'Predatory schemes': Lawmakers including Elizabeth Warren, Bernie Sanders compared corporate landlords to a 'cartel' — here's what they're doing now to protect renters

'Predatory schemes': Lawmakers including Elizabeth Warren, Bernie Sanders compared corporate landlords to a 'cartel' — here's what they're doing now to protect renters

As millions of Americans struggle with sky-rocketing rents, new evidence suggests industry software used by landlords to set prices is at least partially to blame.

Last week, a group of prominent senators — including Elizabeth Warren (D-Mass.) and Bernie Sanders (I-Vt.) — called on the Department of Justice (DOJ) to investigate whether rent-setting software is helping landlords unfairly drive up prices.

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The lawmakers cited a ProPublica investigation that likened the behavior of corporate landlords to that of a “cartel” and accused them of taking advantage of private information provided by real estate companies.

“It is urgent that we take steps to protect renters from predatory schemes and ensure that corporate landlords at least follow the rules that are in place,” said Warren at a recent hearing of the Senate Banking, Housing and Urban Affairs Committee.

Here’s how politicians are trying to hold landlords accountable — as Americans face some tough accounting of their own to make rent every month.

RealPage in the crosshairs

Rent costs increased in the U.S. by 7.9% year-over-year in January — the fastest rate since 1982, according to the U.S. Bureau of Labor Statistics.

In an effort to address the country’s ongoing affordability crisis, the Biden administration recently announced actions to protect renters, including tasking the DOJ with addressing anti-competitive information sharing among institutional investors.

One company currently in the senators’ crosshairs is RealPage, whose algorithmic rent-setting software YieldStar is used by many of the country’s largest property managers to set prices on millions of units.

On March 2, Sens. Warren, Sanders, Ed Markey (D-Mass.) and Tina Smith (D-Minn.) sent a letter to the DOJ sharing their concerns about “de-facto price setting” and the outcome of their recent probe into RealPage and YieldStar.

The ProPublica investigation, cited in the senators' letter, suggests YieldStar’s use of non-public pricing information to recommend rents has created a “cartel” of landlords that are colluding to “push the highest possible rents on tenants.”

In November, they sent a letter to RealPage CEO Dana Jones, expressing concern about YieldStar and its role in exacerbating rent inflation.

Rent-setting software in widespread use

There are close to 50 million rental units in the U.S., according to the most recent survey of rental housing conducted by the U.S. Census Bureau — and Texas-based RealPage said its price-setting products are used by landlords who oversee over four million of those units.

RealPage also noted that YieldStar’s algorithm uses various data sources — but all data provided to landlords about outside properties is “anonymized.” Spokesperson Teresa Wolke told Bloomberg: “We are always willing to engage policy stakeholders to ensure an informed and comprehensive understanding of the benefits we contribute to the rental ecosystem.”

Sens. Warren, Sanders, Markey and Smith have now called on the DOJ to “protect American families and closely review rent-setting algorithms like YieldStar to determine if they are having anti-competitive effects on local housing markets that have seen increased institutional investor activity.”

For now? If you're one of the many Americans struggling with rental affordability, here are three things you can do now to keep costs down.

Read more: The total value of your property is worth more than you think — spend less to to protect your possessions

1. Reduce your expenses

In the last three years, rental affordability has significantly worsened, with rents jumping nearly 26% nationally during the pandemic. That's forced many Americans to make difficult trade-offs in their household budgets.

Downsizing to a smaller apartment can be a challenging but effective way to save on rent. Otherwise, you might also consider living with a roommate to share some household costs.

As rent takes an increasing portion of your paycheck, budgeting becomes more important than ever.

Consider using budgeting techniques like cash stuffing, where you take your paycheck in cash and divide it into envelopes based on your budget, including spending on rent, utilities and other daily necessities.

It is also important to protect yourself and your belongings from unforeseen events. Renters insurance can give you peace of mind and ensure you don’t have to pay out of pocket should an emergency occur.

2. Move somewhere cheaper

If you’re not entrenched in the community, city or state you’re renting in, it might be worth looking elsewhere for a cheaper living arrangement.

A lot of jobs these days offer remote work, giving you more flexibility around where you decide to settle — but if you’re planning to move to a new state, make sure you check with your employer that you can still work for your company.

You should also educate yourself about the different state tax laws to avoid any filing errors.

The most expensive state for rent in the U.S. is California, with an average monthly rent of $1,901, according to lending site Earnest.com. In the Golden State, Los Angeles is the most expensive city for renters, with an average price of $2,600.

The cheapest state for rent in the U.S. is West Virginia with an average rent price of $800. Three of the top five most affordable cities are in the Midwest, with Toledo, Ohio, having the cheapest average monthly rent price of $550.

3. Know your rights

All tenants are legally entitled to a safe and clean residence that comes with usable heat, utilities and water.

Make sure you understand your rights as a tenant before signing a lease. There are a series of federal, state and local laws that are designed to protect you against things like discrimination, rent gouging, unfair evictions and more.

There are plenty of free online resources to help you educate yourself or you can connect with a legal professional or check-in with local legal clinics to ensure you’re up to speed on your rights.

You might also want to consider joining a tenants’ association if there’s one in your building or development as they can provide useful information, access to legal assistance and create more bargaining power with your landlord.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.