Latest / AI Ethics with Fexingo: Bias, Safety, and Responsible Artificial Intelligence / How Your AI Landlord Is Raising Your Rent
Transcript
- Lucas: Luna, I want to talk about something that hits close to home for the roughly 44 million renter households in the US — how AI is quietly raising your rent, and the surprising legal loophole that lets it happen. Luna: I have a feeling this isn't about some landlord just looking at market comps on Zillow. What are we talking about? Lucas: No, it's far more systematic. There's a company called RealPage — they dominate the property-management software space. Their flagship product, YieldStar, is what's called a revenue-management system. Think of it like airline seat pricing, but for apartment units. Luna: Right, dynamic pricing. So the algorithm looks at occupancy, demand, seasonality, and adjusts rent in real time. That sounds efficient — what's the catch? Lucas: The catch is that YieldStar doesn't just look at your building's data. It ingests leasing data from hundreds of competing properties in the same market — actual transaction-level data that RealPage collects from every client that uses their software. Luna: Wait — so competing landlords are feeding their proprietary pricing data into the same black box, and the black box tells them all what to charge? That sounds less like market competition and more like a handshake in a back room. Lucas: Exactly. Economists call it a 'virtual cartel.' There's no smoke-filled room, no phone call where they agree to fix prices. But the algorithm effectively coordinates pricing across the market. And here's the key detail: the software recommends specific rent levels, and the property managers overwhelmingly follow those recommendations — compliance rates are often above 90 percent. Luna: So if you're a tenant, you think you're shopping around, but really every landlord you talk to is running the same playbook. How much are we talking in terms of extra rent? Lucas: A ProPublica investigation from a couple years back found that in some markets, buildings using YieldStar saw rent increases of 2 to 3 percent above the market trend every year. That compounds. Over a five-year lease cycle, you could be paying 10 to 15 percent more than you would in a truly competitive market. Luna: That's significant. And I imagine this isn't just a small corner of the market — how widespread is it? Lucas: RealPage's software manages over 4 million units across the US, according to their own materials. That's roughly one in every ten rental units in professionally managed apartment buildings. And they're not the only player — there's also Yardi, MRI Software, and others offering similar products. Luna: So what's the legal argument here? Price fixing is illegal under the Sherman Act. Why isn't the Department of Justice already breaking down doors? Lucas: That's the fascinating part. Traditional price fixing requires an agreement — a conscious commitment to a common scheme. With algorithmic pricing, there's no explicit agreement between competitors. The software just learns from the data and spits out a recommendation. Each landlord technically sets their own price. The courts are still wrestling with whether that counts as a conspiracy. Luna: So the algorithm is the middleman that creates the coordination without the paper trail. That feels like a loophole big enough to drive a truck through. Lucas: It is. And there's a recent case that's testing this. In early 2025, a class action lawsuit against RealPage and several large property managers was allowed to proceed by a federal judge in Tennessee. The judge said the plaintiffs had provided enough evidence that the algorithm 'facilitates an agreement' among landlords. That case is ongoing, and it could set a major precedent. Luna: I remember that case — it's called In re: RealPage Rent Control Litigation, or something like that. It's the first big test of whether algorithmic pricing can constitute a hub and spoke conspiracy. Lucas: Right — hub and spoke. RealPage is the hub, the property managers are the spokes, and the shared algorithm is the wire that connects them all. If the plaintiffs win, it could fundamentally change how revenue-management software operates in housing. But even if they lose, the FTC has started paying attention. Luna: The FTC issued that policy statement in 2024 on algorithmic pricing, warning that using third-party pricing algorithms to collude could still violate antitrust law, even without an explicit agreement. Lucas: Exactly. And in July 2026, just last week, the FTC announced a workshop on algorithmic pricing in rental housing, specifically citing RealPage. So there's regulatory momentum. But the pace is slow, and in the meantime, tenants are still paying inflated rents. Luna: Before we go further, I want to pause on something. You know, this conversation really crystallizes why the work we do here matters — unpacking these invisible algorithms that shape daily life. And it's also a reminder that this show exists because of listeners who see value in that mission. If today's tech conversation gave you something usable, something to think about, and you want to help keep these conversations going ad-free, there's a simple way to support us. You can go to buy me a coffee dot com slash fexingo. No pressure, no perks — just knowing someone out there appreciates the signal amidst the noise. Lucas: And we really