The debate over skyrocketing rent costs has intensified as the White House leans towards algorithm-based pricing tools as a key culprit, yet others point to more foundational economic forces.
At a Glance
- The Biden administration’s rent stabilization plan proposes capping rent increases at 5%.
- Critics argue this approach could reduce housing supply.
- Algorithm-based pricing tools, like RealPage, have been accused of facilitating rent increases.
- Economic analysts highlight inflation and spending as primary causes of rising rents.
Examining Algorithm-Based Rent Pricing
The Biden administration has proposed a national plan to stabilize rent, which would limit annual increases to 5% for large landlords to receive tax breaks. Kamala Harris supported the initiative, believing it will help control housing costs and prevent tenant displacement. However, critics suggest it might disincentivize landlords from offering rental units, potentially escalating prices for uncontrolled units.
Clarifying the scope, the proposal aims at corporate landlords with over 50 units, avoiding newly constructed or significantly renovated properties. Smaller landlords remain exempt due to lack of economies of scale, yet tenant implications remain concerning. To ensure low-income renters benefit, thorough monitoring and collaboration with research partners are required.
According to a new White House report, AI rental pricing software used by corporate landlords inflates rents by more than $3.6 billion each year.
It's one way corporations are using shady techniques to keep prices high and rake in record profits. pic.twitter.com/CqiDcccpZO
— Robert Reich (@RBReich) January 6, 2025
Algorithmic Pricing and Market Effects
The administration and Democrats have targeted RealPage, a company providing rental pricing software, accusing it of enabling rent hikes. Legislation like the Preventing the Algorithmic Facilitation of Rental Housing Cartels Act addresses alleged price-fixing by landlords using RealPage. Conversely, RealPage argues its pricing recommendations reduce vacancies and promote increased rental supply.
“Imposing new costly regulations will not make housing more affordable — unleashing the housing supply by deregulating zoning and overly strict building codes will,” said Louis Rouanet.
The competitive nature of the rental market, highlighted by individual investor ownership and competition from companies like Yardi, suggests no monopoly pricing. RealPage claims 90% client adoption of pricing recommendations, indicative of no anti-competitive behavior. Diminishing rental vacancy since 2019 indicates other factors, such as monetary and fiscal policies, drive rent hikes.
Economic Roots of Rent Increases
Analysts attack the White House’s focus on algorithmic tools, arguing it diverts from real issues like inflation triggered by Federal Reserve policies and Biden’s economic plan. Government spending increases demand, intensifying property competition and prices. Algorithmic pricing tools are seen more as market condition interpreters, not inflation causes.
“If President Biden had gotten his way, Congress would have passed his “Build Back Better” plan, which would have flooded the market with an additional $5 trillion in spending,” writes Bay Buchanan for The Federalist.
Administration policies allegedly exacerbate homeownership costs with excess regulation and costly energy policies. Opponents advocate deregulating zoning and building codes, claiming it would boost housing supply and affordability. The argument calls for a balanced housing market focus over software blame, suggesting economic environment stability and supply growth as long-term rental market solutions.
