In recent years, the United States has faced a significant housing affordability crisis, with rents skyrocketing and many tenants spending over 30% of their income on housing. This issue has been exacerbated by corporate landlords using algorithms to set artificially high rental prices, a practice that Vice President Kamala Harris aims to combat with new legislation. Her plan not only targets these rent-setting algorithms but also addresses the broader housing shortage by proposing the construction of millions of new homes.
The Rise of Rent-Setting Algorithms
Rent-setting algorithms, such as those offered by companies like RealPage, have come under legal scrutiny for allegedly enabling landlords to collude and set rents above competitive levels. These algorithms suggest rental prices to landlords, who then use this data to maintain high rent levels even when occupancy rates are declining. Maurice Stucke, a law professor and former DOJ antitrust division prosecutor, notes that this behavior is a "telltale sign of collusion" as it allows landlords to control the market rather than respond to it.
The use of such algorithms has led to lawsuits from the attorneys general of Arizona and Washington, DC, who accuse RealPage of operating a "housing cartel" that manipulates rent prices. Arizona AG Kris Mayes highlighted that a significant portion of rental homes in Phoenix and Tucson are owned by companies using RealPage, underscoring the widespread impact of these practices.
Kamala Harris' Legislative Proposal
In response to these issues, Kamala Harris has proposed the Preventing the Algorithmic Facilitation of Rental Housing Cartels Act. This legislation aims to ban landlords from using algorithms to set rents, thereby preventing them from engaging in anti-competitive behavior. Harris argues that these practices are "anticompetitive" and contribute to the rising cost of housing, which is a major concern for American voters across the political spectrum.
Harris' plan also includes measures to curb Wall Street investors from buying homes in bulk, which can further drive up prices and limit housing availability for individual buyers. While these efforts may only address the housing crisis on the margins, they are politically popular as they target perceived predatory behaviors by large corporations.
Addressing the Housing Shortage
Beyond tackling rent-setting algorithms, Harris' housing plan focuses on increasing the supply of affordable homes. She has pledged to build 3 million new homes within four years, a move aimed at alleviating the housing shortage that has been a key driver of rising prices. This initiative is part of a broader strategy to enhance housing affordability by boosting supply and reducing regulatory barriers that delay housing production.
However, experts caution that while increasing supply is crucial, it must be coupled with strategic planning to ensure that new developments meet the needs of diverse communities. There is also a risk that stringent regulations on landlords could reduce investment in housing, potentially exacerbating the shortage.
The Political and Economic Implications
Harris' focus on regulating rent-setting algorithms and increasing housing supply reflects a broader political strategy to appeal to first-time homebuyers and renters who feel disadvantaged in the current market. As Daryl Fairweather, Redfin's chief economist, points out, Harris is addressing the concerns of those who feel "out-competed" by investors and landlords.
The success of Harris' plan will depend on its ability to balance regulation with incentives for housing development. While her proposals have garnered support from various political and economic stakeholders, their implementation will require careful coordination between federal, state, and local governments to ensure they effectively address the housing crisis.
Kamala Harris' initiative to ban rent-setting algorithms and boost housing supply represents a significant effort to tackle the complex issue of housing affordability in the United States. By addressing both the technological and structural factors contributing to high rents, her plan aims to create a more competitive and fair housing market. As the 2024 presidential election approaches, housing policy will remain a critical issue for voters, and Harris' proposals could play a pivotal role in shaping the national conversation on housing affordability.
