The eviction crisis is coming to America, and we are already five years behind. Tenants across the country are quickly finding as they reach out to extend rent payments that this is not the same type of landlord they were dealing with a decade ago. They are less flexible, more apt to pile on fees, and just like death and taxes, unavoidable in obtaining their due.
Why is this so, and who is this new landlord? About ten years ago, as the dust settled after the housing crisis of 2008, large syndicates out of Wall Street started buying up huge swatches of multifamily (more than four units) units—infamous names like Goldman Sachs and Blackstone. As property owners grew ever larger, so too did the companies with whom they contracted to manage their properties. This is the new landlord—large, well-ordered property management companies powered by a state-of-the-art, Artificial-Intelligence-based operating system running on mountains of data, your data to be exact. Anyone who has signed a lease in the last few years knows what I am talking about. First, it’s a credit report, then your driver’s license, bank statements, proof of employment. The list goes on and on, and they keep everything in a large database. As if that wasn’t bad enough, these firms also share this data amongst other large property management companies. Your data circles around and around, and it is used against you, both to lock you into your housing contracts, and to block you from seeking new housing until your property manager is satisfied you have paid every last debt they feel you owe, legal or otherwise.
This might sound like a bad episode of Black Mirror, but it is all too real. RealPage is the software platform that property managers use to share information with each other about their tenants, rent prices, anything and everything a company could want to know about maximizing real estate profits. This platform is so powerful, it has allowed property managers to form a cartel and artificially inflate the cost of rent across the country.
How do I know this? Two years ago, I was working in this industry. I owned a banking services company and am a licensed broker. I handled these multifamily-housing purchase deals. Something felt off to me about this industry. Rents were too high, profits kept rising, but it didn’t seem to match with typical market expectations. So, I took a two-year sabbatical to conduct a four-part economic study to isolate the cause for the rising rental rates, rent-burdening, and homelessness I saw, and I found my answer. RealPage was at the center of it. This Artificial-Intelligence based software platform had completely altered the market, giving property managers and property owners an unparalleled advantage. This is not surprising to anyone familiar with the power of AI. Just look at what Amazon meant for the retail market or Netflix for home entertainment. Any industry AI has entered has been forever reshaped.
So, what will tenants face as they contact property managers to pay off balances due and fight to stay in their housing? Tenants will encounter something the property managers themselves call “Aggressive Leasing Tactics.” You see, once property managers have locked tenants in at an artificially high rent, the next step is keeping the tenant there and maximizing profits for the property owner. This means fees stacked one on top of another and the very real threat of eviction. The story truly turns into nightmare as the tenant seeks to obtain housing elsewhere. Because these property managers share data, they also agree to not accept applicants who have any debt with another property management company in the cartel. Tenants are essentially locked out of housing all-together, at times even forced into bankruptcy under the weight of relentless debt collection.
These are the realities of tenants in the time of Corona. I go into much more detail about these property management companies and their deviant practices in my book, “Stealing Home: How Artificial Intelligence Is Hijacking the American Dream.” We need real action on the part of our local and national authorities to strengthen tenant rights and limit the strength of these new Goliath landlords.
James Nelson is a long-time banker and licensed broker and the author of “Stealing Home: How Artificial Intelligence Is Hijacking the American Dream.”