A new White House report released this week reveals that rental pricing algorithms are costing American renters an average of $70 per month through illegal price coordination — amounting to a staggering $3.8 billion in excessive charges during 2023 alone.

The Council of Economic Advisers analysis shows that software companies like RealPage, which control pricing for nearly one in four multifamily rental units nationally, facilitate widespread price coordination among landlords who would otherwise compete with each other.

“While the root cause of high housing costs is the under-supply of housing, insufficient competition in the housing industry exacerbates the costs significantly,” the report states. The analysis indicates these estimates likely represent just the minimum impact on renters.

The report comes amid intensifying scrutiny of RealPage and similar companies. In August, the Department of Justice and eight state attorneys general filed an antitrust lawsuit against RealPage for allegedly monopolizing the market for rental pricing software, as previously reported by Uprise RI.

The company’s main products — AI Revenue Management and Lease Rent Options — use extensive market data to recommend profit-maximizing rents. But rather than simply helping landlords respond to market conditions, these tools enable coordinated pricing that artificially inflates rates above competitive levels.

According to the White House analysis, RealPage takes “extensive measures” to prevent landlords from charging lower rates than recommended. The process of rejecting a price recommendation is deliberately onerous, requiring separate justifications for each floor plan in a building.

The impact varies significantly by location. In six major metropolitan areas, the monthly cost to renters exceeds $100. In nearby Boston, the added cost to renters is $79 per month. The practice affects both algorithm-using properties and nearby rentals, as artificially inflated prices in one segment of the market push up rates across the board.

“The estimates likely understate the true aggregate cost,” the report warns, noting that their analysis captures only direct effects on algorithm-utilizing units, not the broader market impact.

This coordination has implications beyond just higher prices. When landlords face less competitive pressure, they have reduced incentive to maintain quality standards or respond to tenant concerns.

The Biden administration has taken several steps to address these practices. The Federal Trade Commission and Department of Justice recently clarified that price fixing laws apply even when algorithms rather than humans set prices. The administration has also pushed for increased price transparency on rental listing platforms.

These findings build on previous investigations into rental market manipulation. In June 2024, as Uprise RI reported, the FBI raided Cortland Management’s headquarters as part of a criminal antitrust probe into alleged rent inflation schemes.

For renters already struggling with housing costs, this report confirms their suspicions about artificial price inflation while quantifying the impact. The $70 monthly average represents nearly $840 in additional annual housing costs for affected tenants.

The Technical Mechanics of Price Manipulation

The White House report details how these pricing algorithms operate to suppress market competition. The software collects vast amounts of data about local rental markets, including competitor pricing, occupancy rates, and market demand.

Using this information, the algorithms calculate what they call “optimal” pricing — but optimal in this context means maximizing profits for the collective group of landlords using the system, not setting competitive market rates.

The report explains that small landlords who might normally compete by offering lower prices are effectively pressured into maintaining artificially high rates through the algorithm’s recommendations and built-in penalties for deviating from them.

Market-Wide Ripple Effects

Perhaps most concerning is how this practice creates ripple effects throughout the entire rental market. Even landlords who don’t use the software often end up raising their prices in response to the artificially inflated rates around them.

The White House analysis suggests this “strategic complementarity” in pricing means the true cost to renters likely far exceeds the estimated $3.8 billion direct impact. In markets with limited housing supply, these effects become even more pronounced.

Enforcement Challenges and Future Implications

The report highlights several challenges in addressing algorithmic price fixing. Traditional antitrust laws were written with human coordination in mind, making it more complex to prove illegal collusion when it’s facilitated by software.

However, recent legal actions suggest authorities are adapting their approach. The Justice Department’s lawsuit against RealPage marks a significant shift in how antitrust laws are being applied to digital tools and platforms.

The White House analysis makes clear that ending these anticompetitive practices could meaningfully decrease rental costs nationwide. However, achieving this goal will require continued enforcement action and potential new regulations to ensure genuine market competition.

For renters, the report offers validation of long-held suspicions about market manipulation while quantifying its impact on their monthly expenses. It also suggests that without significant intervention, these practices will likely continue to drive up housing costs across the country.