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Software the U.S. government says is illegal gives landlords ability to coordinate rent hikes. Now it’s being used in Canada by developer Dream Unlimited
When Shanice Sharpe moved into a one-bedroom apartment at 22 John St., in the working-class neighbourhood of Weston in the Greater Toronto Area, her rent seemed reasonable.
But since 2022, it has shot up nearly 10 per cent each year and she’s currently spending most of her monthly income on housing. “I have three jobs just to pay for my life,” she said.
The majority of her fellow tenants have faced similar hikes from the building’s Canadian owner, Dream Unlimited, which has $25 billion in assets.
Now, there’s evidence that the real estate developer is getting advice on rent increases from an AI software, YieldStar, that is currently the subject of a major U.S. government lawsuit alleging it enables landlords to artificially inflate rents and “harms millions of Americans.”
According to a document obtained by The Breach, the property manager at 22 John St. admitted to using Yieldstar “in order to calculate the estimated market rents for a given apartment.”
The real estate software, made by Texas-based RealPage, gathers confidential real-time data about rental prices and occupancy rates from landlords. An algorithm powered by artificial intelligence then generates suggestions for what they should charge renters—amounts that are often higher than they would be without such collusion between landlords, according to allegations in the case filed two weeks ago by the U.S. government.
On the heels of F.B.I. raids earlier this summer on several U.S. corporate landlords who use the software, the Department of Justice says RealPage has “found a modern way to violate a century-old law through systematic coordination of rental housing prices.”
The documentation obtained by The Breach shows that the yearly rental increases proposed by YieldStar for apartments at 22 John St. range mostly between seven and 54 per cent.
With its hikes currently capped at 9 or 10 percent, Dream Unlimited appears to be choosing increases at the lower end of the recommended ranges—but that’s still three times higher than what’s allowed by Ontario’s rent control laws.
The provincial maximum on rent-controlled apartments last year was 2.5 per cent, but Sharpe’s building has no limit because Ontario Premier Doug Ford removed controls on any rental units built or occupied after November, 2018.
The document, an affidavit from the property manager at 22 John St., claims YieldStar “is commonly used in the industry by many large corporate Landlords in Canada and the United States of America.”
According to a market-research database consulted by The Breach, to date there are 13 companies in Canada with more than $5 billion in revenue using the software. Dream Unlimited, however, might be the largest corporate landlord in Canada to acknowledge doing so.
The real estate developer brands itself as a positive force in communities that has “a vision to revolutionize the way people live and work.”
But with ongoing rent increases, residents at Sharpe’s building and at 33 King St., another building owned by Dream, organized with the York South-Weston Tenants’ Union and launched a rent strike in summer 2023, withholding their rent.
The affidavit obtained by The Breach stem from a case at the Ontario Landlord and Tenant Board over the rental strike, which is still ongoing. The tenants’ union is concerned there’s nothing to stop Dream Unlimited from using the software algorithm to hike rents even higher.
“Tenants in the building are furious about learning that Dream is using the same technology that corporate landlords use in the United States,” said Chiara Padovani, co-chair of the York South-Weston Tenants Union. “We have proof to validate what we had suspected all along, that it doesn’t actually give a damn about solving the housing crisis.”
Landlords previously had ‘too much empathy’: software developer
In the United States, an investigation by ProPublica into how RealPage contributed to rising rents across the country in 2022 sparked an outcry from senators, which led to a Department of Justice investigation.
Traditionally, landlords calculating rent increases would have to make informed guesses about how much they think the local market can bear, including by informally calling competitors—something Dream Unlimited’s property managers continue to do.
But according to the U.S. government’s case, YieldStar’s algorithm can drive landlords to collude in setting artificial rates based on competitively-sensitive information, such as signed leases, renewal offers, rental applications, and future occupancy.
With the software, landlords are enabled, if not encouraged, to extract as much revenue as possible from both existing and prospective tenants.
One of the main developers of the software used by YieldStar told ProPublica that landlords had “too much empathy” compared to the algorithmic pricing software.
Corporate landlords have acknowledged the same.
“The beauty of YieldStar is that it pushes you to go places that you wouldn’t have gone if you weren’t using it,” said a director at a U.S. property management company in a testimonial video on RealPage’s website that has since disappeared.
In a public statement responding to what it calls a “false narrative,” RealPage says that landlords are not obligated to adopt the rates suggested by YieldStar’s algorithm. But it does promise they can use the tool to outperform the market by three to seven percent.
“The irony of this all is that this isn’t the free market,” said Padovani of the York South-Weston Tenants Union. “This isn’t a market where landlords compete against one another to try and fill their buildings. In fact, it’s the opposite. It’s a market where landlords are agreeing to keep rents artificially high.”
Dream Unlimited’s CEO did not respond to a request for comment.
There has been no indication that the federal Canadian government is monitoring or investigating the use of algorithmic pricing tools by landlords in the country.
The Department of Justice did not reply to questions from The Breach by time of publication about whether it had looked into Yieldstar’s use in Canada.
‘Time to investigate’
With rents soaring across the city, Sharpe has found the search for a more affordable apartment challenging, if not impossible. “Everything starts at like $2,200 for a new place in Toronto, or even the old ones, if they’re renovated units,” she said, noting that her monthly take-home income is $3,100.
In July, the average asking rent in Toronto for one bedroom apartments was $2,458. Rent-burdened tenants often get a roommate or, like Sharpe, a third job, to supplement their income. Increasingly, tenants are also cutting down on food to make rent at the end of the month.
“Whenever someone gets a rent increase above rent control, what we hear from people is, ‘Where are we supposed to go? Because if I lose my home where I’m living right now and have to find a new place to live, there is nowhere that is going to be the same price—let alone cheaper,’ Padovani said. “So tenants don’t have a choice.”
Left with few options, tenants at 22 John St. have been actively organizing.
“They’ve taken incredible action by going on a rent strike, and drawing the line in the sand because the government has failed to put the protections and regulations that every single renter in this country deserves,” Padovani said. “One of the most inspiring things that are happening right now, in the context of the housing affordability crisis, is tenants banding together and saying, ‘No way.’”
The York South-Weston Tenants Union would like to see the Ontario government expand rent controls to include buildings completed after 2018, like 22 John St., and to stop the practice of ending rent control for older apartments when they go back on the market.
“The premier could snap his fingers and bring back rent control for every single apartment building in this province,” Padovani said. “Instead, he’s taken away that protection that we’ve had in the past.”
While the U.S. government’s antitrust lawsuit progresses south of the border, Padovani believes governments across Canada should pause public-private partnerships with YieldStar users.
For its part, Dream Unlimited has entered into lucrative public-private partnerships with various levels of government. Dream is a developer of two rental housing projects, one in Ottawa and one in Toronto, that are being created in partnership with government bodies.
Padovani also believes it’s time the government investigate the impacts of the technology on housing affordability in Canada.
“If these impacts are what the evidence from the United States shows, then it equates to a housing cartel, and that’s a criminal offence,” Padovani said. “The government of Canada, whether it’s federal, provincial, or municipal, should by no means be doing business with criminals.”
