It's late 2023. The Phoenix area investigators with the state attorney general's office are looking at apartment rents. They're up 76% since 2016. Something is off. These four building rents are 12% higher than others, but they offer similar amenities.

They have different landlords, so you'd think they should be competing with one another, but they weren't. The prices were allegedly being set by one entity, an algorithm owned by a company called. Called Realpage. In fact, this was happening everywhere in the area. That's old fashioned price fixing using new technology.

We allege, in effect, a housing cartel. Over 2000 miles away, something similar is happening. It's alleged that all of these different units, their prices were set by one single algorithm, which sounds bad, and it could be happening in cities and states across the country. Renters have filed over 30 different lawsuits against Realpage. We're going to talk about what all this means.

How algorithms, these black boxes of data, are shaping our markets and giving an incredible amount of power to the few. And how the Department of Justice and some state attorney generals are fighting back, because this is a story about how a few lines of code broke the american housing market.

What is realpage? So, Realpage is a company that operates software that allows landlords to input their data into an algorithm, and then realpage sets the prices for all of those landlords. This is actually against the law. Attorney general Mays isn't the only one alleging this. Our allegations are that realpage, in combination with 14 of the largest landlords here in the District of Columbia, are effectively colluding with one another to set rents across America.

Rent is up 20% since 2020. The attorney generals of Arizona and DC are suing Realpage and a host of big landlords, alleging that an algorithmic housing cartel is helping drive up prices.

In the pre real page days, landlords would compete with one another. They played a guessing game with rent. Prices push it too high, and people move, leaving landlords hunting for new tenants. It was a delicate balance, a market, and I'm not sure if it was fair, but it wasn't rigged. An algorithm helped change all of that.

We're talking about an algorithm that aggregates otherwise confidential information that the landlords have that ordinarily they would not share with their competitors. Data like rent prices, lease expiry dates, any deals they offer to tenants, that allows then the algorithm to spit out a pricing recommendation, all designed to keep the overall market at its highest peak. They are not charging what the market can bear. They are controlling the market. It's leading to the exacerbation of our affordability crisis, our housing crisis.

Here in Arizona, if you could imagine a smoke filled room where the landlords, the largest landlords in the District of Columbia, came together to decide what they were going to charge in rent to share their confidential information, everybody would be able to see that that's an anti competitive practice. Until recently, using shared pricing algorithms like this flew under the radar. If your algorithm set prices, you'd just say, it's not cheating, it's a suggestion. Not anymore. Lena Khan and the FTC have said, just a suggestion.

That's price fixing, no excuses. And realpage. According to the lawsuits, they weren't even pretending the prices were suggestions. Realpage has a system set up where the landlords who have adopted the system agree to a set of rules. One of the rules is that Realpage gets to set rent prices.

If landlords want to charge less than the digital oracle suggest, they have to justify their decision. The justification needs to be reviewed by Realpage. Realpage can push back against the justification. And if you push back too much, RealPage can kick the landlord out of the scheme with one insider telling investigators, sometimes we were happy to see customers go. They also had a policing agent that would go out and make sure that the landlords and their leasing agents were staying in line and not deviating from the price that was being set.

This scheme, if true, has had a real, tangible impact on Americans. Realpage advertises that it's going to increase revenue to 2% to 7% for the participants in the cartel. What realpage is telling these landlords and is doing with these landlords is don't worry about occupancy rates anymore. It doesn't matter really how many people move out of your building. You're still going to grow your revenue over time.

How? Through these coordinated price increases in Phoenix alone, we've seen rent increase 76% since 2016. It is almost certain that people were evicted as a result of these price increases, and that some people were made homeless by them to their prospective customers, the landlords. Realpage is pretty open about all of this. You can go to their website, type in a zip code, and view a sample of what buildings are using the software, along with any corresponding price changes.

We'll see. This building right here, rent is actually down about 4%. If we just zoom out a little bit. A few blocks over, this rent is actually up 4%. They used to have videos where landlords talked about how RealPage's algorithm pushed them to raise rent, but the company deleted it after the Washington Post ran a story on investor calls.

They're flat out saying the algorithm is going to recommend higher lease rates for every property. But the company goes to great lengths to train landlords to hide this scheme from renters. Landlords were coached across a variety of scenarios and told not to mention realpage or pricing algorithms to tenants. Instead, they were supposed to say stuff like units were being priced individually. RealPage and the larger industry dispute the charges.

Since the onslaught of lawsuits, Realpage has largely stayed quiet, ignoring our request for an interview. But the industry has published a paper defending itself. They make a bunch of different arguments, but it boils down to two major points. The first, sharing info doesn't mean they're teaming up. Why?

Because the rental world is just too big and too messy for any sort of secret deal to stick. But that doesn't seem to stand up to scrutiny. The real page algorithm is being used by nearly 90% of the apartment owners in the DMV. Realpage controls 70% of the rental units in Phoenix, and that they control at least 50% of the market in Tucson, 90% in DC, 70% in Phoenix. That hardly seems like a fragmented rental market.

And their second point, more houses, not less. Data sharing is the real fix for high rents. That's bunk. You know, we've got apartment units all over Phoenix that aren't being rented right now because people can't afford them. The spaces are there, but people can't afford them because these landlords are setting artificially high rent via an algorithm.

And that is just unacceptable. Absolutely unacceptable. Things are shifting. Renters are banding together in class action lawsuits. Arizona, DC, and possibly North Carolina are suing.

They want to end the scheme, refund renters, and find companies like realpage. The DOJ has started a criminal investigation into the whole thing. I don't think this is just an Arizona based problem. This is not the only place where algorithms are being used to set prices. This is, to me, one of the bigger kind of issues facing kind of our economy on consumers in the next decade or so.

There's a lot of positive things that algorithms and machine learning can do for society, but there are also risks associated with it. We can't be afraid of technology. We have to lean in and learn about it and make sure that we're keeping the public safe from the abuses that can sometimes flow from misuse of technology.

Thanks for watching, and as always, don't forget to like and subscribe to our channel. This is the first of many videos we're producing on the rise of big data in society. If you have any areas that you want us to study, let us know in the comments below.