Investigation into AI-driven rental software raises concerns over affordable housing in California

In recent developments surrounding the controversial use of AI-driven rental software in California, the U.S. Department of Justice has launched a significant investigation into RealPage, a Texas-based software company providing pricing and tenant screening solutions for landlords. The investigation stems from allegations of a price-fixing scheme that could potentially exacerbate the ongoing affordable housing crisis affecting many Californians.

RealPage’s revenue management software is designed to help property owners optimise rental prices to enhance revenue. However, critics argue that the software has contributed to a rise in rents by promoting algorithmic pricing practices that limit competition among landlords. The application reportedly uses extensive private data to set rent prices and has discouraged landlords from negotiating rental terms directly with tenants. This practice has raised concerns among advocates for renters, who believe such tools have inflated costs in an already strained housing market.

The Justice Department, alongside California and seven other states, filed a lawsuit against RealPage in August. According to the lawsuit, the company engaged in a pricing alignment scheme that allegedly facilitated the illegal sharing of confidential pricing and supply information among landlords, which the lawsuit describes as an act that “replaces competition with coordination” and “subverts competition.” California’s Attorney General, Rob Bonta, stated that these practices have had a detrimental impact on renters in various markets across the state, especially in multifamily buildings throughout Southern California.

Bonta emphasised the seriousness of the allegations, stating, “Anticompetitive agreements are illegal, whether done by a human or software program.” He further noted that the toll of rising rents weighs heavily on millions of Californians struggling to secure stable housing. Some tenant advocacy groups have even pointed to RealPage as a factor contributing to the homelessness crisis in the region. Rose Lenehan, an organiser with the Los Angeles Tenants Union, expressed that the collusion among large corporate landlords using RealPage’s services has inflated rent prices, affecting not just current tenants but also those searching for rental properties in a manipulated market.

In response, RealPage has refuted the allegations, asserting that the widespread lack of affordable housing in the United States is the primary reason for escalating rental costs. Dana Jones, CEO and President of RealPage, stated, “RealPage is proud of the role our customers play in providing safe and affordable housing to millions of people.” Jones expressed a commitment to continuing innovations that benefit both residents and housing providers, labelling claims against the company as “false and misleading.”

As the investigation unfolds, some cities in California have begun to take matters into their own hands. San Francisco recently enacted a pioneering ban on algorithmic property management software, including RealPage’s offerings. Additionally, similar proposals are being considered in San Jose and San Diego. In Los Angeles, City Councilmember Heather Hutt introduced a motion to assess how many landlords use algorithm-based software for pricing and to explore the possibility of instituting a ban.

The future trajectory of antitrust actions against RealPage remains uncertain as the political landscape shifts. Under President Biden, there has been a notable increase in antitrust initiatives, but industry experts speculate that a potential Trump presidency could lead to a decrease in such litigation, echoing trends seen during Trump’s previous term. RealPage did receive word earlier this month that a criminal probe by the Justice Department’s Antitrust Division has been closed, although civil lawsuits against the company are still active.

The situation surrounding AI-driven rental pricing strategies exemplifies a burgeoning intersection of technology and housing policy, raising complex questions about the implications for equitable housing practices going forward. As these developments continue, stakeholders across the housing and technology sectors are poised to monitor the outcomes closely.

Source: Noah Wire Services