Algorithmic pricing in real estate is under scrutiny, but critics argue the real issue lies in economic policies rather than technology.
At a Glance
- The Biden administration aims to regulate rent hikes through a new proposal.
- Some say regulatory constraints and economic mismanagement are to blame for rising rents.
- The potential negative impact on housing supply concerns critics of rent control.
- Algorithmic pricing tools are defended as market assessment instruments, not price inflators.
Understanding the Proposed Rent Stabilization Plan
The White House’s recent report identifies algorithmic pricing as a factor in rising rents. The Biden administration’s proposal aims to cap rent increases to 5% annually for two years among large landlords, offering tax breaks for compliance. Kamala Harris endorsed this as a measure to curb tenant displacement. However, critics express concern that the move could discourage landlords from renting out units, potentially driving up costs for non-regulated properties.
The proposal targets landlords with over 50 units, exempting those who have made substantial renovations or have new constructions. Compliance is incentivized by offering faster tax depreciation write-offs. Yet, ensuring the policy’s effectiveness requires diligent monitoring and partnership with research organizations to truly benefit low-income renters.
Algorithmic Pricing: Tool or Culprit?
The administration’s focus on algorithmic pricing, mainly concerning RealPage, seeks to address alleged anti-competitive practices. The Preventing the Algorithmic Facilitation of Rental Housing Cartels Act was introduced in this vein. RealPage’s methodology aims to match rental rates with market conditions, potentially supporting increased rental supply and reducing vacancies. While owning a significant percentage of rental properties, individual investors limit monopoly pricing, suggesting a competitive market framework.
“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.
Competition from companies like Yardi further diminishes accusations of monopolistic tendencies. The declining rental vacancy rate since 2019 indicates other drivers of rent increase, primarily attributed to the government’s fiscal stance and inflation policies rather than technology-induced inflation.
Beyond Technology: The Role of Economic Policies
Critics argue that focusing solely on algorithmic pricing evades addressing deeper economic issues influencing rent surges. They cite the Federal Reserve’s monetary policies and the current administration’s economic strategies as central to inflation and subsequently escalating rents. Furthermore, regulatory barriers are spotlighted, restricting housing development that could potentially ease the affordability crisis.
“As early as Jan. 20, 2021, President Biden declared war on America’s energy production, canceling the Keystone Pipeline and restricting permits for drilling and hydraulic fracturing,” writes Bay Buchanan for The Federalist.
Suggestions arise for zoning deregulation and simplified permitting processes to spur affordable housing construction. The narrative pushed by the White House is seen by some as shifting responsibility for housing woes away from policy inadequacies, instead pointing fingers at technological innovations. Resolving these market challenges may involve fostering a stable economic climate and advocating for increased housing availability.