Beyond the Algorithm: RealPage and the Real Drivers of Housing Costs

The Department of Justice’s (DOJ) recent lawsuit against RealPage has reignited debates over technology’s role in housing affordability. The DOJ alleges that RealPage’s rent-setting algorithm inflates prices by enabling anti-competitive practices. However, while this controversy has captured attention, it risks overshadowing the deeper, systemic factors driving rent increases and housing shortages.

The RealPage Controversy

At the heart of the DOJ’s case is RealPage’s YieldStar software, which analyzes market data to recommend rental prices. The lawsuit claims that this tool allows property managers to coordinate pricing strategies, keeping some units vacant to drive rents higher. Reports estimate that YieldStar contributed to a 4% average rent increase in 2023, adding up to $3.8 billion in additional costs for renters. Critics argue this practice exacerbates affordability challenges in already tight markets.

RealPage’s Defense

RealPage has pushed back against these claims, maintaining that its software simply reflects supply and demand rather than distorting it. The company argues that the tool helps property owners make data-driven pricing decisions, which can sometimes result in lower rents in oversupplied areas. Additionally, they point out that YieldStar’s market penetration remains relatively limited, suggesting its impact on overall rent trends is overstated.

The Bigger Picture: What’s Really Driving Rent Increases?

While algorithm-driven rent adjustments play a role in pricing, they are a small piece of a much larger puzzle. Housing analysts argue that long-term supply shortages and restrictive policies have been the primary drivers of rising rents.

Two key structural issues stand out:

• Zoning and Regulatory Barriers: Many cities have long-standing zoning laws and permitting restrictions that limit apartment construction, especially in high-demand urban areas. This has constrained supply and driven up prices.
• Post-2008 Housing Deficit: The Great Recession led to a dramatic slowdown in new housing construction. Over the past decade, the U.S. has consistently built fewer homes than needed to accommodate population growth, resulting in a multi-million-unit shortfall nationwide.

These structural challenges have done far more to inflate rents than any pricing algorithm. Even in states where rent-setting tools are widely used, housing costs have remained more stable when supply has kept pace with demand.

Addressing the Housing Crisis

Focusing on rent-setting software alone ignores the broader affordability crisis. Instead, policymakers should prioritize:

1. Expanding Housing Supply – Encouraging the development of multi-family housing and streamlining zoning restrictions.
2. Improving Permitting Processes – Reducing bureaucratic delays to accelerate housing construction.
3. Increasing Density Options – Allowing more flexible housing developments, such as duplexes and apartment complexes, in traditionally single-family neighborhoods.
4. Federal and State Investment – Supporting affordable housing programs and infrastructure to meet long-term demand.

Keeping Perspective

While debates over technology in the housing market are important, they should not distract from the real issue: a persistent shortage of available housing. Pricing algorithms like YieldStar may influence rent adjustments, but they operate within a system shaped by supply constraints and regulatory barriers. Addressing the housing crisis requires a systemic approach, focusing on increasing supply and removing obstacles to new construction—not just scrutinizing the tools landlords use to price their units.