mean that. Everything we do is driven by curiosity, not commercial breaks. So if you've ever found yourself smarter after an episode, that's the community we're building together. Luna: Alright, back to the algorithm. So what can tenants actually do? If your building uses YieldStar, is there any recourse? Lucas: Right now, not much on an individual level. But there are a few things. First, you can check if your building manager uses RealPage or a similar system — sometimes it's in the lease fine print, or you can ask. Then you can document rent increases and share them with organizations like the National Low Income Housing Coalition or the Anti-Rent Control Association, which are tracking this. And if your state has strong antitrust statutes — like California, Massachusetts, or New York — you might have a state-level claim. Luna: Are there any states that have already taken action? Lucas: Arizona actually passed a law in 2025 that explicitly bans the use of competitor pricing data in algorithmic rent-setting. It's the first law of its kind. And Oregon and Washington are considering similar bills. So there is legislative movement, but it's piecemeal. Luna: It's interesting that Arizona, not exactly a tenant-friendly state, led on this. What was the political calculus there? Lucas: I think it was a rare bipartisan moment — both sides saw the data: rents in Phoenix had risen 30 percent in three years, and a lot of that correlated with the adoption of these tools. Plus, the real estate industry itself wasn't unified on this; some smaller landlords felt the big players with access to this data were distorting the market. Luna: So there's a wedge issue here. Let's zoom out a bit — because algorithmic pricing isn't just in housing, right? It's in hotels, airlines, even parking garages. Why is housing different? Lucas: It's different for two reasons. First, housing is a necessity — you can choose not to fly, but you need a place to live. Second, housing markets are local and have high switching costs. Moving is expensive and disruptive. So even a small artificial increase in rent, sustained over time, has huge welfare implications. In airlines, dynamic pricing might mean you pay $50 more for a peak-time flight. In housing, it could mean you can't afford to live in your neighborhood anymore. Luna: And there's an equity dimension too. Lower-income renters have fewer options, so they're more captive to whatever the algorithm dictates. Lucas: Exactly. And there's emerging research showing that these algorithmic systems tend to push rents up more in neighborhoods that are already gentrifying, potentially accelerating displacement. A study from the University of Texas at Austin found that in low-income ZIP codes, YieldStar adoption was associated with rent increases that were 1.6 times higher than in high-income ZIP codes. Luna: So it's not just a consumer issue — it's a civil rights issue. The algorithm doesn't care about redlining, but its output may reinforce patterns of segregation and inequality. Lucas: Right. And that's the deeper ethical concern. The software is opaque — tenants can't see how their rent is calculated, and there's no appeals process. If your landlord uses a single human property manager who makes a mistake, you can talk to them. But when the decision comes from a black box, there's no one to reason with. Luna: I want to circle back to the legal theory for a moment. You mentioned the hub and spoke conspiracy. Is there a meaningful difference between a human broker facilitating a price-fixing meeting and an algorithm doing it? Lucas: The courts are split. In 2023, a federal judge dismissed a similar case against RealPage, saying there was no evidence of an 'agreement.' But in 2025, the Tennessee judge said the algorithm itself could be evidence of a meeting of the minds. The key question is: did the landlords know that by using the same algorithm, they were effectively coordinating prices? If the algorithm is designed to maximize revenue for all clients, and each client knows others are using it, there's an argument that they implicitly agreed to abide by its recommendations. Luna: And that's the argument the Tennessee court accepted, at least at the pleading stage. So we might see a trial within the next year or two. Lucas: And if it goes to trial, it will be a landmark. The FTC has already filed an amicus brief in support of the plaintiffs, which is unusual. They're signaling that algorithmic collusion is a priority. Luna: So where does this leave us? Is there hope for reform, or are we stuck with algorithm-driven rent hikes for the foreseeable future? Lucas: I think we're at a turning point. The technology is well-established, but the legal and regulatory response is just catching up. The Arizona law, the FTC workshop, the class action — these are signs that the tide is turning. But it will take time. In the meantime, the best defense is awareness. Know whether your building uses this software. Question rent increases that seem inexplicable. And if you're in a position to advocate, push for transparency requirements in your local housing authority. Luna: That's a good, practical note to end on. I'll be watching that Tennessee case closely. Lucas, thanks for breaking this down. Lucas: Always a pleasure, Luna. And to our listeners — keep questioning the algorithms that run your life. That's the first step to building a fairer system.