introduced in Congress is aimed at tackling a financial burden that millions of households are facing — namely, rents that are “too damned high”, as a New York City housing activist claimed famously.
The bill was introduced by Sen. Amy Klobuchar (D-Minn.) and co-sponsored with eight other Senate Democrats. It targets companies who collect rental market data from landlords, and then use that data to create an algorithm for determining rents.
Klobuchar called this a “high-tech” version of collusion. He said that companies who use these models collude to raise costs for consumers by sourcing rents widely from their competitors. RealPage allows landlords to enter nonpublic rent information and receive price recommendations. This circumvents the normal competitive strategies used to set rents. She said the bill would not prevent landlords from using algorithms but would stop companies from illegally working together to set higher rental rates.
Klobuchar stated, “It is textbook collusion.” It’s illegal for landlords to collide with one another. They can’t get together and decide, “Hey, let’s all raise our rents and we won’t be competing with each other.”
She said, “Well, it’s a very high-tech and sophisticated way. Our laws should be just as sophisticated.”
The Justice Department filed a lawsuit against RealPage last year. This company is the leading provider of algorithmic pricing. RealPage was accused of colluding with landlords to raise rents across the nation.
“We interact constantly with algorithms. Whether we are shopping online, paying our rent, booking flights, hailing a cab, or buying insurance. Klobuchar stated, “I mean, it happens.” “But, we have to draw the lines when they are used to fix prices and hurt consumers. That is exactly what the Justice Department and I believe has been happening.”
The Biden administration’s Council of Economic Advisers released a report that found algorithms such as the ones used by RealPage increased average rents by over $90 per month in Phoenix, Las Vegas, San Diego, Tampa, and Washington, D.C. – and by over $130 in Dallas, Denver, and Atlanta.
According to the report, algorithmic pricing will add $3.8 billion in 2023 to the rental price nationwide.
RealPage was also used by the report to calculate rent in nearly one-fourth of all multifamily properties.
RealPage released a statement in December defending its software. It said that it was designed to be compliant with the law and increase competition in the rental housing market.
It said: “We are unwaveringly convinced that RealPage revenue management software is beneficial to both housing providers as well as residents.”
Klobuchar stated that rent is the biggest monthly expense for many households. We have documentation from economists proving that price-fixing algorithms will increase rents by $4 billion by 2023. This is something we are aware of, but it’s hard to make ends meet for many people.
According to the latest Consumer Price Index report, rents are one of the main drivers of post-pandemic high inflation. They have risen by 4.3% in the last year. This is higher than the 2.9% annual average rate of inflation.
Klobuchar’s legislation, entitled the “Preventing Algorithmic Collusion Act,” requires rental companies to disclose whether they use algorithms to determine rents. The Federal Trade Commission would be directed to examine how these algorithms affect competition.
It will need bipartisan support in the Republican-controlled Senate and House to have a future. Klobuchar expressed optimism that the bill will be supported by Republicans.
The Trump administration is also interested in advancing the issue. While former president Joe Biden’s Department of Justice, with the help of then-FTC chairwoman Lina Khan, was aggressive about antitrust enforcement, it has a similar interest. Under Trump’s first administration, antitrust cases were brought against Google and Meta. Vice President J.D. Vance spoke out against powerful monopolies in the Senate. Gail Slater will take on a leadership role as a DOJ attorney.
Donald Trump, in announcing Slater’s appointment, said that Big Tech has “run wild” for years.
Still, Klobuchar admitted that seeing the hefty showing of tech CEOs at Trump’s inauguration — the “broligarchs,” as she called them — gave her pause.
But some good people will continue to do this work in the Department of Justice. “My hope is for continued enforcement of antitrust laws,” she said.
Klobuchar, in the meantime, urged renters to do their research and be aware that “forces” are out there, raising rents.
Why not ask, when you are going to rent a place: “Are you affiliated with RealPage? Or one of the companies that set rents?” She said.
