Some have complained high-paying tech jobs have driven up rents in major tech hubs — creating an exodus that will later drive up rents in other cities.
But ProPublica asks whether there’s another technology at work:
On a summer day last year, a group of real estate tech executives gathered at a conference hall in Nashville to boast about one of their company’s signature products: software that uses a mysterious algorithm to help landlords push the highest possible rents on tenants. “Never before have we seen these numbers,” said Jay Parsons, a vice president of RealPage, as conventiongoers wandered by. Apartment rents had recently shot up by as much as 14.5%, he said in a video touting the company’s services. Turning to his colleague, Parsons asked: What role had the software played?
“I think it’s driving it, quite honestly,” answered Andrew Bowen, another RealPage executive. “As a property manager, very few of us would be willing to actually raise rents double digits within a single month by doing it manually.”
The celebratory remarks were more than swagger. For years, RealPage has sold software that uses data analytics to suggest daily prices for open units. Property managers across the United States have gushed about how the company’s algorithm boosts profits. “The beauty of YieldStar is that it pushes you to go places that you wouldn’t have gone if you weren’t using it,” said Kortney Balas, director of revenue management at JVM Realty, referring to RealPage’s software in a testimonial video on the company’s website. The nation’s largest property management firm, Greystar, found that even in one downturn, its buildings using YieldStar “outperformed their markets by 4.8%,” a significant premium above competitors, RealPage said in materials on its website. Greystar uses RealPage’s software to price tens of thousands of apartments.
RealPage became the nation’s dominant provider of such rent-setting software after federal regulators approved a controversial merger in 2017, a ProPublica investigation found, greatly expanding the company’s influence over apartment prices. The move helped the Texas-based company push the client base for its array of real estate tech services past 31,700 customers.
The impact is stark in some markets. In one neighborhood in Seattle, ProPublica found, 70% of apartments were overseen by just 10 property managers, every single one of which used pricing software sold by RealPage…. But by RealPage’s own admission, its algorithm is helping drive rents higher. “Find out how YieldStar can help you outperform the market 3% to 7%,” RealPage urges potential clients on its website.
YieldStar has since swapped in a “Page Not Found” error for their web page urging landlords to
“outperform the market 3% to 7%” with their software. (But the original page is still viewable at Archive.org.)
ProPublica points out that “Few tenants know that such software, owned by a privately held company, has had a hand in rent increases across the country.” Yet by the end of 2020, RealPage told America’s Securities and Exchange Commission that its services helped manage 19.7 million of the country’s rental units. Five of America’s top 10 property managers use the software.
And interestingly, RealPage discourages bargaining with renters, “and has even recommended that landlords in some cases accept a lower occupancy rate in order to raise rents and make more money. One of the algorithm’s developers told ProPublica that leasing agents had ‘too much empathy’ compared to computer generated pricing….”
“The software’s design and growing reach have raised questions among real estate and legal experts about whether RealPage has birthed a new kind of cartel that allows the nation’s largest landlords to indirectly coordinate pricing, potentially in violation of federal law…. RealPage acknowledged that it feeds its clients’ internal rent data into its pricing software, giving landlords an aggregated, anonymous look at what their competitors nearby are charging.”
Read more of this story at Slashdot.
Source: Slashdot – Rent Going Up? One Company’s Algorithm Could Be Why.
