Price gouging software assists predatory landlords in raising rent for tenants. Proposed legislation would close a loophole and make the practice illegal.
Real estate software, used by many landlords, aggregate data on nearby rents and recommend rent hikes.
The practice impacts all renters, not just those living in buildings where landlords price fix with the software, according to Sen. Richard Blumenthal.
“Potentially every renter in Connecticut is paying more, because some significant proportion of property owners and landlords are benefitting by this rental price gouging,” Blumenthal said.
Companies like RealPage and Yardi advertise their products as “property management software.” The software instead helps landlords in Connecticut and across the nation coordinate prices to increase rent in the same market, according to Blumenthal.
The result is less competition and higher rent prices for consumers. RealPage increases rents for client landlords between 5% and 12%, according to Blumenthal.
“It automatically processes data to tell the landlords where rents can be inflated without losing tenants,” Blumenthal said. “The shortage of housing, in effect, is aggravated by this kind of high tech, cartel price fixing when it comes to rents. There's so much information out there and so many landlords that it would be difficult to have there be this kind of collusion, but for modern technology, the software and the algorithms.”
Current antitrust law only protects against groups directly communicating to fix prices. Blumenthal co-authored legislation that would also make it illegal to include price fixing through third party means, including the real estate software.
“There's no competition, if information is collected by these algorithms, and then the landlords are told what to charge, which means that in fact, there's high tech, rental price gouging.”
Blumenthal says at least one local landlord, Greystar, with properties in New Haven, Newington and Storrs, is known to use the price fixing software.
Local housing advocates have seen firsthand the effect of price gouging in Connecticut neighborhoods, Tom Freeman, an attorney with Greater Hartford Legal Aid, said.
“We see the effects of the rent continually rising, year after year. We see clients who are scared for a certain time of the year where they know that the lease is going to be renewed and, based on the past years, they know it's gonna go up a certain amount. We see those downstream effects all the time of the rents just continually rising,” Freeman said.
