The White House Council of Economic Advisors (CEA) released a report on December 17 detailing the impact of rental housing price algorithms on the cost of rent. The report shows that such algorithms, which are marketed by RealPage and other companies, add an average of $70 per month to the cost of rent for units in algorithm-utilizing buildings. In 2023 alone, such algorithms are estimated to have cost renters more than $3.8 billion.
Rental pricing algorithms like those proffered by RealPage use rental housing market data to predict and recommend rent prices that will maximize profits for landlords. At least 10% of all rental units use RealPage’s products to help determine rent prices, and the CEA estimates that nearly one in four multifamily housing providers use a RealPage pricing algorithm.
“Algorithmic pricing weakens competition because it can facilitate price coordination among landlords who would otherwise be competing,” explains the CEA in its report. “Our analysis indicates that if price coordination was eliminated, there would be an economically meaningful decrease in price mark-ups for rental units using pricing algorithms.”
The publication of the research is the latest effort of the Biden administration to lower the cost of housing and hold accountable housing providers that engage in unfair practices that increase the cost of rent. In August, the U.S. Department of Justice, along with the attorneys general of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee, and Washington, filed a civil antitrust lawsuit against RealPage for its “unlawful scheme to decrease competition among landlords in apartment pricing and to monopolize the market for commercial revenue management software that landlords use to price apartments.”
While pricing algorithms contribute to increased rental housing costs, the report notes the nation’s affordable housing crisis is rooted in the severe shortage of affordable, available housing. This shortage is most acute for people who are paid the lowest wages, who face an absolute shortage of 7.3 million affordable, available rental homes. It is unclear whether the incoming Trump administration will continue supporting the DOJ’s lawsuit against RealPage in the new year.
Read the report here.