Tech Blame Game: Are Landlords’ Algorithms Really Driving Rent Increases?

House offered to a person

The debate over skyrocketing rents in America’s housing market intensifies as the White House accuses algorithmic pricing software of driving prices up while critics argue that economic policies play a bigger role.

At a Glance

  • The Biden administration proposes rent stabilization to curb rent hikes.
  • Critics claim economic factors, not AI, are the real drivers of rent increases.
  • Government regulation could exacerbate housing issues.
  • Reports deflect blame for rent hikes onto software tools.

White House Policies and Critics’ Concerns

The Biden administration has put forth a national rent stabilization plan aimed at limiting annual rent increases to five percent for two years, specifically targeting corporate landlords with over 50 units. This initiative seeks to stabilize housing costs and protect tenants from displacement. However, critics caution that such a policy could inadvertently reduce housing supply by discouraging landlords from offering rental units, potentially driving up prices for non-controlled units.

Kamala Harris publicly supported the proposal, which exempts smaller landlords from these restrictions due to their lack of economies of scale. Yet, this exemption could inadvertently harm tenants in these smaller properties. Effective implementation requires extensive monitoring alongside research partner collaboration to ensure benefits reach low-income renters.

Algorithmic Software and Economic Influences

The administration and Democrats have targeted RealPage, a software provider, accusing it of facilitating rent hikes through algorithmic pricing. The Preventing Algorithmic Facilitation of Rental Housing Cartels Act aims to combat alleged price-fixing by landlords utilizing such tools. Proponents argue that RealPage’s software can reduce vacancies and potentially incentivize increased rental supply, suggesting that the rental market’s competitiveness and landlord diversification help prevent monopolistic practices.

“Imposing new costly regulations will not make housing more affordable — unleashing the housing supply by deregulating zoning and overly strict building codes will,” said Louis Rouanet.

Critics claim the White House deflects attention from significant economic factors driving rent increases, such as expansive monetary policies and substantial government expenditure. They argue that labeling AI as a primary culprit ignores broader fiscal and monetary policies, which are said to fuel inflation. Excessive government spending is believed to have increased demand, causing property prices to soar.

Looking Ahead: Solutions and Implications

The rental vacancy rate’s ongoing decline since 2019 suggests other factors beyond algorithmic tools are at play. Many advocate for regulatory reforms, such as deregulating zoning and building codes, to boost housing supply and enhance affordability. Proposals for a stable economic environment and growth may better address the rental market’s challenges than new regulations.

“If President Biden had gotten his way, Congress would have passed his “Build Back Better” plan, which would have flooded the market with an additional $5 trillion in spending,” writes Bay Buchanan for The Federalist.

As this debate continues, it is crucial to address the reasons behind rising housing costs genuinely and implement effective strategies enhancing overall economic stability. For now, the stance on algorithmic pricing remains contentious, with various stakeholders advocating for different solutions to alleviate America’s rental crisis.