Who is really to blame for high rental prices?
There is no doubt that America has a housing crisis. The rents are high. Home property is farther and farther away, especially for young people trying to build wealth or move to cities where they are the best jobs. The public is understandably frustrated and looking for someone to blame. The last villain is artificial intelligence.
In particular, pricing tools operating with AI such as Revenue Management Software They have been accused of inflating rents and wounded competition. The Ministry of Justice under Biden’s administration brought a suit Against Realpage and a number of owners, arguing that software allows prices to be established through algorithmic resonance. Several cities, such as San Francisco, Minneapolis and Philadelphia, have prohibited Owners from the use of such algorithms when setting rental values. Cities such as Madison, Wisconsin consider similar policies.
The Realpage Discussion
The Realpage system recommends rental prices by analyzing the owner’s data along with the wider market trends, including competitors pricing when software has access to it. The software does not regulate rents. Owners can ignore his suggestions. They do not communicate with other Realpage customers, nor do they even know who these competitors are. Still critics claim that software can lead to ”implicit collusion“Where the owners follow independently similar recommendations, resulting in higher prices.
The doj argues that this is antithetical behavior, similar to traditional prices that determine prices, facilitated only by an algorithm and not by a smoky backroom agreement. The case pushes antitrust legislation to new territory and remains unclear if Trump’s administration will continue the lawsuit. Suffice it to show that many businesses were based on the same tool and prices increased later, even without immediate coordination?
The Biden Administration Council appreciated Rents in buildings using this software are moderately higher – the $ 70 per month order on average. But is this proof of pricing launch or just a reflection of businesses better understanding of the markets involved? In addition, in weak markets, these same tools can recommend reducing prices to fill vacancies.
Why the highest prices can be good
In a free market, the highest prices are signals. Tell developers to build more housing. They say resources to move where demand is stronger. In particular, encouraging offering, markets and high prices, they face shortages.
Unfortunately, the housing market is not free. In many cities, it is strangled by restrictive zones, historical preservation laws, long licensing procedures and Nimby opposition. The problem is not ai. It’s a government.
Class software for high rents is like blaming Waze for traffic. Politicians have a very limited housing offer. Now, facing the predictable result of rising prices, they are tools of scapegoat that simply reflect and respond to these conditions.
A dangerous previous
The broader risk of this regulatory voltage is a cold effect. If the simple use of algorithms analyzing market data is considered illegal coordination, we open the door to interventions in countless other industries, such as retail, energy, travel and even grocery stores. Is it a problem if an algorithm helps consumers detect discounts for purchases or maintain electricity during high demand periods? If the answer is no, then why should we punish the software that helps businesses set prices in a way that benefits them?
Instead of treating pricing software as a threat, we should ask if it reduces the cost of transactions and improves the distribution of efficiency through increased transparency. AI tools that help sellers discover the value of their bids and help buyers find lower prices are not inherently anti-competitive. It’s just part of a smarter market.
AI is not the enemy
We are on the edge of a technological revolution. Algorithms are already helping consumers to charge electric vehicles when electricity is cheaper and find travel agreements when airline seats have not been unloaded. In rental markets, it is inevitable that the owners will adopt tools for the best price of their stock. And we can expect tenants to use their own tools to find cheaper apartments or negotiate terms of lease.
A more logical policy may require the landlord to be disclosed if such invoices have been used to determine rents, though it is not clear whether tenants are even interested in this information. But the ban on tools, especially when there are no signs of communication or coercion, is the wrong approach.
The risk we face is not innovation. It is distraction. Politicians have helped to create this crisis of economic access by limiting the development of housing. Only they can remove these obstacles. The AI category is a diversion and the more we chase this narrative, the more it will take to solve the real problem.
