In full transparency, the following is a media release from Sen. Ed Markey and Sen. Elizabeth Warren, who were elected by voters in the Commonwealth of Massachusetts to serve the state in Washington DC in the US Senate. Both are Democrats. (stock photo)
WASHINGTON DC – U.S. Senators Elizabeth Warren (D-Mass.), a member of the Senate Banking, Housing, and Urban Affairs (BHUA) Committee, along with Tina Smith (D-Minn.), Bernie Sanders (I-Vt.) and Edward J. Markey (D-Mass.) sent a letter to RealPage CEO Dana Jones, expressing concern about RealPage’s algorithmic pricing software, YieldStar, and its role in driving rising rents and exacerbating inflation. This letter follows reporting indicating that YieldStar may push affordable housing for families further out of reach by “artificially inflating rents and stifling competition,” creating a rent-hike race to the top.
According to a ProPublica investigation, YieldStar, a “software that uses a mysterious algorithm to help landlords push the highest possible rents on tenants,” has become the favored rent-setting tool for some of the largest landlords in the country. RealPage reported that its clients used its rent-setting technology to price nearly 20 million units in 2020. Greystar, the largest property management company in the U.S., uses this software to set rents for over 150,000 apartments. And it is not just the largest landlords utilizing this technology: ProPublica investigators found that rent in 70 percent of units in one Seattle neighborhood, overseen by ten different property managers, was set using RealPage’s pricing software.
Using lease and other private information collected from RealPage customers, YieldStar’s algorithm calculates and suggests the highest rents landlords should charge, “push(ing) (them) to go places that (they) wouldn’t have gone if (they) weren’t using it.” RealPage advertises that its customers “outperform the market,” “recommend(ing) that landlords in some cases accept a lower occupancy rate in order to raise rents and make more money.”
“YieldStar’s recommendation that landlords keep units vacant when tenants are unable to meet its asking price undermines efforts to ensure that the housing market is fair and free from discrimination. Keeping rental prices artificially high predictably and disproportionately hurts lower-income tenants, tenants of color, female-headed households, and persons with disabilities. It also undermines efforts to increase housing affordability by expanding the housing supply: zoning reforms and federal investments to increase the supply of housing will not bring rents down if landlords are colluding through algorithms to keep new units empty,” the lawmakers wrote.
By providing landlords with private data on what competitors charge in rent, YieldStar has spurred concern that “RealPage has birthed a new kind of cartel that allows the nation’s largest landlords to indirectly coordinate pricing.” RealPage has also created a forum – RealPage User Group – which encourages landlords to work together on issues like revenue management. According to one former Justice Department prosecutor, these collaborative efforts “could raise an antitrust red flag.”
“While rising housing costs and limited housing supply have been a strain on renters across the country, they offer lucrative financial opportunity for the nation’s largest landlords. Last year, while families continued to grapple with the economic fallout of the COVID-19 pandemic, the ten largest publicly traded apartment landlords saw their incomes grow by 57 percent after hiking rents, while their executives enjoyed a 23 percent increase in compensation…“As housing becomes increasingly concentrated within the hands of a few, we are concerned that your software is facilitating a never-ending race to setting the highest possible rents,” the lawmakers continued.
Given these concerns, the lawmakers questioned RealPage about rent increases among its clients, vacancy rates, and details about its YieldStar algorithm.