Minnesota legislators introduced a bill Feb. 19 to ban rent-fixing algorithms to prevent landlords from artificially using shared data to inflate rent prices.
Rent price algorithms have increased rent prices in the Twin Cities Metro Area by an average of $27 per month, dominating the rental market in student housing areas like Dinkytown, Seven Corners, Stadium Village and Prospect Park, according to the Minnesota Legislature.
Rent price algorithms use automatic data analysis to determine what rental prices will make a profit for landlords and property owners, and may use artificial intelligence.
The U.S. Department of Justice and Attorneys General throughout the country, including Minnesota Attorney General Keith Ellison and RealPage Inc., are suing a rent algorithm website. The suit, filed in August, alleges the company’s algorithmic pricing scheme violates antitrust laws and harms renters by inflating apartment prices.
RealPage holds various information on rent pricing and occupancy of 26 student housing buildings on and near the University of Minnesota campus. RealPage is used in 15% of multifamily rental properties in the Metro Area, according to the Minnesota Legislature.
A RealPage executive told a landlord that analyzing competitor data could help reveal opportunities for landlords to raise rent by $50 per day instead of $10, according to Ellison’s office.
Undergraduate Student Government (USG) Local Affairs Director Siya Shelar said the algorithm is another obstacle making accessible living harder for students. Shelar said it was disheartening to see people who pay their own rent being exploited.
“You don’t know what you’re consenting to and what you’re allowing, like what information you’re allowing these landlords to have access to, and they don’t care about you,” Shelar said.
Shelar said students should know about the rent algorithms and participate in local advocacy by supporting legislators fighting for the bill. Legislators want to hear about people’s personal stories regarding rent increases and students paying their rent, she added.
“They want to see the faces of people experiencing these issues, and I think students should absolutely know and absolutely get involved, even if it’s something you’re selfishly doing for yourself,” Shelar said. “That’s the whole point of advocacy is what issues are impacting you, and how you can stand up for them.”
Edward Goetz, a professor of urban and regional planning at the University’s Hubert H. Humphrey School of Public Affairs and Director of the Center for Urban and Regional Affairs, said the existence of the rent algorithms is problematic for students and renters.
Goetz said one of the main problems resulting from the algorithm’s use is its contribution to the housing affordability crisis for students and low-income individuals. With increased algorithm use, the market becomes more difficult for students to the point where they cannot spend money on necessities besides rent, namely food and clothing.
“I just think that housing affordability should be our priority for so many different reasons,” Goetz said. “That’s why I think the legislature is probably going to be acting on this.”
Goetz said rent algorithms are illegal collusion in the marketplace and that he has seen companies promote the algorithms as a way for landlords to increase their rental income. Goetz added it means increasing rents as much as possible compared to what the rest of the market is doing.
Goetz said he encourages students to contact their local legislators and make it very clear how it is affecting their lives, including all of the things making it difficult to keep housing and the effects of the high rent.
Third-year student Andrew Palik said he was not surprised landlords were using the algorithm to “screw people over even more.”
“We’re already milked dry paying for school,” Palik said. “I think most people aren’t even able to afford to pay for college all the way and that’s just college, so combined with rent and just cost of living somewhere, it’s messed up.”
Palik said he wants more transparency when it comes to sharing information through the algorithms and hopes it’ll come to an end.
“I don’t think there’s any problem with using algorithms to make pricing, but how they’re doing it, where they’re getting it, and they’re working with other companies to make it, I don’t like that,” Palik said. “I think I would really like apartment places and companies to say our prices are used with algorithmic pricing.”
