Cities take the lead in battling rent-setting algorithms
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The future of trading is fast, powerful, and precise. Experience it now on Robinhood Legend. Sign up today. Investing is risky. Robinhood Financial LLC, member SIPC, is a registered broker-dealer. Other fees may apply. The rent is too damn high. Just how the algorithm wants it. From American Public Media, this is Marketplace Tech. I'm Megan McCarty Carino.

The use of algorithmic software to set rent prices has come under increasing scrutiny in recent years. Last year, the Biden administration sued the real estate company RealPage, alleging its rent algorithm, which aggregates and analyzes private data from different properties, allows landlords to collude on prices and stifle competition.

There's no word yet on what the second Trump administration's Department of Justice will do with this case just yet. But in the meantime, some cities are taking action, with several banning the use of these algorithms completely. Robbie Saquara has been reporting on these efforts for Stateline.

So there are four cities currently that have banned these type of software. You have San Francisco, Philadelphia, Berkeley, California, and then Minneapolis was the most recent. And these four cities aren't super surprising because we have seen renter...

legislation kind of passed through it, whether it's been eviction protection, maybe stuff that is just short of rent control in some places. But I think what the surprise has been is how quickly it's been enacted upon, given how slow housing legislation can be. Are there any cities that are sort of

regulating these systems, but maybe not outright banning them. So that is one of the big things that we're trying to figure out is how are these being regulated? It does seem like the enforcement side of this is lacking a little bit outside of fines.

something about policy is that a lot of cities and states kind of operate in a copycat way. If they see what's working in one state, they're going to, you know, take the things that work well. I think, you know, over this next year, we will see some of these cities as kind of a model. How are they being able to rein in some of these places? Are the fines working? Now, when it comes to the fears of collusion, that's obviously all, you know, geared towards the bigger fish. But

I've talked to some small mom-pop landlords who are worried about them being caught in the crosshairs of this. There's a different balance, right? Landlords look at this as a business. For some of them, it might be their only source of income. And for tenants, this is their home. This is the place that you go after work. And you want to make sure that you can keep it every month that you're paying rent. So without an understanding of how enforcement is going to be done, it may not have the effects intended.

As you note in your reporting, it seems like cities are really outpacing states when it comes to banning these algorithms. Are there any states trying to do this on a statewide basis? Washington states, they have gone, I would say, the farthest this session. You know, other states like New York have...

tried to float out another one. They failed last year. Colorado is another one that's introduced legislation. They also were unsuccessful last year. But in a sense of why states may be lagging behind cities is that ultimately it's hard to get things passed in state legislature. There's so many more people than cities. And then also,

If you want to think about how many people at the state legislative level are actually renters, that plays a part into it. There's a pretty low amount who may feel the sting of having to look for rental, you know, rents in big cities. So that also plays a part to it, too. So it's going to be interesting to see if Washington passes it this year. I would imagine that another one would pass. That's just the nature of some of these policies. It just takes one to kind of break it open. But they're an interesting state to track.

And what about the stance from landlords on the use of these algorithms?

Yeah. So landlords say that this market data helps them be able to make the best possible pricing decisions possible. RealPage, they've pushed back that these are being used to collude. They're saying that, hey, we're just getting as much data and insight that we can. And for people who want to use it, they can use it, but we're not forcing people to buy it. Another thing that we're also seeing is Berkeley. They are being sued by RealPage for passing this

So now we're starting to see a little bit of pushback from this. We know that there is a current Department of Justice case started last year against RealPage and Yardi and some of these third-party softwares. It expanded to some of the bigger corporate landlords.

but a new administration has taken over. So it's going to be interesting to see if that Department of Justice case is going to stand as is. It may be something that goes to the back burner, and that also could influence how cities and states react in terms of a regulatory standpoint. And for landlords, you know, if there isn't going to be any heat elsewhere about this, they will continue to use it as is. We'll be right back. Trading shouldn't have barriers. When Robinhood started, it was built to make trading more accessible.

Now, Robinhood offers more sophisticated trading tools. Experience the future of trading on Robinhood Legend, the all-new desktop platform that harnesses intuitive design to deliver a seamless experience for traders, free to use with a Robinhood account. The future of trading is fast, powerful, and precise. Experience it now on Robinhood Legend. Sign up today.

Investing is risky. Robinhood Financial LLC member SIPC is a registered broker-dealer. Other fees may apply. You're listening to Marketplace Tech. I'm Megan McCarty Carino. We're back with Robby Sequara, staff reporter at Stateline.

As you know, critics have alleged, sometimes in court, that these systems go beyond market research for landlords and amount to basically a kind of price fixing, right? Yes. And all of this, I think, is giving us more transparency in how rents are being set. You think about it, you know, there really wasn't much about eviction policies until people started writing about it, until people started talking about it. And now we're talking about a new way in which...

the market has been changed. If there's gonna be a crackdown on this particular part of rent setting through algorithms, well, what other ways might landlords try to get ahead of the game? In what ways will enforcement keep up with them? In what ways will people try to figure out the best way to make a profit? And what ways will people try to rein in practices that they seem to be illegal or maybe breach upon antitrust issues? And in the housing space, we're seeing a very interesting conversation with that.

Although when I see cities like San Francisco and Berkeley sort of leading the charge to ban these systems, I mean, these are places that have notoriously unaffordable housing markets for a long time, largely because of constrained housing supply. I kind of get an alarm bell in my head, like, is this technology just serving as an easy scapegoat for housing policy problems that go a lot deeper? You know...

I think that when it comes to policy, the really truly transformative policy that housing advocates want that, you know, are actually going to meaningfully make a huge difference in the affordability and the availability of housing, that's going to take a lot of time and also going to take a lot more agreement with, you know, lawmakers.

I think for some housing advocates who I've talked to, they're cautious about it. Hey, how much is actually going to change the day to day for people if, you know, rents were high and they weren't really using these softwares? You know, that's a whole other issue entirely. So I think when it comes to housing policy, there are so many things that need to be done. This is one way that they're hoping to fix it. But I think tenants and advocates definitely are saying that more needs to be done when it comes to actual true availability and true affordability.

That was Robby Saquara at Stateline. We'll link to Robby's reporting at MarketplaceTech.org. And the latest on that suit filed by RealPage against the city of Berkeley earlier this month. According to the Associated Press, RealPage alleges that Berkeley's ban of its software is a violation of the company's freedom of speech.

RealPage attorney Stephen Weissman told reporters on a conference call, quote, Berkeley is trying to enact an ordinance that prohibits speech, speech in the form of advice and recommendations from RealPage to its customers. The company said it's considering legal action against other cities that have banned algorithmic rent software. Daniel Shin produced this episode. I'm Megan McCarty Carino, and that's Marketplace Tech. This is APM.

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