News 4’s Chris Glorioso shares the details in this I-Team report.
As the housing shortage continues to drive up rents, lawmakers and attorneys general are taking aim at another factor that may be influencing your monthly lease: Artificial intelligence.
An I-Team hidden camera investigation found leasing agents well aware the rents they advertise are heavily influenced by sophisticated algorithms and automated software.
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On a tour of the Park + Garden luxury apartment building in Hoboken, New Jersey, this month, the NBC New York I-Team asked the simple question, “who sets the price?” of a 2-bedroom apartment. In response, the leasing agent at first suggested the quoted rent was driven by supply and demand.
“We don’t set the price. It’s just based on the market,” she told the I-Team.
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But later, that same agent explained how rents in the building are recommended by software from Real Page, a company that is currently being sued by several states and the federal government, for using shared algorithms that prosecutors say coordinate pricing among landlords.
“Is the rent just basically set by that software?” the I-Team asked.
“The rent is set by that software but I have not heard anything about that,” the leasing agent replied.
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Ravi Bhalla, the Hoboken mayor, said he believes the use of shared pricing algorithms at buildings like Park + Garden amounts to collusion between landlords who should be competing on price – not sharing data to coordinate prices.
“This is absolutely a cartel,” Bhalla said. “When you have price collusion to artificially drive up prices above market rents, when you have corporate landlords who knowingly conspire with each other and engage in trade secrets to advance their own profits, there are specific laws to protect the residents of the state of New Jersey.”
The Bozzuto Group, which owns Park + Garden, did not immediately respond to the I-Team’s request for comment. However, in court filings, the company has specifically denied using rent-setting software that is coordinated with competitor companies.
Real Page has also vigorously denied allegations its software allows landlords to artificially raise rents by sharing pricing data.
“RealPage’s revenue management software is purposely designed and built to be legally compliant and has always used data legally and responsibly,” wrote Jennifer Bowcock, Senior Vice President of Communications at Real Page. She added that the company’s software “does not use any personal or demographic data to generate rent price recommendations.”
According to the Real Page website, the company offers “AI-driven algorithms” which “optimize revenue by providing precise recommendations for new and renewal leases.”
Last month, Matthew Platkin, the New Jersey Attorney General, filed a lawsuit against Real Page and ten of the state’s biggest corporate landlords, alleging they’ve all used rent-setting algorithms that amount to price-fixing. Among the landlord defendants are Bozzuto, AvalonBay, and Greystar, companies that own thousands of rental units nationwide.
The New Jersey suit also claims building owners that use Real Page are often violating the state’s consumer protection law – by falsely telling prospective renters that “the market” sets the rent, instead of prices being largely determined by a shared algorithm.
“What you’re seeing are rents that are being artificially inflated. When they’re telling you it’s competitive, that market forces are determining your rent, it’s not,” Platkin said. “It is an algorithm set by Real Page — that Real Page strictly enforces — based on sensitive information that is not available to the public.”
On hidden camera, the I-Team asked leasing agents what kinds of information their companies share with competitor landlords. At a building owned by AvalonBay, one representative assured the I-Team there is no sharing of confidential corporate data among competitors.
“We do not share information with other landlords. As you might know, that’s against the law,” he said.
“So this building does not share information with other landlords, even through RealPage?” the I-Team asked.
“All the information we have is posted on the website,” he answered.
When the I-Team inquired further with AvalonBay’s corporate office, a company representative insisted rental managers set apartment rental prices independently and that any software used to assist in those decisions is not supposed to share confidential corporate information with other landlords.
“AvalonBay’s revenue management software contracts have always required that AvalonBay’s non-public data not be used by the software provider for the benefit of others and that the non-public data of others not be used for AvalonBay’s benefit,” the company said.
At a building owned by Greystar, a leasing agent said any information shared with competitor companies is akin to what a member of the public might find on websites that list units and their rental histories.
“We share our information, which is how much are we charging for these units, what’s our price per square foot,” the rental agent said. “There are aggregating databases, similar to like Apartments.com or something like that that gather that information. Every single rental building in the country is going to share with entities like that, which is how we know what market conditions are.”
Greystar did not respond to the I-Team’s request for comment, but in court filings it has denied the existence of any conspiracy, collusion, or cartel behavior on the part of landlords who use Real Page.
Last week, Jersey City’s Municipal Council voted unanimously to ban the use of software that allows landlords to share algorithms in order to set rent. A representative for Mayor Bhalla said he is now planning to introduce similar legislation in Hoboken.
Other cities across the country, including Philadelphia, San Francisco, and Berkeley have passed similar restrictions.
Bowcock said the sharing of “nonpublic” data via Real Page software shouldn’t be deemed anti-competitive.
“We are disappointed to hear about Jersey City passing legislation that will ban the use of certain nonpublic data in our revenue management software, as we believe such data can be used in pro-competitive ways,” she said.
