Guest Author
If one thing unifies Americans, it’s that at some point in our lives we will rent an apartment or a home. Whether it’s for a dorm room at college or an apartment for a first job in the city, almost every American will rent from a landlord at some point in their lives. While the average cost of rent nationwide has stayed relatively low over the past few years at around $1,739 per month, it has climbed significantly in major cities. In Miami, for example, the average cost for an apartment is currently over $2,500 per month, considerably higher than the national average.
Renters in major cities like Jacksonville, Tampa, and Orlando face a similar picture, with rents far higher than the national average.
With the election fast approaching, the Joe Biden administration has turned its attention to landlords, desiring to be seen as protecting everyday Americans. It argues that these high rents aren’t the product of supply and demand or a failure to build enough homes where Americans want to live but is instead due to corporate greed and collusion.
Specifically, the Department of Justice, along with Attorneys General from eight states, announced a lawsuit against RealPage, a company that sells software to landlords to help them approximate market rental prices.
The Department of Justice’s attack against RealPage isn’t the first attempt to remove pricing algorithms from the rental market. Earlier this year, Supervisors in San Francisco announced plans to ban landlords from using algorithms to set rents. While Supervisors have yet to enact the ordinance, its unanimous passage on first reading suggests the proposal is almost certain to enter the statute book in September. Renters should note with some irony that the federal government and other states are following the housing policies of a city plagued with the country’s most egregious housing affordability crisis.
A case of the blind leading the blind?
While landlords are easy political targets, especially corporate landlords, the attacks against pricing algorithms ignore how property management software works and the influence they hold on setting prices.
As the lawsuit notes, property management companies like RealPage only provide price recommendations to landlords based on a range of variables. Landlords are still the ones who determine prices for their units. They are free to raise or lower prices as they see fit.
These services allow landlords to determine the actual value of their units rather than forcing them to guess. This information not only ensures that landlords receive a fair value for their units but also that they remain occupied. Without this information, landlords could lose critical revenue to maintain and update their properties or be faced with empty units, further exacerbating the housing shortage.
While the Department of Justice and State Attorneys General go after pricing algorithms, the Biden administration has largely ignored the root cause of sky-high rents in America: a failure to build enough houses where people want to live.
According to Zillow, the U.S. is short about 4.5 million homes, which also forces up the cost of rental properties. Other estimates suggest the shortage to be as high as 7 million homes. The housing shortage is particularly acute in Florida, with Miami short 313,000 homes, Orlando short 21,528 homes, Tampa short 31,342, and Jacksonville short 14,250 homes.
If members of the Biden administration were truly interested in addressing rental affordability, instead of attacking landlords and pricing algorithms, they would address the root cause of America’s housing shortage: slow permitting, restrictive land-use and zoning laws, and overregulation that has prevented homes from being built.
Florida Attorney General Ashley Moody was noticeably absent from the lawsuit. Like most of the Republican colleagues in state capitols across the country, this lawsuit was likely recognized as an election-year partisan play to drum up support for a failing economic agenda that assumes corporate greed is to blame over the principles of supply and demand. Unfortunately, this partisan play will do little to solve Florida’s rental affordability crisis and may actually result in more vacant units and higher prices.
If the government is successful, Florida’s housing crisis could become much worse.
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Dr. Edward J. Longe is the Director of the Center for Technology and Innovation at The James Madison Institute. Doug Wheeler is the director of the George Gibbs Center for Economic Prosperity.
