(WASHINGTON) — New legislation in Congress aims to tackle a financial burden weighing on millions of households — rent that is “too damn high,” as one New York City housing activist famously claimed.
The bill, introduced by Sen. Amy Klobuchar, D-Minn., and co-sponsored by eight other Senate Democrats, targets companies that collect data on rental markets from landlords and then use the data for an algorithm to help broadly determine rents.
In an exclusive interview with ABC News, Klobuchar called it a “high-tech” version of collusion, saying companies that use these models are widely sourcing rents from competitors and colluding to drive up costs for consumers. The landlords plug in their nonpublic information related to rents into the RealPage software and then are able to receive pricing recommendations, circumventing normal competitive strategies for setting rents. The bill, she said, wouldn’t prevent landlords from using algorithms — but it would stop companies from illegally working together to set higher rents.
“It’s just textbook collusion,” Klobuchar said. “It’s clearly illegal for these landlords who compete with each other to get together for dinner one night and go, ‘Hey, let’s all set our rents high and then we won’t compete with each other.’
“Well, this is just a high-tech, sophisticated way of doing it, and our laws need to be as sophisticated,” she said.
Last year, the Justice Department sued real estate software company RealPage, which is the most-used company providing algorithmic pricing. The lawsuit alleged RealPage engaged in a collusion scheme with landlords that resulted in higher rent across the country.
“We constantly interact with algorithms, whether shopping online, paying rent, booking a flight, hailing a ride, buying insurance. I mean, that happens,” Klobuchar said. “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.”
A report by the Biden administration’s Council of Economic Advisers found that algorithms like the one used by RealPage added over $90 a month to average rents in Phoenix, Las Vegas, San Diego, Tampa and Washington, D.C. — and added over $130 a month to rents in Dallas, Denver and Atlanta.
In 2023, the algorithmic pricing added a total of $3.8 billion to the price of rentals nationwide, according to the report.
The report also found that RealPage is used to determine rent for nearly 1 in 4 multifamily properties.
In a statement in December, RealPage defended its software, saying it was built to be legally compliant and enhances competition for customers in rental housing.
“We remain unwavering in our belief that RealPage’s revenue management software benefits both housing providers and residents,” it said.
“Housing is still the largest monthly expense for most households, and that includes rent,” Klobuchar said. “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 stubborn drivers of high, post-pandemic inflation — up 4.3% over the past year, according to the government’s latest consumer price index report. That outpaces the overall annual inflation rate, which stands at 2.9%.
The legislation introduced by Klobuchar, called the “Preventing Algorithmic Collusion Act,” would require rental companies to disclose if they are using algorithms to set rents. And it would direct the Federal Trade Commission to study how these algorithms are affecting competition.
It will need bipartisan support in the Republican-controlled Senate and House to have a future. Klobuchar said she is optimistic the bill can garner support from Republicans.
While former President Joe Biden’s Department of Justice was aggressive on antitrust enforcement, aided by then-FTC Chairwoman Lina Khan, the Trump administration also has interest in propelling the issue. Antitrust cases against Google and Meta were initiated under Trump’s first term, and Vice President J.D. Vance was vocal about taking on powerful monopolies while in the Senate. One of his former aides, Gail Slater, will now take a leading attorney role at the DOJ.
In announcing Slater’s position, President Donald Trump said Big Tech companies have “run wild for years.”
Still, Klobuchar admitted that seeing the hefty showing of tech CEOs at Trump’s inauguration — the “broligarchs,” as she called them — gave her pause.
“But there are some good people that are going to keep doing this work within the bowels of the Department of Justice. So my hope is that there will be continued antitrust enforcement,” she said.
In the meantime, Klobuchar urged renters to do their own research, with the awareness that there are “forces out there” raising rents in most metropolitan areas.
“Why not ask when you’re going to rent: ‘Are you involved with RealPage or one of these companies that sets rents?'” she said.
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