Algorithmic pricing tools are blamed for rising rental costs, sparking debate over whether technology or economic policy is at fault.
At a Glance
- The White House targets algorithmic pricing for high rental prices.
- Critics say economic policies and government spending drive rent increases.
- A stabilization plan is proposed to cap rent hikes by large landlords.
- There is a debate over deregulating zoning and building codes for better housing supply.
Biden Administration’s Rent Plan
The Biden administration proposed a national rent stabilization plan to counteract rising rental costs. Landlords with over 50 units must limit annual rent increases to 5% for two years to benefit from tax breaks, with smaller landlords exempted. The proposal, supported by Kamala Harris, focuses on stabilizing housing costs and protecting tenants from displacement. Yet, critics, including some economists, caution this may inadvertently decrease housing supply by discouraging landlords from investing in rental units.
The debate continues as some argue the plan might lead to increased prices elsewhere, particularly for units not falling under the proposed caps. Corporate landlords, new constructions, and substantial renovations remain targeted to ensure fairness, while also incentivizing compliance through favorable tax depreciation terms. Effective monitoring and collaboration with research partners are emphasized to realize benefits for low-income renters efficiently.
According to a new White House report, AI rental pricing software used by corporate landlords inflates rents by more than $3.6 billion each year.
It's one way corporations are using shady techniques to keep prices high and rake in record profits. pic.twitter.com/CqiDcccpZO
— Robert Reich (@RBReich) January 6, 2025
Technology or Economics?
The administration and Democrats have also lashed out at RealPage, a software provider for rental pricing, accusing it of facilitating rent hikes. Reports of the Preventing the Algorithmic Facilitation of Rental Housing Cartels Act reflect measures to combat price-fixing by landlords utilizing RealPage. However, RealPage argues its services aid in reducing vacancies and spurring more rental availability. Critics maintain that this focus on software distracts from deeper economic issues perpetuating rental inflation.
“Imposing new costly regulations will not make housing more affordable — unleashing the housing supply by deregulating zoning and overly strict building codes will,” said Louis Rouanet.
The Federal Reserve’s monetary policies and the Biden administration’s economic agenda are often blamed for current inflation. Government spending is seen to heighten competition for properties, thus augmenting rents. Critics urge a focus on deregulating zoning codes and permitting to enhance housing supply and affordability, rather than implementing new regulations that might stifle the market further.
Real Root Causes
A viewpoint prevalent among critics is that housing shortages stem from regulatory barriers rather than algorithmic tools. The report contends that algorithmic pricing is subordinate to monetary and fiscal missteps which inflate demand beyond available supplies. Calls for less regulation and streamlined permitting processes aim to encourage affordable housing constructions, potentially easing market pressures and achieving housing accessibility goals.
“If President Biden had gotten his way, Congress would have passed his ‘Build Back Better’ plan, which would have flooded the market with an additional $5 trillion in spending,” writes Bay Buchanan for The Federalist.
Lower vacancy rates since 2019 indicate the need for reform in zoning laws, suggesting they play a significant role in housing shortages. The administration is urged to craft policies fostering stable economic conditions conducive to increased housing supply. This strategic pivot could resolve the ofttimes intricate challenges tethered to the rental market.
