The Biden-Harris administration is fighting to lower rents
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With prominent journalists and pundits spending so much time these days scolding Kamala Harris for not yet releasing an all-encompassing policy platform, it’s worth considering how the Biden-Harris administration is fighting to make rents more affordable.
Last week, the Department of Justice sued RealPage, a technology company with an algorithm that helps landlords push rents as high as possible. It’s welcome news aimed at benefiting ordinary people.
It’s also a stark reminder that if Harris doesn’t prevail in November, we’ll be subjected to a DOJ with radically worse priorities. There’s simply no way Donald Trump, who got his start as an overtly racist landlord and whose son-in-law and top advisor Jared Kushner has a portfolio of thousands of apartments — some infested with maggots and mice, for which Kushner’s company ultimately paid a $3.25 million penalty to the state of Maryland — would ever make such a pro-tenant move.
The lawsuit hasn’t gotten a ton of coverage, but it’s a big deal that speaks to the stakes of this election.
RealPage is real bad for renters
Like a depressingly large share of tech companies, RealPage leverages cutting-edge computing power to generate an opaque algorithm that aims to make life worse for many people.
The company collects data like vacancy rates, current rent prices, and lease end dates from their clients, who are multifamily housing property managers and landlords. Then, RealPage feeds that aggregated information into its algorithm, which spits back out recommended prices, updated daily, for every available rental.
This might sound benign, but it’s not. RealPage essentially created a platform to allow business competitors to share proprietary data to coordinate setting higher rental rates. When competing businesses enter into agreements with each other to set prices, that’s price-fixing. As the Federal Trade Commission explains in its guide to antitrust laws, companies are supposed to set their own prices and terms rather than colluding with a competitor. Consumers expect that market forces set prices, not an agreement between rival companies.
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Here’s where RealPage is using technology to skirt a longstanding rule of antitrust law. Technically, property managers and landlords do not share private data with each other and do not make agreements to set prices. Instead, they share data with RealPage, which is not a market competitor, and RealPage, in turn, aggregates and anonymizes that data, and their algorithm then generates suggested rental rates.
But, as the FTC and DOJ explained in a different case where a private plaintiff filed a class action lawsuit against a company similar to RealPage, price fixing is still price fixing even if you have an algorithm do it. Price fixing is illegal when competitors make an agreement to set prices. The illegality of what the FTC terms “algorithmic collusion” comes into play when there’s an agreement to use a price-fixing algorithm.
The DOJ complaint against RealPage clarifies that this software's main purpose is to ensure rent goes up. This isn’t speculation. They’re just quoting RealPage staffers, who sell their software by saying things like “our tool ensures that [landlords] are driving every possible opportunity to increase price even in the most downward trending or unexpected conditions.” And rent has indeed gone up. Across the country, rental costs are up almost 20 percent since 2020, and lower-income consumers have seen the biggest jump.
When ProPublica broke the story of RealPage’s algorithm in October 2022, they surfaced a company video discussing approvingly apartment rental prices going up by as much as 14.5 percent. In fact, RealPage advertised its software by saying it can help landlords “outperform the market 3 percent to 7 percent.” The DOJ complaint even quotes a RealPage executive explaining, “There is greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down.”
So, in a rental market where RealPage has come to dominate, renters no longer have the benefit of competition. Landlords aren’t competing with each other to lower rents. Rather, those landlords agree to use the RealPage rates. The DOJ complaint estimates that landlords who use RealPage end up offering prices within five percent of RealPage’s price recommendations more than 85 percent of the time. And a substantial number of landlords use RealPage.
One estimate says that in some markets, half or more of the landlords use RealPage. ProPublica found one Seattle zip code where 10 property managers controlled 70 percent of over 9,000 apartments, all of which used RealPage. (Eight states, including California and Minnesota, joined DOJ in the lawsuit.)
Trump does not care if the rent is too damn high
It isn’t idle speculation that a future Trump administration wouldn’t continue litigation against RealPage. Overall, his administration was wildly uninterested in pursuing price-fixing cases, bringing the lowest amount of criminal antitrust prosecutions in nearly 50 years.
The Trump administration also contributed to the circumstances that led up to RealPage’s current ability to maintain a monopoly. In 2017, RealPage proposed a merger with its largest competitor, and the DOJ initially flagged it and asked for additional documentation. However, the DOJ’s investigation was oddly limited to evaluating whether the merger would unfairly affect competitors with similar software. As ProPublica noted in 2022, DOJ merger guidelines state that mergers are normally evaluated based on their impact on customers, but the DOJ didn’t talk to any tenant advocates or renters.
The concerns of DOJ staff about the merger were overruled by Trump appointees, and the merger went through. Today, RealPage has roughly an 80 percent market share, with access to data on over 16 million rental units across the country.
A Harris administration, on the other hand, will likely continue going after companies like RealPage as part of an overall effort to make housing more available and affordable. Just last week she called on Congress to pass the Preventing the Algorithmic Facilitation of Rental Housing Cartels Act. That bill, authored by Sen. Ron Wyden, would bar landlords from working with companies like RealPage and ban coordination of price and supply information between property owners. Harris has also proposed the construction of three million new affordable housing units and a $40 billion innovation fund for local governments to address housing issues.
She’s also backing the Stop Predatory Investing Act. Large institutional investors, particularly private equity firms, have been buying up single-family homes in massive quantities and turning those into rentals. Across the country, those institutional buyers purchased over 13 percent of all homes sold in 2021. Institutional investors bought 28 percent of all 2021 home sales in Texas and 25 percent of all 2021 home sales in Atlanta. Sen. Sherrod Brown, who is sponsoring the bill, noted that in his home state of Ohio, two investors own more than 12,000 homes in just three markets. Brown’s bill would bar an investor with 50 or more single-family rental homes from deducting interest or depreciation on those homes.
Harris’s recent statements on housing may also have calmed some progressives who were worried that she might remove Biden’s FTC Chair, Lina Khan, if she wins in November.
Being from California, Harris has ties to Silicon Valley tech companies and venture capitalists, several of whom have supported her campaign. One of her biggest backers, Reid Hoffman, the founder of LinkedIn, publicly called on Harris to fire Khan because Khan is “waging war on American business.” Khan has been very aggressive in challenging monopolies and has expressed specific concern about the use of algorithms to set prices. Harris has made clear she shares that concern and has also indicated she will go after grocery chains for price-gouging. She’ll need Khan to execute those plans.
Given the bias and dysfunction of the federal courts these days, it isn’t clear whether the DOJ’s lawsuit against RealPage will succeed. But at least Kamala Harris is trying to make things better for working class people. That’s far more than can be said of Trump, and worth keeping in mind amid the media-driven frenzy about her campaign not churning out enough white papers.
That’s it for today
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Thanks for reading.
Great summary of how RealPage operates and the uphill battle to stop this epidemic of price gouging. Another way to combat this is to do an overhaul of the Internal Revenue Code (IRC). There's no reason corporations need a lot of special deductions and tax credits only to turn around and raise prices beyond the level needed to keep up with costs. Congress also needs to consider and pass Bernie Sanders Senate bill concerning excessive CEO pay.
We are witnessing - live - a candidate running for president whose statements and behavior is truly delusional *but* either unremarked-upon or treated as nothing unusual … and yet that same press is “scolding” Kamala Harris for not delivering a point-by-point policy declaration?
And as to RealPage: Real disaster lurking in the shadows.