On January 30, 2022, ProPublica, an non-profit news organization, published an article alleging the real estate industry was engaging in price fixing when setting residential apartment rents. The report highlighted how RealPage’s YieldStar rent application facilitated data mining and the sharing of market information—potentially including insider data—which could be seen as price fixing. This process, referred to as algorithmic pricing, has since led to lawsuits, with most of the largest landlords now facing lawsuits from the US Department of Justice In response, several states are enacting laws to ban the use of algorithmic pricing.
This issue doesn’t stop at the border. In a recent Globe and Mail article, it was reported that Canada’s Competition Bureau is investigating whether landlords are using algorithmic pricing to set rents. The NDP first called for an inquiry last October, and while the House of Commons human resources committee did not pass their motion, Minister François-Philippe Champagne later indicated that he would formally request the Competition Bureau to investigate the practice.
On Monday, Liberal leadership candidate Chrystia Freeland pledged to ban the practice of using AI to track market trends and artificially raise rents. There is speculation that this stance is aimed at her leadership rival, Mark Carney, who was until recently chair of the Brookfield Asset Management. Three Brookfield subsidiaries are named as defendants in a US lawsuit.
RealPage software is widely used by large landlords, which have historically monitored competitor rents through platforms like Craigslist, Apartment.com, Zillow, Rentals.ca, and local news sites. They have also conducted in-person visits to apartment complexes to assess occupancy and tenant satisfaction. RealPage has streamlined this process, reducing costs and improving the quality of market analysis.
To prove price fixing, the Competition Bureau would need to demonstrate that rents remain “sticky” even when demand weakens. According to Rentals.ca, the decline in rents last year was mainly concentrated in Ontario, where average asking rents for apartments fell 4.7 per cent to $2,332. This followed a 3.7 per cent increase in apartment rents in Ontario during 2023. Naturally, rents vary based on location, apartment type and quality.
Another key question is whether RealPage provides landlords with proprietary data that could not otherwise be determined using publicly available market information and research.
If landlords are deemed guilty of using modern data-mining methods, then the same could be said for much of the travel industry—including hotels and airlines—the entertainment industry, e-commerce platforms, retailers, electricity providers, and ride sharing services. Many of these industries wield as much, if not more, market power than even the largest landlords. Dynamic or algorithmic pricing takes many forms, from time-of-day and competitor-based pricing to bulk discounts, bundling, value-based pricing, and segmented pricing strategies.
Thomas Sowell once said, “The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.” In a market already struggling with supply shortages, it is hardly surprising that we saw asking rents rise during a period of high inflation and ballooning demand driven by record immigration. However, we have also seen falling rents as a result of recent market dynamics. To me, the focus on algorithmic pricing as the culprit for high rents is a way for politicians to deflect attention from their slow response to the housing affordability crisis.
Independent Opinion
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