November 23, 2022

Warren, Smith, Sanders, Markey Question RealPage CEO on YieldStar Price Setting Software’s Role in Creating Landlord “Cartel” and Exacerbating Housing Inflation

“According to a ProPublica investigation, YieldStar, a “software that uses a mysterious algorithm to help landlords push the highest possible rents on tenants,” has become the favored rent-setting tool for some of the largest landlords in the country.”

“As housing becomes increasingly concentrated within the hands of a few, we are concerned that your software is facilitating a never-ending race to setting the highest possible rents.”

Text of Letter (PDF)

Washington D.C. - U.S. Senators Elizabeth Warren (D-Mass.), a member of the Senate Banking, Housing, and Urban Affairs (BHUA) Committee, along with Tina Smith (D-Minn.), Bernie Sanders (I-Vt.) and Edward J. Markey (D-Mass.) sent a letter to RealPage CEO Dana Jones, expressing concern about RealPage’s algorithmic pricing software, YieldStar, and its role in driving rising rents and exacerbating inflation. This letter follows reporting indicating that YieldStar may push affordable housing for families further out of reach by “artificially inflating rents and stifling competition,” creating a rent-hike race to the top. 

According to a ProPublica investigation, YieldStar, a “software that uses a mysterious algorithm to help landlords push the highest possible rents on tenants,” has become the favored rent-setting tool for some of the largest landlords in the country. RealPage reported that its clients used its rent-setting technology to price nearly 20 million units in 2020. Greystar, the largest property management company in the U.S., uses this software to set rents for over 150,000 apartments. And it is not just the largest landlords utilizing this technology: ProPublica investigators found that rent in 70 percent of units in one Seattle neighborhood, overseen by ten different property managers, was set using RealPage’s pricing software. 

Using lease and other private information collected from RealPage customers, YieldStar’s algorithm calculates and suggests the highest rents landlords should charge, “push(ing) (them) to go places that (they) wouldn’t have gone if (they) weren’t using it.” RealPage advertises that its customers “outperform the market,” “recommend(ing) that landlords in some cases accept a lower occupancy rate in order to raise rents and make more money.”

“YieldStar’s recommendation that landlords keep units vacant when tenants are unable to meet its asking price undermines efforts to ensure that the housing market is fair and free from discrimination. Keeping rental prices artificially high predictably and disproportionately hurts  lower-income tenants, tenants of color, female-headed households, and persons with disabilities. It also undermines efforts to increase housing affordability by expanding the housing supply: zoning reforms and federal investments to increase the supply of housing will not bring rents down if landlords are colluding through algorithms to keep new units empty,” the lawmakers wrote.

By providing landlords with private data on what competitors charge in rent, YieldStar has spurred concern that “RealPage has birthed a new kind of cartel that allows the nation’s largest landlords to indirectly coordinate pricing.” RealPage has also created a forum – RealPage User Group – which encourages landlords to work together on issues like revenue management. According to one former Justice Department prosecutor, these collaborative efforts “could raise an antitrust red flag.”

“While rising housing costs and limited housing supply have been a strain on renters across the country, they offer lucrative financial opportunity for the nation’s largest landlords. Last year, while families continued to grapple with the economic fallout of the COVID-19 pandemic, the ten largest publicly traded apartment landlords saw their incomes grow by 57 percent after hiking rents, while their executives enjoyed a 23 percent increase in compensation…“As housing becomes increasingly concentrated within the hands of a few, we are concerned that your software is facilitating a never-ending race to setting the highest possible rents,” the lawmakers continued.

Given these concerns, the lawmakers questioned RealPage about rent increases among its clients, vacancy rates, and details about its YieldStar algorithm.  

Senator Warren has long pushed to make housing more affordable for families and has called out companies for their role in exacerbating housing costs: 

  • On August 2, 2022, at a BHUA hearing, Senator Warren called out corporate landlords’ growing role in the rental market and emphasized the need for a Tenant Protection Bureau to hold corporate landlords accountable and protect renters from extreme rent hikes, illegal eviction, and other predatory practices.
  • On May 13, 2022, Senators Warren and Reed sent a letter to Secretary of the Department of Housing and Urban Development (HUD), Marcia Fudge, calling on HUD to preserve homeownership affordability for American families as Wall Street firms expand their activity in the housing market.
  • On March 31, 2022, at a BHUA hearing, Senator Warren called out Wall Street’s role in worsening the housing affordability crisis for seniors by buying up manufactured home communities
  • On February 10, 2022, Senator Warren called out private equity firms and other big investors for exacerbating inflation and locking families out of affordable housing opportunities. 
  • On January 13, 2022, Senator Warren sent letters to the CEOs of three private equity-backed firms—Progress Residential, American Homes 4 Rent, and Invitation Homes —calling out their growing activity in the housing market that has resulted in rent hikes and unaffordable homes for first-time buyers.
  • On August 5, 2021 during a hearing exchange with Senator Warren, a Department of Housing and Urban Development (HUD) nominee committed to consider changes that facilitate sales of distressed homes to homeowners, not private equity firms.
  • In July 2021, Senator Warren called on large corporate landlords to avoid needless evictions as the CDC eviction moratorium neared expiration. 
  • At a hearing Senator Warren made the case for her American Housing and Economic Mobility Act, which would create a new housing innovation grant program to reduce exclusionary local zoning laws.
  • On April 2021, Senator Warren and Representative Emanuel Cleaver, II (D-Mo.) reintroduced the American Housing and Economic Mobility Act to bring down the costs for renters and buyers, level the playing field so working families can find a decent place to live at a decent price, reduce exclusionary zoning laws, and take a step towards addressing the effects of decades of housing discrimination on communities of color.
  • In May 2019, Senator Warren and then-Representative Dave Loebsack (D-Iowa) wrote to the private equity firms behind some of the country's largest manufactured housing communities to request information about their use of predatory practices to boost profits in the communities they own.

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