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The Government Is Cracking Down On Using AI For Rental Price-Fixing

FTC Chair Lina Khan testifies at a congressional hearing in May.

The chair of the Federal Trade Commission said using artificial intelligence to inflate rent prices isn't going to fly with the government, as federal investigations into price-gouging are proceeding across the country. 

“One thing that we at the Federal Trade Commission have been crystal clear about is that there is no AI exemption to the laws on the books,” FTC Chair Lina Khan said at Georgia Tech on Friday, Atlanta News First reported.

“In the same way that price-fixing is illegal if you’re kind of going in a back room and shaking hands, price-fixing is still illegal if you’re doing it through an algorithm.”

The FTC wants to make sure AI isn't being used by real estate companies to “collectively collude and collectively inflate” rental prices, Khan said. 

Major metros are seeing skyrocketing rental rates. In cities like Chicago and Washington, D.C., median rents saw double-digit percentage increases in May, and nationwide rents rose to the highest level since October 2022, Redfin reports. 

The FTC is working with other federal agencies as part of an investigation into AI-powered rental price-gouging.

Khan's statement comes shortly after the FBI raided the offices of Atlanta property management firm Cortland Management on May 22. The raid was executed under a limited search warrant in connection to an investigation from the Department of Justice looking into possible antitrust violations in multifamily housing, Cortland said. 

Cortland, which builds and manages $21B worth of apartments in major cities, said it is cooperating fully with the investigation and denied the firm or its employees were targets in a statement to Bisnow

The DOJ has been looking into rental price-fixing and antitrust matters for some time. Multifamily software company RealPage is being investigated for such allegations. After initiating civil proceedings against RealPage in 2022, the DOJ launched a criminal investigation in March.

More than 30 lawsuits, all of which accused RealPage of collusion with landlords to raise rents beyond competitive levels, were rolled into one last August. The DOJ has refused to dismiss these lawsuits, as well as a similar case with Yardi Systems and landlords that was filed last September.

In a separate antitrust suit against RealPage and 14 landlords brought last year by D.C. Attorney General Brian Schwalb, a judge on May 29 granted AvalonBay Communities’ motion to dismiss, but it denied the dismissal requests of Highmark Residential and JBG Smith, Multifamily Dive reported