There’s no denying America has a housing crisis. Rents are high. Homeownership is increasingly out of reach, especially for young people trying to build wealth or relocate to cities where the best jobs are. The public is understandably frustrated and looking for someone to blame. The latest villain is artificial intelligence.
More specifically, AI-powered pricing tools like RealPage’s revenue management software have been accused of inflating rents and hurting competition. The Department of Justice under the Biden administration brought a suit against RealPage and a number of landlords, alleging that the software enables price-fixing through algorithmic coordination. Several cities, including San Francisco, Minneapolis and Philadelphia, have banned landlords from using such algorithms when setting rental prices. Cities like Madison, Wisconsin are considering similar policies.
The RealPage Debate
RealPage’s system recommends rental prices by analyzing a landlord’s own data along with broader market trends, including competitor pricing when the software has access to it. The software doesn’t set rents. Landlords can ignore its suggestions. They aren’t communicating with other RealPage customers, nor do they even know who those competitors are. Still, critics claim the software can lead to “tacit collusion,” where landlords independently follow similar recommendations, resulting in higher prices.
The DOJ argues this constitutes anticompetitive behavior, akin to traditional price-fixing cartels, only facilitated by an algorithm rather than a smoky backroom deal. The case pushes antitrust law into new territory, and it remains unclear whether the Trump administration will continue the lawsuit. Is it enough to show that multiple firms relied on the same tool and prices rose afterward, even without direct coordination?
The Biden administration’s Council of Economic Advisors estimated rents in buildings that use such software are modestly higher—on the order of $70 per month on average. But is that evidence of price gouging or simply a reflection of businesses better understanding the markets they participate in? Moreover, in weak markets, these same tools can recommend lowering prices to fill vacancies.
Why Higher Prices Can Be a Good Thing
In a free market, higher prices are signals. They tell developers to build more housing. They tell resources to move where demand is strongest. By encouraging new supply, markets and high prices in particular, address shortages.
Unfortunately, the housing market isn’t free. In many cities, it’s strangled by restrictive zoning, historical preservation laws, lengthy permitting processes, and NIMBY opposition. The problem isn’t AI. It’s government.
Blaming software for high rents is like blaming Waze for traffic. Politicians have long constrained housing supply. Now, faced with the predictable result of rising prices, they’re scapegoating tools that merely reflect and respond to those conditions.
A Dangerous Precedent
The broader risk of this regulatory trend is a chilling effect. If the mere use of algorithms that analyze market data is considered unlawful coordination, we’re opening the door to interventions in countless other industries, including retail, energy, travel, and even groceries. Is it a problem if an algorithm helps consumers locate shopping discounts or conserve electricity during periods of high demand? If the answer is no, then why should we punish software that helps businesses set prices in a way that benefits them?
Instead of treating pricing software as a menace, we should be asking whether it reduces transaction costs and improves allocative efficiency through increased transparency. AI tools that help sellers discover the value of their offerings and help buyers find lower prices are not inherently anti-competitive. They’re just part of a smarter marketplace.
AI Is Not the Enemy
We’re on the cusp of a technological revolution. Algorithms are already helping consumers charge electric vehicles when electricity is cheapest and find travel deals when airline seats go unsold. In rental markets, it’s inevitable that landlords will adopt tools to better price their inventory. And we can expect tenants to use their own tools to find cheaper apartments or negotiate lease terms.
A more sensible policy might require landlord disclosure if such pricing tools were used in setting rents, though it is unclear if tenants even care about this information. But banning tools outright, especially when there’s no evidence of communication or coercion, is the wrong approach.
The danger we face isn’t innovation. It’s distraction. Politicians helped create this affordability crisis by restricting housing development. Only they can remove those barriers. Blaming AI is a diversion and the longer we chase that narrative, the longer it will take to solve the real problem.
