The AI Dilemma: How Algorithms Are Reshaping Rental Prices in California

Lisa Mailhot  |  December 5, 2024

Buyers

The AI Dilemma: How Algorithms Are Reshaping Rental Prices in California

 

If you’ve been searching for a place to rent and faced equally steep prices everywhere, you’re not imagining things. Landlords’ use of AI-powered software to determine rent prices is a significant factor behind this trend. These algorithms, developed by companies like RealPage, analyze proprietary lease data to set rents across properties. However, this practice has drawn criticism for artificially inflating prices and making housing less affordable for renters.

Federal prosecutors allege that RealPage’s software facilitates an “unlawful information-sharing scheme,” enabling landlords to maintain elevated rent levels. In response, cities like San Francisco and San Diego are leading efforts to curb the use of such pricing algorithms. For instance, San Diego is drafting an ordinance to ban these tools, mirroring San Francisco’s pioneering legislation.

A Growing Housing Crisis

California, with its high percentage of renters (44% compared to the national average of 35%), is particularly vulnerable to the effects of such practices. Renters in the state already face significant challenges due to the high cost of living. Studies have shown that low-income residents bear the brunt of rising rents, with many spending an increasing portion of their income on housing.

Despite these challenges, RealPage has received substantial investment from entities like California public pension funds, raising concerns about conflicts of interest. Critics argue that such investments inadvertently harm the people these pensions aim to support.

 

Legislative Pushback

California’s leadership is taking steps to address this issue. Legislative actions are not only focused on banning these AI tools but also on ensuring fair housing practices. The involvement of federal prosecutors and several states in an antitrust lawsuit against RealPage underscores the gravity of the situation.

Bottom Line

Navigating the housing market in Orange County can be daunting amidst these rising challenges.  Let's connect if you’re looking for a home and want expert guidance in this competitive market. Together, we’ll find the perfect place for you to call home.

 

 

Reference: “Landlords are using AI to raise rents; California cities are leading the pushback” by Wendy Fry | CalMatters. Published on December 4, 2024.

RECENT BLOG POSTS

Top 15 U.S. Cities Where Quality of Life Shines Bright in 2024–25

Discover the 15 U.S. cities leading in quality of life for 2024–25, as ranked by U.S. News & World Report. From affordability challenges to cultural gems and natural b… Read more

She-Elites Are Shaping the Future of Luxury Real Estate

Women are redefining the luxury real estate market, emerging as powerful decision-makers in high-end home buying and selling. Discover how this trend is transforming t… Read more

Shield Yourself: How to Spot and Avoid Real Estate Scams

Protect your investment! Learn how to identify red flags in real estate scams, from wire fraud to fake listings. Safeguard your hard-earned money with these expert tip… Read more

Winter Freeze: Real Estate Market Sees Sharpest Slowdown in Two Years

Discover the trends that froze the real estate market in December, as homes lingered on the market and inventory plunged. What does this mean for buyers and sellers he… Read more

California’s New Wildfire Insurance Rule: What It Means for Homeowners

California's new insurance regulation requires coverage in wildfire-prone areas but may result in significant cost increases for homeowners. Learn how this impacts hom… Read more

2025 and Beyond: Navigating the Turbulent Waters of Real Estate Antitrust Litigation

As real estate braces for 2025, antitrust litigation remains a key battleground. Learn about the appeals, buyer-side lawsuits, policy shifts, and DOJ scrutiny reshapin… Read more

Understanding Quitclaim Deeds: When and Why You Might Need One

Quitclaim deeds are a quick and efficient way to transfer property between family members or spouses without a sale. Learn what a quitclaim deed is, how to create one,… Read more

Unpacking the Surge in Existing-Home Sales Across the US

In November, existing-home sales reached a three-year high with a 6.1% annual increase, led by significant growth across three major U.S. regions. This blog explores t… Read more

Navigating the Rising Tide: Protecting Your Home in Insurance Deserts

Explore the challenges and solutions facing homeowners in areas known as "insurance deserts" where escalating premiums and climate risks make obtaining affordable cove… Read more

We are excited to assist you in finding your perfect home

Let's find a time that suits you best to chat about your goals, show you how we work, and figure out how we can help you the most