Regardless of occasional political friction, america and Canada stay deeply intertwined economically and culturally. Their similarities make them best for comparability — particularly when investigating the causes of rising rents and housing costs, which have surged in lockstep in each international locations.
Between 2019 and 2024, Canada’s median dwelling value skyrocketed 45 p.c to CN $481,745, in line with Zoocasa. In america, the rise was 34 p.c over the identical interval, touchdown at $426,800, per the St. Louis Fed.
Rental prices adopted swimsuit. Nerdwallet reported Canadian common earnings rose 74.3 p.c from 2003 to 2023, however dwelling costs ballooned 227 p.c. US earnings grew 86 p.c, however dwelling costs climbed 135 p.c. Rents almost doubled in each nations.
So, what’s guilty for this housing inflation? In keeping with regulators on each side of the border, the offender is property administration software program — particularly, synthetic intelligence-driven pricing instruments like RealPage’s lease optimization algorithm. These instruments counsel optimum lease ranges based mostly on a property’s traits and native market situations. Politicians allege these AI instruments quantity to collusion, functioning as high-tech price-fixing. This regulation-happy narrative couldn’t be farther from the reality.
A Fallacy of Central Planning
In Canada, a class-action lawsuit filed final December targets RealPage and 14 property administration companies. Nevertheless, the AI pricing software in query is barely used there — it accounts for not more than 1 p.c of the Canadian rental market, and even then, the pricing algorithm shouldn’t be used — the software program is basically relegated to back-office bookkeeping. But, Canada’s lease nonetheless surged. The software program didn’t trigger the disaster — it’s merely a scapegoat for deeper systemic issues.
Nonetheless, politicians and the press are urgent ahead.
Within the US, the now-departed Biden DOJ launched an antitrust swimsuit that mirrors the Canadian claims. Senator Amy Klobuchar has additionally launched laws aimed toward “curbing” rental AI software program.
As Friedrich Hayek warned, “The extra the state ‘plans,’ the tougher planning turns into for the person.”
It is a textbook case of regulatory overreach based on a flawed assumption: that costs are made in boardrooms or by algorithms, relatively than within the market by way of voluntary trade and supply-demand dynamics.
The Actual Drivers: Cantillon Results and Regulatory Distortion
If we’re critical about diagnosing the issue, we should think about the Austrian concept of malinvestment and Cantillon results. Central banks’ decade-long coverage of artificially low rates of interest — pushed underneath the guise of stimulus — has distorted capital allocation. Low cost credit score flooded into actual property markets, fueling speculative bubbles and driving up housing costs past what middle-class incomes might assist.
On the similar time, government-imposed zoning restrictions, development allow delays, and lease management legal guidelines have stifled the availability of recent housing. It is a basic instance of what Ludwig von Mises referred to as interventionism — a patchwork of state interference that produces unintended penalties worse than the issues it seeks to unravel.
A Toronto survey by Simplydbs reveals the general public understands what many policymakers don’t. Renters cited inflation, restricted housing development, and excessive possession prices as the first causes of rising rents. Landlords ranked lowest. The market individuals themselves see the reality.
Spontaneous Order, Not Bureaucratic Panic
The market course of is decentralized. Costs convey information dispersed amongst tens of millions of actors — what Hayek referred to as the “use of data in society.” AI pricing instruments merely combination this information extra effectively. They don’t override it. Banning such instruments gained’t convey costs down. It would solely cripple landlords’ capacity to answer native situations in actual time — possible inflicting much more inefficiencies.
Furthermore, this crackdown on AI lease instruments shouldn’t be a principled stand towards monopoly or collusion. It’s a case of political theater — an try and externalize blame for inflation that was brought on by governments and central banks themselves. As Mises wrote, “Authorities is the one company that may take a helpful commodity like paper, slap some ink on it, and make it completely nugatory.”
We live with the implications of unsound cash, dangerous regulation, and housing coverage formed by political expediency, not market ideas. That’s the root of lease inflation — not software program, and positively not landlords utilizing fashionable instruments to navigate distorted markets.
If the objective is reasonably priced housing, the reply lies in eradicating the regulatory roadblocks, ending financial inflation, and letting the market carry out its coordinating operate free from coercive interference. The rest is only a detour on the street to serfdom.
