SACHA PFEIFFER, HOST:
If you feel like you've been getting squeezed on rent these days or you've been priced out of the market for your area entirely, you're not alone. Rental rates for housing are rising around the country, sometimes by double-digit percentages. One reason might be a software algorithm that helps landlords set the highest possible prices for rent. A new report from ProPublica examines a Texas-based company called RealPage, which makes the program. Reporter Heather Vogell is here to talk about it now. Hi, Heather.
HEATHER VOGELL: Hi.
PFEIFFER: Would you tell us first what prompted you to look into this software and this company?
VOGELL: Sure. I actually received an email from a tenant who was so alarmed by the rent increases that he was seeing in Seattle that he started poking around doing some research into what was happening with the property managers in his neighborhood. And he came across RealPage and mention of this pricing software. And so he reached out to me, and I was intrigued and started looking into it myself.
PFEIFFER: Walk us through how the software works, how the algorithm works.
VOGELL: The algorithm takes into account characteristics of apartments like the floor plan, bedrooms, things like that and also of the property that the apartment's located in. And then what it does is it makes a recommendation to the property manager, a suggested price for every available unit. And the property manager can decide whether they want to accept or suggest it. But what we were told by a few former RealPage executives was that typically about 90% of those suggestions are adopted, as the software suggests.
PFEIFFER: Overall, how much were you able to determine the degree to which this company is a driving force behind rising rental rates in the country?
VOGELL: I think it's very difficult to pin that question down. I could not answer that definitively with my reporting. But we were able to see the impact was in certain specific neighborhoods in terms of how many landlords were using the software, what the rent trends were. And also the company's own marketing material boasted repeatedly that they were helping landlords beat the market by 3% to 7%.
PFEIFFER: Well, you know, many renters know that sometimes you can go to your landlord and say, could you not raise it this year or could you not raise it as much? But one of the things I found most striking about your reporting is that the software basically eliminates empathy from the process. Could you explain that?
VOGELL: RealPage was discouraging landlords and is discouraging landlords from bargaining with renters, suggesting that landlords accept the prices as is instead of working things out with renters. One of the reasons we were told that it does that is one of the developers put it there was a feeling among property managers that leasing agents, the people who were on the ground actually helping renters sign their leases and hammering out these final details, they might have too much empathy for the renters. So that was, you know, an actual phrase that somebody used to me.
PFEIFFER: It sounds like it almost lets people be hard-hearted by hiding behind the software.
VOGELL: I guess there are some people who probably would see it that way.
PFEIFFER: Did you find any instances of landlords who rejected the program's high or higher prices?
VOGELL: I did speak with one property agent who said that when her building started using YieldStar, it was really shooting for very high prices, and leasing slowed way, way, way down. So they did push back. The landlord ended up raising rents a little bit more gradually. And she kind of came away with it not sure whether the pricing software may have been correct or whether her judgment may have been correct.
PFEIFFER: What did this company, RealPage, say about its software when you talked to them?
VOGELL: They told me that their software uses aggregated market data from, quote, "a variety of sources in a legally compliant manner." And they said that the old way of checking prices for competitors was that the property managers would call around and find out what their competitors were charging. They said that their software eliminates the need to make those sorts of calls, which the company said could itself put the property manager at risk of collusion.
PFEIFFER: Heather, after all your reporting, what did you come away thinking this means for renters overall?
VOGELL: Well, I think that there is a big concern that this type of software being used so much in certain markets will push prices up above competitive levels. We know that there are a lot of renters devoting an increasing amount of their income to rent, and it's creating a very big burden for them.
PFEIFFER: That's ProPublica reporter Heather Vogell. Thank you for your reporting.
VOGELL: Thank you so much. Transcript provided by NPR, Copyright NPR.
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