A recent report by the White House Council of Economic Advisers (CEA) has unveiled a troubling trend: Artificial intelligence (AI) tools are being used by landlords across the U.S. to significantly inflate rental prices. RealPage’s property management software packages these tools, which are marketed as rent optimization aids, but are accused of enabling illegal price coordination.
The AI, dubbed ‘AI Revenue Management,’ is supposed to recommend rent prices. But the CEA and the Department of Justice (DOJ) say its functionality allows landlords to act like a cartel, raising rents without direct communication. RealPage is being sued by the DOJ for violating the Sherman Act by allowing its pricing algorithm to enable price fixing, which is federally outlawed to protect consumers from anti-competitive behavior.
According to the CEA, this AI-driven price inflation costs renters $3.8 billion a year and nearly 25 percent of multifamily rental properties use the RealPage algorithm. In cities like Atlanta and Denver, the usage rate is over 50%, which leads to rent hikes of up to $181 per month. But these inflated rents don’t just impact properties using RealPage; neighboring landlords often raise prices to keep up with the competition.
RealPage defends itself, saying landlords have the right to reject the AI’s price suggestions. However, a class action lawsuit claims that RealPage forces users to comply with the AI’s recommendations, making sure landlords follow the AI’s recommendations. This is a de facto cartel, and the AI is a powerful tool for coordinated price setting.
Indirect effects ripple across the market, and the CEA estimates the real cost of these AI-driven rent increases could be as high as $3.8 billion. Such practices could be eliminated nationwide, substantially lowering rental housing markups and much needed relief for millions of renters struggling with soaring housing costs.