Trend Alert: AI Rent Fixing Software

AI-driven rent pricing software has come under increased scrutiny due to concerns about potential anticompetitive practices and their impact on housing affordability.  Landlords and Property Managers are using artificial intelligence and machine learning to analyze market trends, tenant behaviors, property conditions, and economic indicators to recommend rent adjustments. Although they say these tools help maximize rental income while maintaining occupancy and competitiveness, these platforms lack human judgement and can negatively impact affordability with anticompetitive practices.  Things to know:

  • AI-Driven Rent Fixing Software uses local rental trends, competitor pricing, and economic factors to forecast future rental market conditions.  It creates pricing models to proactively adjust rent amounts (think how airlines and hotels set pricing) driven by profitability and strategic rent hikes.

  • The leading platforms being used are RealPage AI Revenue Management (YieldStar), Entrata Revenue Management, Zillow Rental Manager, Appfolio Rent Comparison Tool, ResMan AI Pricing.  If you see one of these names, your landlord is using AI-driven rent pricing software.

  • Although these systems may benefit landlords, there are some obvious downsides to renters:

    • Lack of human judgement: These tools do not account for unique property conditions, maintenance issues,  local nuances, or the tenant-landlord relationship. 

    • Over-reliant on market trends: These models depend heavily on real estate market conditions which can be volatile.  Sudden downturns, job losses, weather emergencies, or pandemics can make the predictions inaccurate and dangerous.

    • Potential for discrimination and bias:  Any model is only as good as the data they’re trained on.  Over-dependence may lead to increases that disproportionately impact certain demographics and potentially violate Fair Housing laws. Incomplete, outdated, or biased data could lead to flawed recommendations and unfair rent adjustments.

    • Overinflated Rents: Aggressive automated rent hikes without considering local affordability and demand will result in increased tenant-stress, late payments, and evictions.  This all impacts the renter, including the eventual higher lease abandonment and vacancy rates in the area.

    • Reduced flexibility in Unique Situations: AI may not account for factors like an upcoming major renovation, seasonal demand fluctuations, or a loyal tenant’s personal preference to maintain a steady residence.

As expected, AI-driven rent pricing software has come under increased scrutiny due to these concerns and several legal measures have been implemented or proposed to regulate the use of such software.  In January 2024, U.S. Senators introduced the "Preventing the Algorithmic Facilitation of Rental Housing Cartels Act." This proposed legislation aims to make it illegal for landlords to use algorithms to artificially inflate rent prices or reduce housing supply by coordinating pricing strategies. There are also local ordinances and bans implemented or proposed in several US cities such as San Francisco, Philadelphia, Houston, and Eugene, OR.  This story will continue to develop and we will update our information as needed, but no matter what’s happening - LeaseWisely, my friend.