March 03, 2023

Warren, Lawmakers Urge Justice Department to Review YieldStar, Warn of De-Facto Price Setting and Collusion After Senate Investigation

New letter reveals findings from lawmakers' investigation of RealPage’s YieldStar Product that Advises Landlords on Rent Increases

New letter reveals findings from lawmakers' investigation of RealPage’s YieldStar Product that Advises Landlords on Rent Increases 

“Given YieldStar’s market share .. the widespread use of its … proprietary rental data by the country’s largest landlords could result in de-facto price-setting by those companies, driving up prices and hurting renters”

“The DOJ should act 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.”

Text of Letter to DOJ (pdf) - YieldStar Response Letter (pdf)

Washington, D.C. – U.S. Senators Elizabeth Warren (D-Mass.), Ed Markey (D-Mass.), Tina Smith (D-Minn.), and Bernie Sanders (I-Vt.) sent a letter to Jonathan Kanter, Assistant Attorney General of the Antitrust Division at the Department of Justice (DOJ) calling for the DOJ to investigate YieldStar following new findings from their investigation of RealPage’s YieldStar product. The lawmakers warned that Yieldstar, which landlords use to set prices on millions of rental properties, could be “facilitating de-facto price setting and driving rapid inflation.” The lawmakers’ findings are particularly important given the Biden administration’s recent announcement of actions to protect renters, including tasking the DOJ with addressing anti-competitive information sharing practices in the housing market. 

“It is therefore essential that the Department use all of its tools to ensure that renters do not fall victim to corporate landlords and anti-competitive forces. We were pleased that, last month, the Department made an important announcement that it would “heighten its scrutiny of competing companies’ pricing and other information sharing practices” because of concerns that they can “enable illegal collusion.” Our investigation of RealPage’s YieldStar product provides important new information to guide the Department’s efforts,” the lawmakers wrote. 

Following the financial crisis of 2008, the presence of institutional investors, particularly in the single-family housing space, has grown steadily at about 3 percent each year since 2010. By buying up chunks of housing at prices that are often far lower than what is charged for traditional homebuyers, large institutional investors have amassed hundreds of thousands of homes. Furthermore, these homes have increasingly become consolidated within the hands of a few large corporate actors: Invitation Homes and American Homes 4 Rent alone have amassed approximately 130,000 single-family homes.

A recent ProPublica investigation revealed that institutional investors are not acting alone in reducing competition in the housing market. According to the report, RealPage’s YieldStar product, a “software that uses a mysterious algorithm to help landlords push the highest possible rents on tenants,” has become the favored rent-setting tool for some of the largest landlords in the country. Greystar, the largest property management company in the U.S., uses this software to set rents for over 150,000 apartments.

On November 22, 2022, the lawmakers sent a letter to RealPage CEO Dana Jones, expressing concern about RealPage’s YieldStar, and its role in driving rising rents and exacerbating inflation. The lawmakers requested information on how this rent-setting software has affected the rental housing market. While RealPage did not provide all of the requested information that would have provided insight into YieldStar’s direct impact on rent prices, what they did share was alarming, revealing that “the widespread use of …[Yieldstar’s]  proprietary rental data by the country’s largest landlords could result in de-facto price-setting by those companies, driving up prices and hurting renters.”  Specific findings included:

  • Publicly available information from RealPage indicates that the software is used to help set prices for over four million units, which would be approximately 8% of all rental units, and appears to show that the company has access to “transactional apartment data from the rent rolls of 13+ million units.”
  • Information provided by RealPage also revealed that the use of YieldStar has been most prevalent in some of the regions most heavily targeted by corporate buyers and with the highest rent increases.
  • RealPage provided important information about the extent to which the company facilitates information sharing by and among large institutional landlords – a particular concern given the market share of the product. The company’s response indicated that “YieldStar uses a proprietary algorithm to make recommendations to apartment providers about setting a price for rental units at their property,” and that “the YieldStar software is fundamentally built on the disruptive idea that a property’s internal supply and demand dynamics are much more important than external factors, such as rents offered by other properties.”

Senator Warren has long pushed to make housing more affordable for families and has called out companies for their role in exacerbating housing costs: 

  • On August 2, 2022, at a BHUA hearing, Senator Warren called out corporate landlords’ growing role in the rental market and emphasized the need for a Tenant Protection Bureau to hold corporate landlords accountable and protect renters from extreme rent hikes, illegal eviction, and other predatory practices.
  • On May 13, 2022, Senators Warren and Reed sent a letter to Secretary of the Department of Housing and Urban Development (HUD), Marcia Fudge, calling on HUD to preserve homeownership affordability for American families as Wall Street firms expand their activity in the housing market.
  • On March 31, 2022, at a BHUA hearing, Senator Warren called out Wall Street’s role in worsening the housing affordability crisis for seniors by buying up manufactured home communities
  • On February 10, 2022, Senator Warren called out private equity firms and other big investors for exacerbating inflation and locking families out of affordable housing opportunities. 
  • On January 13, 2022, Senator Warren sent letters to the CEOs of three private equity-backed firms—Progress Residential, American Homes 4 Rent, and Invitation Homes —calling out their growing activity in the housing market that has resulted in rent hikes and unaffordable homes for first-time buyers.