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Landlords found using AI tool to surge rent prices costing Americans $3,600,000,000 annually

Home> News> AI

Published 16:25 9 Jan 2025 GMT

Landlords found using AI tool to surge rent prices costing Americans $3,600,000,000 annually

Reports show that AI was used to eliminate competition at the cost of renters

Harry Boulton

Harry Boulton

Featured Image Credit: KATERYNA KON/SCIENCE PHOTO LIBRARY / Feverpitched / Getty
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Reports have shown that landlords are now using AI pricing tools to collectively surge rent prices, setting tenants in American back around $3,600,000,000 annually.

Rising rent prices are certainly nothing new, and many tenants scorn prices that seem to be unsustainably increasing every single year - especially in high demand locations like New York, Chicago, Dallas, and many others.

What many renters didn't quite realize, however, is that these price increases are likely coordinated by landlords - with dedicated AI technology at the heart of it all.

A report by the White House Council of Economic Advisors (CEA) has revealed that countless landlords are taking advantage of algorithmic artificial intelligence to collectively increase their prices across the country in a wide-scale anti-competitive effort.

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RealPage is at the heart of AI-driven rental price increases that have cost America over $3.6bn annually (Pavlo Gonchar/SOPA Images/LightRocket via Getty Images)
RealPage is at the heart of AI-driven rental price increases that have cost America over $3.6bn annually (Pavlo Gonchar/SOPA Images/LightRocket via Getty Images)

The AI in question is proposed by tech company RealPage, and is split between what they call 'AI Revenue Management' and 'Lease Rent Options'.

Both are understood to recommend prices that are not only higher than any individual landlord would set, but are also unilateral across properties of the same type.

As per ZME Science, this is likely understood as a price fixing measure which is illegal under the Sherman Act, and has come at a major cost to renters nationwide.

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The CEA estimates that the average cost to a renter in an applicable 'algorithm-utilizing building' is around $70 per month, with overall excess costs of around $3.8 billion to tenants across America in 2023.

On top of this, it's understood that at least 10% of all rental units across the US utilize this AI technology, with around one in every four properties in the multifamily housing sector taking advantage of price surges.

The reason this is so bad for renters - and conversely so profitable for landlords - is that individually set prices in a typically competitive environment encourage landlords to lower their rents in order to beat out their rival properties. While this isn't always the case, especially in markets where demand drastically outweighs supply, it still acts as a principal factor within the renting world.

With the introduction of widespread tech like AI Revenue Management though, that competitiveness is gone as landlords all share the exact same price, effectively forming what many are calling a 'cartel'.

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"When algorithmic recommendations are based on profit-maximizing prices for a set of landlords collectively," the CEA report explains, "the algorithm will recommend prices that are higher than the profit-maximizing price each landlord would set independently."

The result of this is a losing game for tenants as they have no choice but to stomach the rising costs as on the flip side landlords have no reason to offer their properties for cheaper rates.

While AI is most definitely at the heart of these measures and is what allows such widespread collective action to remain successful for those in positions of power, some on social media indicate that it's an issue that spreads beyond the technology itself.

US Justice Departments have sued RealPage in an attempt to block and ban their AI technology (Anna Moneymaker/Getty Images)
US Justice Departments have sued RealPage in an attempt to block and ban their AI technology (Anna Moneymaker/Getty Images)

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"Artificial intelligence isn't actually independently intelligent," argues one user on a Reddit thread regarding the issue, "Humans program AI. As a result, AI works to get good at doing things their programmers want/desire. AI has no need or use for money. Humans do. It is humans that program AI to maximize profit."

Indeed it is true that such technology wouldn't exist if there wasn't already an appetite or desire to gouge prices in the first place, but it certainly does still prompt conversations surrounding the application of AI in situations like this, with how easy it is to do things that authorities argue you shouldn't be able to do.

The US justice department have brought antitrust lawsuits against both RealPage and large scale landlord agencies in order to end the use of common rental pricing algorithms, so hopefully renters will be able to see a brighter future soon.

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