New legislation in Congress tries to address a financial burden that millions of households bear—rent that is “too damn high,” as one New York City housing activist famously claimed.
Sen. Amy Klobuchar, D-Minn., filed the measure, which is co-sponsored by eight other Senate Democrats. It targets corporations that gather rental market data from landlords and then use the data in an algorithm to assist widely decide rentals.
In an exclusive interview with HeadlinesForever, Klobuchar described it as a “high-tech” kind of collusion, claiming that corporations using these strategies are broadly sourcing rents from competitors and cooperating to raise consumer costs. Landlords enter nonpublic rent-related information into the RealPage program and obtain pricing recommendations, bypassing traditional competitive rent-setting procedures. The law, she added, would not bar landlords from utilizing algorithms, but it would prohibit firms from illegally collaborating to raise rates.
“It’s just textbook collusion,” Klobuchar explained. “It is clearly illegal for these landlords who compete with each other to get together for dinner one night and say, ‘Hey, let’s all raise our rents so we don’t compete.'”
“Well, this is just a high-tech, sophisticated way of doing it, and our laws need to be as sophisticated,” she told me.
Last year, the Justice Department sued RealPage, the most widely utilized provider of algorithmic pricing. The complaint claimed RealPage participated in a conspiracy scheme with landlords, resulting in increased rents across the country.
“We are constantly interacting with algorithms, whether we’re shopping online, paying rent, booking a ticket, hailing a vehicle, or purchasing insurance. “That happens,” Klobuchar remarked. “But we’ve got to draw the line when they’re actually being used to fix prices, to hurt consumers, and that is exactly what I believe, and the Justice Department believes, has been going on.”
According to a report by the Biden administration’s Council of Economic Advisers, algorithms like the one employed by RealPage increased average rents by more than $90 per month in Phoenix, Las Vegas, San Diego, Tampa, and Washington, D.C., and by more than $130 per month in Dallas, Denver, and Atlanta.
According to the analysis, algorithmic pricing would raise rental prices countrywide by $3.8 billion in 2023.
The investigation also discovered that RealPage is used to calculate rent for approximately one in every four multifamily residences.
In a December statement, RealPage defended their software, claiming that it was designed to be legally compliant and to increase competition for clients in rental homes.
“We remain unwavering in our belief that RealPage’s revenue management software benefits both housing providers and residents,” according to the announcement.
“Housing is still the largest monthly expense for most households, and that includes rent,” she added. “We have clear documentation from economists that this price-fixing by algorithms increased the rents by nearly $4 billion in 2023 — we know this is happening, and it’s so hard for people to get by now anyway.”
Rents have been one of the most intractable causes of high post-pandemic inflation, rising 4.3% in the last year, according to the government’s most recent consumer price index data. That outpaces the general yearly inflation rate of 2.9%.
Klobuchar’s measure, the “Preventing Algorithmic Collusion Act,” would force rental firms to report if they use algorithms to calculate rents. Furthermore, it would direct the Federal Trade Commission to investigate how these algorithms harm competition.
It will require bipartisan backing in the Republican-controlled Senate and House to have a future. Klobuchar expressed optimism that Republicans will approve the package.
While former President Joe Biden’s Department of Justice was aggressive in antitrust enforcement, assisted by then-FTC Chairwoman Lina Khan, the Trump administration is likewise interested in advancing the subject. Antitrust actions against Google and Meta were filed during Trump’s first term, and Vice President J.D. Vance was vociferous about challenging big monopolies while in the Senate. Gail Slater, one of his former aides, will now become a senior attorney at the DOJ.
In announcing Slater’s appointment, President Donald Trump stated that Big Tech corporations had “run wild for years.”
Still, Klobuchar said that witnessing the large number of tech CEOs at Trump’s inauguration — the “broligarchs,” as she dubbed them — caused her pause.
“But some decent individuals will continue to perform this job within the Department of Justice. “So my hope is that antitrust enforcement will continue,” she remarked.
Meanwhile, Klobuchar encouraged tenants to conduct their own research, noting that there are “forces out there” pushing rents in major urban areas.
“Why not ask when you’re going to rent: ‘Are you involved with RealPage or one of these companies that sets rents?'” she told me.