Landlord Software Is Making Life Hell for Renters, Report Says

Property tech­no­logy, or prop­tech, is allo­wing big land­lords to buy homes at scale, raise rents, and evict tenants remo­tely.

A new report from Tech Equity Colla­bo­ra­tive looks at the way that the growing property tech­no­logy (“prop­tech”) industry is impac­ting tenants for the worse. Rese­ar­chers found that the influ­ence of venture capi­tal in the industry led to worse outco­mes for tenants and pros­pec­tive home­ow­ners. 

The property tech­no­logy sector—­soft­ware that helps compa­nies and land­lords purchase real estate, collect rent, screen tenants and more-—has grown enor­mously in the last decade: accor­ding to the report, “Venture capi­tal invest­ment in the space has incre­a­sed by 53X globally between 2010 and 2021, from $600M to $32B.” That inclu­des $19 billion of invest­ment in 2021 alone. And invest­ments from private equity incre­a­sed 35 percent the same year.

Many of these compa­nies profess to demo­cra­tize housing owners­hip or renting but end up crea­ting preda­tory forms of inclu­sion where efforts osten­sibly meant to remove histo­ri­cal barri­ers actu­ally incre­ase inequa­lity by char­ging fees or through decep­tive prac­ti­ces. The report says these compa­nies are acce­le­ra­ting the finan­ci­a­li­za­tion of housing, or the conver­sion of property into a specu­la­tive asset to park cash. They’ve also enabled corpo­ra­ti­ons to hide behind algo­rithms when scre­e­ning out tenants, file evic­tion noti­ces in bulk and coor­di­nate rent hikes.

In some cases the fede­ral govern­ment parti­ci­pa­ted in this acti­vity: in 2012, the Fede­ral Housing Finance Agency crea­ted a Rent to Own program that allo­wed large inves­tors to purchase fore­clo­sed homes in bulk and turn them into rental proper­ties.

Exploi­ta­tive rent to own programs have a long history in the U.S. In the 1950s and 60s, count­less Black renters were victi­mi­zed by “contract to deed” programs where they would pay a higher rent with a promise to have the deed turned over to them, only to have the contract cance­led for minor viola­ti­ons. 

Modern Rent to Own sche­mes are simi­lar in that renters build no equity and in the majo­rity of cases don’t end up owning a home. They have been super­char­ged by private equity and the tech sector. The report breaks down the success of vari­ous rent to own star­tups along with their funding; the compa­nies Home Part­ners of America and Divvy have success rates of 38 percent and 50 percent, respec­ti­vely, and are backed by venture capi­tal and private equity. A company called Trio has a 78 percent success rate and is backed by Fede­ral Housing Admi­nis­tra­tion mort­ga­ges. It was the only star­tup the rese­ar­chers could find utili­zing govern­ment-backing rather than venture capi­tal. 

Private equity has been encro­a­ching in the single family home space since 2008 and purcha­ses have surged since the pande­mic. This is parti­ally thanks to prop­tech; while large inves­tors initi­ally found mass home­ow­ners­hip logis­ti­cally challen­ging, this was stre­am­li­ned through the prop­tech sector and big data analy­tics, the report found.



“They inves­ted heavily in new tech­no­lo­gi­cal tools that suddenly made it profi­ta­ble to manage large property port­fo­lios, ” accor­ding to Tech Equity. This allo­wed large venture and private equity backed compa­nies to screen tenants, collect rent, field (or ignore) main­te­nance requests, or evict tenants remo­tely and in bulk. It allo­wed some compa­nies like Ameri­can Homes 4 Rent to incre­ase rent by 150 percent and incre­ase fees by up to 1000 percent.

The report also calls out tenant scre­e­ning soft­ware; tools which have long been criti­ci­zed for exhi­bi­ting bias and which are the subject of nume­rous lawsuits  for discri­mi­na­tion as well as getting pros­pec­tive tenants comple­tely mixed up with other people. The report found these kinds of soft­ware are opaque and leave consu­mers at a disad­van­tage. Accor­ding to the report, “Based on sample reports, even land­lords are not privy to how the deter­mi­na­ti­ons are made.”

The lack of trans­pa­rency also dilu­tes fede­ral protec­ti­ons. The Fair Credit Repor­ting Act allows consu­mers to know what is in their credit report, what factors in the report went into a denial and to request a correc­tion if anyt­hing is inac­cu­rate. But it’s not clear if this covers predic­tive analy­tics, which are specu­la­tive. “What if that infor­ma­tion is not accu­rate or inac­cu­rate? What if it’s enti­rely hypot­he­ti­cal, as in the case of predic­tive scoring?” the report’s authors ask.

Tech Equity is asking for more trans­pa­rency from the industry and rele­a­sed an “ethi­cal prac­tice guide” calling on compa­nies to test products for unequal outco­mes, mini­mize the data they collect and provide oppor­tu­ni­ties for consu­mers to appeal deci­si­ons.