Is AI raising your rent? | The Big Story

Introduction

In the past, a bold proclamation from the "Rent is Too Damn High" party echoed the struggles of everyday citizens in urban centers, highlighting the challenges of affordability as individuals worked long hours only to find it increasingly difficult to make ends meet. Now, more than 13 years later, the sentiment remains just as relevant—with rents skyrocketing to new heights.

The latest controversy comes as the U.S. Department of Justice investigates software designed to help landlords set rental prices. Allegations suggest this software, produced by a Texas-based company called RealPage and known as Yield Star, engages in practices akin to price fixing, contributing to the rising cost of housing across the United States and potentially influencing rent prices in Canada as well.

The Role of Yield Star

Yield Star is a subscription-based software tool that provides corporate landlords with rental price recommendations based on proprietary data input by the landlords themselves. This algorithmic pricing model leverages confidential information—such as signed leases and occupancy rates—and suggests prices that exceed the market average by up to 54%. The DOJ alleges that this method enables a form of coordination that can be likened to a housing cartel, undermining the principles of fair market competition.

The legality of this practice is under scrutiny, with officials claiming that such a systematic approach violates century-old antitrust laws. Traditionally, landlords would determine rental prices based on personal evaluations or calls to other landlords, but now, with software like Yield Star, they can collude more efficiently in the cloud.

The Canadian Connection

Interestingly, Yield Star is not just confined to American soil; it is making its mark in Canada as well. Reports indicate that some property management companies in Canada have also been utilizing Yield Star to set rental prices. For instance, a significant rent strike occurred in Greater Toronto, where tenants protested excessive rent hikes based on the software's recommendations. The company involved acknowledged in an affidavit that they employed Yield Star and used it to suggest rent increases that fell significantly above Ontario's allowable cap, taking advantage of a legislative loophole that permits unlimited rent increases for buildings constructed after a certain date.

Investigations and Consequences

In light of these developments, tenant unions in Canada are demanding an investigation by the Competition Bureau. They are advocating for a thorough look into the implications of using Yield Star in the Canadian rental market, much like the inquiries currently underway by U.S. authorities.

The U.S. DOJ's legal action against RealPage seeks to put an end to this subscription service, but the effectiveness of these investigations remains to be seen. The case could set a significant precedent for algorithmic pricing regulations across multiple industries, highlighting a growing need for governmental oversight in the modern, tech-driven economy.

As technology continues to shape economic landscapes, there is a critical need for societies to examine these advancements' roles and implications, especially when they affect fundamental needs like housing.

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Keywords

• Rent
• Yield Star
• Artificial Intelligence
• Price Fixing
• Antitrust Laws
• Housing Cartel
• Competition Bureau
• RealPage
• Ontario Rent Control
• Tenant Unions

FAQ

1. What is Yield Star?
Yield Star is a real estate software by RealPage that helps landlords set rental prices based on algorithm-driven recommendations.

2. How does Yield Star impact rent prices?
The software suggests rental prices that can be 3% to 54% higher than the market average, leading to concerns about collusion among landlords.

3. Is Yield Star being used in Canada?
Yes, it has been identified in Canada, impacting rent prices in several properties, particularly in the Greater Toronto Area.

4. What actions are being taken against Yield Star?
The U.S. Department of Justice is investigating RealPage for potential antitrust violations, and Canadian tenant unions are calling for an investigation by the Competition Bureau.

5. Are there any legislative measures in Canada that affect rent increases?
Yes, under Ontario rent control laws, there are limits to how much landlords can increase rents for certain properties, but these laws have loopholes for newer buildings.