Is algorithmic rent pricing working?

The latest in real estate technology

September 13

Window washing is a $40 billion industry: This AI-powered robot wants a piece of it.
At the presidential debate, fossil fuels and energy politics took center stage.
Proptech firms circle an architecture field resistant to technology.

Fifth Wall Climate Summit at Blueprint 2024

We are heading to Las Vegas for Blueprint next week to host our second-annual Climate Summit on Tuesday, September 17! We hope to see you there, and stay tuned for insights and takeaways from our Summit and the larger Blueprint conference.

Is algorithmic rent pricing working?

The news: San Francisco’s Board of Supervisors passed an ordinance that bans housing providers in the city from using certain software and algorithms to set rents. To comply, RealPage was required to eliminate the use of private competitor data of properties for rent recommendations in San Francisco. It has also allowed that configuration for any jurisdiction.

The issue: Regulators are concerned that algorithmic rent pricing allows landlords to artificially inflate rent prices and offer tenants less favorable terms. RealPage stated, “This ordinance will do nothing to make housing more affordable in the city, where there is a severe supply shortage of rental units that needs to be addressed.” The company also reiterated that the private data is “highly aggregated, anonymized and blended.”

The bottom line: There are legitimate concerns about algorithmic pricing, so much so that the DOJ has opened a lawsuit against RealPage. However, there are ways that revenue management services can function in the market without crossing the line.

Fifth Wall POV

Whether we like it or not, algorithmic pricing is extremely common. For example, think about how often prices change for an item on Amazon or for an airline ticket. Sarah Liu, Partner at Fifth Wall, explains:

“Algorithmic pricing is a fundamental part of how our free markets work in this day and age and is nothing new—it is used in almost every single industry right now from airlines to food and services. With the rapid rise of rents in many markets, it's understandable that the residential sector is under more scrutiny, since housing is a must-have versus other algorithmically priced goods like leisure travel. However, its seems unrealistic to expect just the real estate industry to price manually while every other industry continues to use algorithms.”

What’s more, Liu continued:

“Where there seem to be more justified questions is around the use of proprietary data and how that influences market level pricing when a significant share of supply in a certain market is being priced using pooled proprietary data. There are likely ways that all revenue management vendors, including Real Page, can offer their service without relying on pooled proprietary data—HelloData is an example of a startup in our portfolio that is already doing this.”

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LAST BUT NOT LEAST

PDX is the world's largest mass-timber airport

From designboom: "Portland International Airport (PDX) has officially opened its expanded main terminal of mass timber to travelers. Designed by ZGF Architects, the $2 billion renovation is a significant milestone for the Port of Portland, marking the largest mass timber project of its kind in the world. This expansion doubles the airport’s capacity, enabling it to accommodate up to 35 million passengers annually by 2045."

Brendan Wallace, CEO and CIO of Fifth Wall, writes: "The 9-acre, all-wood roof is a feat of engineering. It's beautiful. Timber isn't for everywhere and everyone, but I hope we'll see it more prevalent in more major projects."

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Forward-looking statements and opinions as to carbon reduction initiatives and real estate markets or any other matters, as expressed in this presentation, are those of the individual presenters, but are not necessarily the views of Fifth Wall as a firm, and cannot constitute a guarantee of future success or profitable results. As a result, investors should not rely on such forward-looking statements and/or opinions, or on anything else contained in this post, in making their investment decisions. Moreover, certain information contained herein may have been obtained from published and non-published sources prepared by other parties and may not have been updated through the date hereof. While such information is believed to be reliable for the purposes for which it is used herein, Fifth Wall does not assume any responsibility for the accuracy or completeness of such information, and such information has not been independently verified by Fifth Wall. This post speaks as of its publication date, and Fifth Wall undertakes no obligation to update any of the information herein.

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The latest in real estate technology

September 13

Fifth Wall Climate Summit at Blueprint 2024

Is algorithmic rent pricing working?

Fifth Wall POV

STORIES WE READ THIS WEEK

OFFICE

This once hot real estate type is now being offered as office space

DEVELOPMENT

Developers rush to build around new manufacturing hubs

PROPTECH

Zillow is proactive about incorporating artificial intelligence to its platform

DATA CENTERS

Where the hyperscale data centers are popping up

RETROFIT

The plan for the world’s most ambitious skyscraper renovation

WORTH THE SCROLL

FUN FINDS

LAST BUT NOT LEAST

Comments or questions? Send to newsletter@fifthwall.com What did you think of our newsletter this week? Please let us know, we read every piece of feedback.

Comments or questions? Send to newsletter@fifthwall.com

What did you think of our newsletter this week? Please let us know , we read every piece of feedback.