Several Cities Block AI-Powered Rent Gouging

In 2021, Kevin Weller moved into the Portside Towers in Jersey City, N.J., just across the Hudson River from Manhattan’s Financial District. His rent was around $4,500 a month. At the end of his first 15-month lease, he received a notice that his rent was going up by an additional $1,500 per month. Soon he started hearing from other neighbors that they’d been notified of massive rent increases as well, as high as 30 and 40 percent.

After contacting Jersey City’s Office of Landlord/Tenant Relations and researching Equity Residential, the massive real estate investment trust that owns his apartment complex, Weller started to pick up some interesting clues about what was likely happening. Tenants were being told that “the software” set their rent and that local property managers had no control of pricing.

Equity Residential, or EQR as it’s known on the New York Stock Exchange across from Weller’s apartment, was a client of RealPage, a service that recommends rental prices to landlords, with a promise of increasing revenues. Services like RealPage use data shared by property owners, including information about apartment sizes and nearby rents and vacancy rates, to recommend a lease rate. Sometimes, those recommendations result in drastic swings in rent, often much higher than what a landlord or property manager might charge in a traditional setting.

Over the last few years, since ProPublica published a story detailing the pricing model that RealPage and other services use to recommend rents, tenant groups and public officials have initiated a string of actions to ban or regulate such practices on the basis that they violate antitrust laws and rules against price-fixing. Weller and some of his fellow Portside Towers tenants filed a lawsuit, which was later consolidated with a series of other suits against RealPage and some of the landlords that use their services.

It's an issue that has drawn attention from lawmakers at all levels of government. Several cities have banned the practice. Jersey City is the latest, following San Francisco, Philadelphia, Minneapolis, and San Diego. Hoboken, N.J., is on the cusp of adopting a similar law. “It’s not that, per se, an algorithm is bad or AI is bad,” says Jersey City Councilmember James Solomon. Instead, he argues, the algorithm “magnifies” the harm done by landlords sharing non-public data about their properties. “[The ordinance] targets an abusive practice.”

So far, no state has adopted a ban. Washington state lawmakers recently considered a ban but it didn’t pass. New York Gov. Kathy Hochul, a Democrat, has said she favors a ban. The Colorado legislature passed a law banning the practice last month, but Gov. Jared Polis, a Democrat, vetoed it. In his veto letter, Polis noted that collusion on price-setting is already against the law.

“I share the sponsors’ concerns regarding how rent algorithmic devices might conceivably be developed by companies and used by landlords to drive up rents and cost,” Polis wrote. “I am potentially open to supporting a bill next year that addresses the goals of [the legislation] and makes a distinction between collusive and non-collusive uses of nonpublic competitor data.”

Antitrust Violation?

The U.S. Department of Justice sued RealPage for antitrust violations in 2024, alleging that the company “contracts with competing landlords who agree to share with RealPage nonpublic, competitively sensitive information about their apartment rental rates and other lease terms to train and run RealPage’s algorithmic pricing software.” It later added six large landlords to the suit.

Although the Trump administration has dropped some President Joe Biden-era antitrust suits, it's not clear what position it will take in this case. Separately, at least nine states, including New Jersey, have filed suits alleging antitrust violations.

RealPage says that its service, which has been available for two decades, is purposely designed to comply with existing laws, including antitrust laws. It recently sued Berkeley, Calif., to block a law that it said violates its First Amendment rights. Landlords and real estate groups have opposed the regulations as well, often arguing that existing laws already outlaw price-fixing behaviors.

“If this is about antitrust concerns, we already have antitrust laws on the books, and they’re laws that have some of the most significant penalties, and rightfully so,” Nicholas Kikis, a vice president at the New Jersey Apartment Association, said during a legislative hearing last year.

As part of its ongoing budget negotiations, Congress is considering pre-empting state and local regulations on AI-related products and services for the next decade. That provision could prevent regulations on RealPage if passed. Democratic Sen. Elizabeth Warren of Massachusetts recently sent a letter to RealPage’s CEO asking how much money the company has spent on congressional lobbying related to the proposal.

Calling for State Action

After he got his first rent-increase notice, Kevin Weller helped organize a tenants’ association at Portside Towers in Jersey City. He now serves as its president. The group has sued its landlord for what it says are violations of the city’s rent-control ordinance.

Weller says that landlords often justify rent increases by saying they reflect market demands. But in his view, services like RealPage allow them to manipulate the market, by sharing information among competitors that they otherwise wouldn’t have.

He welcomes the local bans on those services, and says he understands why states might want to wait to adopt additional regulations until some of the lawsuits have been fully adjudicated.

But at some point he argues that states, with their resources and enforcement powers, will need to step in to prevent rents from spiraling out of control.

“I like the market. I like business,” Weller says. “To me, conduct business legally and have at it. But if you’re doing things that are improper and illegal, it is unfair and it should be shut down.”