Many metro Denver tenants paid more than $1,600 in additional rent in 2023 because of a profit-maximizing algorithm that Colorado lawmakers unsuccessfully tried to ban earlier this year, according to a new report issued by the White House.
The White House’s Council of Economic Advisers found that American tenants who live in apartments that use the algorithm paid $70 more per month, on average, than other renters. Last year, its use cost renters an additional $3.8 billion, a figure that the report says is likely a “lower” estimate of the true price tag. The algorithm, owned by software developer RealPage, helps landlords determine rents — and, critics have alleged, coordinate pricing between them, amounting to price fixing.
The toll was high in Denver: Of the 20 major American metropolitan areas examined in the report, tenants in metro Denver shouldered the second-highest extra cost each month of RealPage’s algorithm: $136 on average, behind only Atlanta’s $181.
What’s more, the report found that more than 45% of the region’s rental properties use RealPage’s software — the third-highest percentage of the areas studied and well above the 10% national figure.
“It starts and ends with that fact for us,” said Zach Neumann, the co-CEO of the Community Economic Defense Project, a Denver housing nonprofit that backed the effort earlier this year to ban the use of rent-setting algorithms. “It’s obscene, and it’s taking money directly out of people’s pockets and (giving) it to large, out-of-state landlords.”
RealPage has faced increasing scrutiny for its role in Colorado’s and America’s housing crisis. Consumer-protection advocates, including Neumann’s group, previously called for an investigation into the company, and the U.S. Department of Justice is suing RealPage for allegedly helping landlords to coordinate prices and hike rents. Colorado Attorney General Phil Weiser has joined that lawsuit.
The report, issued this month by outgoing President Joe Biden’s administration, concluded that “eliminating” the cost from RealPage’s software “would meaningfully decrease price mark-ups for rental housing across the country.”
Colorado lawmakers tried to do just that last year, debating legislation that would’ve banned the use of algorithms in setting rents. The state House passed the bill, but a group of Senate Democrats, together with the chamber’s Republicans, adopted a late amendment sought by RealPage that effectively neutralized the measure; the bill ultimately died.
RealPage did not return an email seeking comment last week. A company spokeswoman told Axios that RealPage was “disappointed The White House CEA never contacted RealPage about their report, which is riddled with flawed assumptions.” The company has filed a motion to dismiss the Justice Department’s lawsuit.
Drew Hamrick, a vice president of the Colorado Apartment Association, said in an email that RealPage’s software actually allows landlords to lower prices because they can better manage vacancy rates. He has previously argued that “rental price fixing does not happen.”
In Colorado, lawmakers will again try to ban the use of rent-setting algorithms in the coming legislative session that begins Jan. 8, said Rep. Javier Mabrey, a Denver Democrat who sponsored the first attempt; he also is a co-founder of Neumann’s nonprofit.
“You could not scream any louder that this is the right thing to do,” he said. “The evidence could not be any more clear. There’s no more abstract theories to this — it’s clear that the technology is bad. It led to the cost of living being artificially high for the poorest Coloradans.”
The White House report argued that the true cost of RealPage’s software was likely higher than could be estimated because of its impact on the broader market. The economic council said even landlords who didn’t use the software might still increase their prices to match the broader market and maximize their own returns.
Colorado lawmakers’ interest in the algorithms comes amid a broader — and at times split — effort to address the state’s housing crisis.
Gov. Jared Polis has backed a market-based approach in the form of land-use reforms that seek to ease the development of homes and apartments in the years and decades to come. But other Democrats have advanced a more immediate approach aimed at blunting high rental costs and curtailing the state’s spiraling eviction crisis.
Mabrey argued that the White House data supported pursuing immediate action alongside long-term reforms.
“So many politicians in the Democratic Party have been acting like we can solve the issue with the rising cost of rents by only addressing the supply-side issues and building more housing,” he said. “And I think this shows that there are also demand-side solutions.”
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