No doubt you’ve heard of the surge in countrywide apartment rents, during and post-COVID-19. This has prompted scrutiny of the role of big data in pricing decisions, with several large landlords turning to algorithmic systems for guidance. These systems analyze extensive rental market data, guiding landlords on rent adjustments for renewals and new vacancies. Consequently, traditional rent-cutting practices during market downturns have been replaced with more nuanced strategies, maximizing profits through optimized pricing – all because of “Big Data.”
Two leading real estate software companies, RealPage and Yardi Systems, have faced allegations of facilitating collusion among major apartment owners through their rent-pricing systems. Lawsuits in federal courts have highlighted claims of data exchange leading to artificially inflated rents, impacting tenants across various markets.
https://www.hausfeld.com/media/550bhzyp/realpage-complaint-filed.pdf
The U.S. Justice Department is investigating RealPage’s practices, contemplating potential enforcement actions amidst concerns of algorithmic rent inflation. Both companies have refuted the allegations, asserting their systems primarily aid landlords inefficient building management by analyzing supply and demand dynamics.
Despite these contentions, regulators and the Biden administration have expressed broader concerns about the effects of big data on pricing. The increasing prevalence of algorithm-driven pricing across industries, from student housing to single-family rentals, has prompted a closer examination of its impact on market competition.
In the multifamily housing sector, despite recent market stabilization, rents experienced a significant surge during the pandemic. Promotional materials from Yardi and RealPage have highlighted – bragged – their technology’s role in enabling aggressive rent increases and eliminating concessions for tenants, indicating its perceived efficacy in driving profits.
While the initial resistance to algorithmic pricing has diminished (artificial intelligence buzz has accelerated it), legal battles surrounding market dominance and information control loom ahead. Assessing market power remains a challenge, with courts navigating the complexities of economics and antitrust regulations.
As the discussion continues, it remains to be seen whether the deployment of such systems aligns with market transparency and healthy competition, raising pertinent questions about the future of algorithmic pricing in the rental and property management industry.
David currently is the broker/owner of several real estate related businesses which manage and maintain 300+ client properties on the San Francisco Peninsula.
Trust, transparency, and performance guarantees are the foundation of these businesses. David challenges anyone to find a PM professional that offers services similar - extensive education, customer service, and performance guarantees.
David also provides consulting for his clients on property development feasibility, construction, and complex real estate transactions.
David has authored a published law review article, two real estate books, and over 120 real estate blog articles.
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