New Bill Targets Landlords Using Algorithms to Jack Up Rent Prices

US Senator Richard Blumenthal is sponsoring bills to stop what he says is price gouging by landlords facilitated by the use of algorithms and software. In a release , Blumenthal alleges that shared software platforms are used by landlords to collude with other landlords and raise rent prices across the nation. Thus, the Preventing Algorithmic Collusion Act seeks to close a loophole in the antitrust laws and prevent landlords from exploiting software. Here’s all you need to know about the proposed legislation.

How Does Software Facilitate Higher Rents?

According to Senator Blumenthal’s official release, companies like RealPage and Yardi which advertise their products as “property management software,” help landlords across the nation coordinate prices and increase the rent in the market.

Real estate software is pretty common amongst landlords as they aggregate data on nearby rents and recommend rent prices/hikes.

However, according to Blumenthal, this practice impacts all renters, not just those living in buildings where landlords use the software.

“Potentially every renter in Connecticut is paying more, because some significant proportion of property owners and landlords are benefitting by this rental price gouging,” Blumenthal said in his release.

Further in a CTpublic report, Tom Freeman, an attorney with Greater Hartford Legal Aid, said that local housing advocates have witnessed the effect of the software price gouging first and its impact on Connecticut neighborhoods.

According to Freeman, people are afraid for a certain time of the year when they know their lease will be renewed and the rent prices will go up by a certain amount. “We see those downstream effects all the time of the rents just continually rising,” Freeman said in the report.

Graystay Partners Rental in Connecticut is already facing allegations of using such software to gouge rent prices in a class action lawsuit, according to Blumenthal.

What is The Preventing Algorithmic Collusion Act?

The Preventing Algorithmic Collusion Act seeks to prevent companies and landlords from using algorithms to collude and set higher rent prices. While price fixing and other forms of collusion are illegal under the antitrust laws, the use of algorithms to determine pricing decisions is not covered under them, as per Blumenthal.

Thus, to strengthen the current price-fixing law, the proposed legislation seeks to implement the following changes. The legislation seeks to clarify the law to make it easier to challenge algorithmic price-fixing. The aim is to help antitrust enforcers prevent algorithmic price-fixing beforehand.

It also seeks to increase transparency by directing companies that use algorithms to set prices to disclose the use of such software and give antitrust enforcers the ability to audit the pricing algorithm. The legislation also seeks to ban companies from using competitively sensitive information from direct competitors to inform or train a particular pricing algorithm.

Furthermore, the proposed legislation if passed will direct the Federal Trade Commission to study pricing algorithms and their impact on competition.

The National Apartment Association (NAA) said in a statement on Wednesday that implementing and embracing new technologies is important and responsible use of technology can help manage the supply and demand of properties.

The NAA stated that the nation’s housing cost crisis is exacerbated by a lack of all housing types. Thus, to solve the problem, the U.S. will need 4.3 million new rental homes by 2035 only to keep pace with demand and address the shortfall.