Software suspected of inflating rents in Canada | Toronto housing crisis

More than 100 tenants from different buildings are asking the Competition Bureau of Canada to investigate the use of YieldStarworried that landlords are using this software to inflate rents in Canada.

In May, the FBI raided the company that owns this software, RealPage, and other commercial rental companies that use it due to suspicions of collusion. This software would be used to fix rent amounts and artificially increase them across the United States.

The investigation led the Department of Justice (DOJ) of the United States to initiate proceedings against RealPage in August. Americans should not pay more for rent because a company found a way to collude with landlords to break the lawssays the institution in a press release. She states that YieldStar allows owners to use algorithms to harmonize their rents.

According to the DOJ, due to this software, competing landlords agree to provide, daily, their most sensitive, non-public information such as rent, lease terms and anticipated availability to other owners.

According to Canadian tenants, their rent changes quickly when Yieldstar is involved. The government has in turn requested the opening of an investigation in Canada, while the companies concerned reject accusations of collusion.

Canadian woman says her rent is determined by Yieldstar

Since 2022, Cynthia Black claims to have suffered two annual rent increases of 7% and 11% in two Toronto buildings owned by GWL Realty Advisorsa subsidiary of Canada Life. These buildings are exempt from Ontario’s rent controls – which currently limit annual increases to 2.5 per cent – ​​because they were built after 2018.

When me and other tenants asked [à GWLRA] to stop raising rents excessively, they told us they were using software called YieldStar to determine our rentsshe tells the show The National de CBC.

It was while doing research that she discovered that YieldStar is the subject of legal proceedings in the United States.

How can my landlord use software that is under investigation for pricing in the United States?

Rent hikes can seem overwhelming

When CBC initially contacted GWLRA — which owns thousands of properties in Canada — to learn more about its use of YieldStarthe company declined to answer questions about this software. GWLRA noted, however, that it has only increased rents at an average rate of 3.5% per year in its Canadian properties.

Then, towards the end of October, the institutional owner finally sent a press release to CBCstating: After an internal review, GWLRA decided to stop using YieldStar. He did not respond to questions about the reasons for this decision.

Cynthia Black remains concerned about past increases. Like other tenants in her building, she participated in a protest by hanging red flags on her balcony to alert tenants of rent increases. We still need an investigation from the Competition Bureau, she believes.

Ketan Khanna too hung such red flags. His building belongs to another owner, Dream Unlimited. The building was also constructed after 2018 and is therefore exempt from rent control.

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Rent hikes here can seem overwhelminghe explains. Since 1^is November, he says he pays $2,568 per month for his one-bedroom apartment, compared to just over $2,344 in 2022. In Toronto, the current average rent for a one-bedroom unit is $2,402, according to Rentals.ca.

Dream claims to have never subscribed to YieldStarbut acknowledges that a property management company she employs, Rhapsody Livingused it. The company told CBC it had asked the company tostop using YieldStar in September. She denies that the rent amounts were influenced by the software.

Ketan Khanna has filed a complaint with the Competition Bureau.

Used in Canada since 2017

Ms. Black and other tenants also expressed their concerns to the MPP of NPD Bhutila Karpoche, who subsequently investigated the matter. Ms. Karpoche says she discovered that YieldStar has been used in Canada since at least 2017 and that average rents are higher in buildings using the software.

What we observe is that in units not subject to rent control where YieldStar is used, rents are increasing at a very rapid rate she notes. She found a marketing document from RealPage of 2017 which put forward a pilot project carried out in Canada where buildings using YieldStar outperformed a control group with up to 4% more rental income, even during the quieter winter months.

GWLRA mentioned the use of YieldStar in a 2017 annual report: We now use an algorithm rather than human effort to operate real-time pricing strategies that balance changing supply and demand factors.

The day after the show aired The National of CBC on the alleged use of YieldStar In Canada, federal Innovation Minister François-Philippe Champagne said the government would launch an investigation into allegations of price fixing in the rental market.

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What we saw is completely unacceptable. I will write today to the Competition Commissioner to launch an investigation declared Mr. Champagne during question period on Thursday. His comment followed a question from the MP for NPD Bonita Zarrillo.

A case baselessthis RealPage

In an email addressed to CBCa spokesperson for RealPage denies all allegations FBI. We believe that the allegations made by the DOJ are unfounded and the company will vigorously defend itself against these accusations.

The spokesperson specifies that the presence of RealPage in Canada is relatively weak and express sa disappointment that after several years of education and cooperation on antitrust issues regarding RealPagethe DOJ has chosen this moment to file a lawsuit that aims to scapegoat pro-competitive technology, even though it has been used responsibly for years.

RealPage adds that his revenue management software is designed to comply with laws.

Like the agreement on bread prices?

We need quick action herebelieves Dania Majid, lawyer at the Ontario Tenant Advocacy Centre, as it appears that laws may have been broken. Collusion, price fixing and restriction of supply in the market are crimes defined in the Competition Act and, if found guilty, these owners could face criminal charges.

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This looks a lot like what we saw with bread pricing a few years agoshe adds, in reference to the efforts of several large Canadian grocery retailers to artificially inflate the price of packaged bread for 14 years.

The lawyer emphasizes that the sophistication of the software should not distract from what is happening.

This is not much different than if these competing owners sat around a table to discuss price fixing, which would clearly be considered collusion. In this case, the software is the table.

She says that with financial landlords owning an increasingly large share of the rental market, technology that helps them maximize profits is inevitable, but also worrying.

For his part, Dr. William Strangeprofessor of economic analysis and politics at the Rotman School of Management from the University of Toronto, does not think the concept of tenancy software is inherently bad, saying it is a technology which helps assets perform better. If we see a company using expert systems to improve their business, we usually don’t have a problem with ithe puts things into perspective.

However, he said he agreed with Ms. Majid’s assessment regarding YieldStar. And [les épiciers] Longos and Loblaws were starting to use technology that allows others to see what they charge, this could be considered collusion. And unfortunately [YieldStar] appears to possibly have built-in collusionhe believes.

In a statement to CBCCanada’s Competition Bureau has not specified whether it will open an investigation into the use of the software YieldStar by Canadian owners. The Bureau shall conduct a thorough and complete review of the facts regarding any matter before reaching a conclusionhe replies.

Mme Black hopes to reach a fair resolution if the Competition Bureau discovers wrongdoing. Once you understand the ramifications of this algorithm, if you do nothing and say nothing, it will continue to cause harm.

With reporting from CBC’s Angela Hennessy