Are Algorithms Really Driving Up Multifamily Rents, or Just Driving Headlines?

Decades ago hospitality pioneers invented revenue management when they decided rate-setting should be data-driven and strategic, not gut-driven and impulsive. Revenue management as a discipline has evolved significantly since then, attracting teams of data scientists using more and more powerful analytics. Eventually it jumped to multifamily with early movers like Yieldstar and LRO, which RealPage owns today.

In multifamily, despite lower technical sophistication of the revenue management tools, less overall adoption of the technology and the relative lack of revenue management professionals, it’s become quite a thing. RealPage and others have been sued by the federal government, several states and by private parties, all basically arguing its revenue management tools facilitated price-fixing by multifamily properties that led to inflated rents “above competitive levels.” Setting aside the fact that you could say the same about potential price fixing in hotels, and there have been zero lawsuits about that, the bigger question is simply, “is it true?” Does algorithmic revenue management inflate rents above competitive norms?

Explosive research released last year says yes: Thanks to algorithmic pricing, rents were $25 per month higher for more than 4 million apartments during 2019, driving $1.5 billion of total rent paid above what normal competition would dictate. But these findings are worth some investigation.¹