Pricing software adds billions to rental costs, White House says
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Renters in the U.S. spent an extra $3.8 billion last year because of pricing algorithms used by landlords, according to an analysis from the White House Council of Economic Advisers first shared with Axios.
Why it matters: The report puts some hard numbers to accusations that have piled up against RealPage, a company that makes software that helps big landlords and property managers set prices.
- In August, the Department of Justice filed an antitrust suit against the company, alleging its pricing algorithm allows landlords to collectively push rents higher.
What they're saying: "We are disappointed The White House CEA never contacted RealPage about their report, which is riddled with flawed assumptions," company spokeswoman Jennifer Bowcock said in a detailed statement Wednesday.
- "Their conclusions are based on the erroneous assumption that all property managers are setting coordinated rents, but that is not how RealPage's revenue management software (RMS) works."
- Earlier this month, the company filed a motion seeking to dismiss the DOJs claims in the antitrust suit, arguing that the agency hasn't shown any real anticompetitive effects of its product.
The big picture: The U.S. is in the grips of a housing affordability crisis — creating huge financial headaches for many Americans.
Reality check: Even if these algorithms were pushing up rents, as the CEA suggests, they wouldn't be the driving force behind rising housing prices.
- Instead a long-term shortage of affordable housing is the main culprit, as the CEA itself notes.
Between the lines: It's unclear whether the incoming Trump administration will want to pursue the suit against RealPage. The analysis looks like the White House's last push to draw attention to the issue.
Zoom in: For their analysis, the researchers modeled the price difference between two scenarios using a range of publicly available data.
- In one scenario landlords used RealPage software to set prices. In another they set prices individually.
- They found that those living in algorithm-utilizing buildings spent an average of $70 more per month. That number goes up in metro areas where RealPage use is more common.
- For example, in Atlanta, 68% of landlords of multifamily buildings use this software — and renters in those buildings paid an additional $181, on average, per month, per the CEA's analysis.
Editor's Note: This story has been updated with a detailed response from RealPage.
