The real problem for rising rents is government, not algorithms

Originally published at The Center Square. 

As Americans face skyrocketing rents, the Biden administration's Department of Justice has turned its sights on RealPage, a software company accused of promoting anticompetitive practices by helping landlords adjust prices. But this lawsuit misses the mark.

It's not private-sector tools like RealPage driving up housing costs — it's government-induced inflation, elevated interest rates, restrictive zoning laws, and excessive property taxes that artificially inflate housing prices. Instead of targeting software that improves market transparency, the DOJ and policymakers should address the real culprits behind high housing prices.

RealPage's algorithm offers data-driven pricing suggestions based on actual market conditions, not arbitrary calculations. Critics claim the software allows landlords to "collude," but this misrepresents its function.

The software simply enhances transparency by reflecting actual rental prices in the market — similar to dynamic pricing used in airlines and retail. Landlords maintain their freedom to reject the pricing suggestions, and renters retain their sovereignty to choose where to live.

This isn't price-fixing; it's the market working as it should.

In a related misguided move, San Francisco has outright banned RealPage and similar tools from being used. This ban restricts transparency in one of the most expensive housing markets in the country, making it harder for landlords and renters to have an accurate picture of real-time market dynamics. In a city where progressive housing policies have already exacerbated costs, cutting off a tool that provides clarity is a bad idea.

Instead of helping alleviate the housing crisis, San Francisco's decision to ban these tools further compounds the issue by limiting market information.

The DOJ's case relies on the false assumption that landlords blindly follow RealPage's recommendations, but this patronizing narrative overlooks the realities of market behavior.

Algorithms don't set rents — supply and demand do.

RealPage helps landlords better understand market conditions, increasing efficiency and transparency. It's a tool for better decision-making, not a means of manipulating prices. Blaming RealPage is a convenient distraction from the real problem: the government's role in inflating prices.

Since 2020, Congress's massive deficit spending has given the Federal Reserve ammunition to pump trillions of dollars into the economy, driving up prices, including rents.

Since the pandemic, rents have risen by over 20%. Instead of addressing these causes of inflation, the administration is scapegoating private actors like RealPage to avoid accountability for its failed policies.

In addition to inflationary pressures from Washington, state and local governments exacerbate the housing crisis with restrictive zoning laws that limit new construction and burdensome property taxes that raise costs for homeowners and landlords, ultimately passed down to renters.

In cities like San Francisco, these regulations artificially limit housing supply, pushing prices higher.

If policymakers were serious about addressing housing costs, they would focus on removing these government-imposed barriers, not attacking private sector tools like RealPage. Markets work better when participants have access to more information—not less.

Algorithms like RealPage's provide landlords with real-time data about market conditions, allowing for more efficient price adjustments based on supply and demand.

In an environment with a housing shortage and just three months of housing inventory available at current demand, the market must be allowed to operate freely without heavy-handed government intervention.

Dynamic pricing mechanisms efficiently allocate scarce resources, ensuring that housing units are priced according to their value in the marketplace. This is no different from how airlines price seats based on demand or how restaurants adjust prices for specials.

Attacking this type of transparency ignores how these markets actually function, benefiting consumers and businesses by improving price discovery.

Rather than embracing market-based solutions, the DOJ is wasting time attacking private innovation. Instead of scapegoating software, policymakers should focus on spending less, lowering interest rates, easing local zoning restrictions, reducing property taxes, and encouraging new construction.

This would increase the housing supply relative to demand, reduce prices, and address the real root causes of the housing crisis.

RealPage and similar tools are part of the solution, providing better information and transparency in an already constrained housing market. The Biden administration's misguided focus on private actors won't lower prices —free-market reforms will.