Picture this: Two tenants meet in the lobby of your BTR building. They get chatting, as neighbours do. Same floor, identical 2-bedroom apartments, mirror images of each other. Then one mentions their rent. The other’s jaw drops. “You’re paying HOW much?”
If you’re a BTR operator considering dynamic pricing, this scenario probably makes you squirm. It’s the conversation you dread, the headline you fear: “Greedy Landlord Charges Neighbours Different Rents for Same Apartment.”
But here’s the thing – that headline is nonsense. And I’m going to tell you why dynamic pricing isn’t just ethical, it’s MORE ethical than the alternative. Though I’ll also warn you about the ways it can go spectacularly wrong (I’m looking at you, Uber, during the Sydney train meltdown).
The Myth of Fixed Pricing Fairness
Let’s start with an uncomfortable truth: Your current “fair” pricing system is anything but.
Consider this scenario: Market rents in your area have softened from $600 to $580 per week. With fixed pricing, you have three imperfect options:
- Keep prices at $600: Your existing tenants stay stable, but you struggle to fill vacancies. Empty apartments earn nothing.
- Reduce rents for all tenants to $580: Sure, you’ll fill vacancies quickly. But you’ve just given every existing tenant a surprise discount. When markets rise, tenants don’t expect rents to rise mid-lease. So why would they reduce now? It works both ways.
- Charge market rent for new leases: This is what most sensible operators do. New tenants pay $580, reflecting current market conditions. Existing tenants continue at $600 until their leases expire, when they can renegotiate based on market rates at that time. It respects contract certainty while staying competitive for new leases. Everyone understands the rules, and nobody feels cheated.
None of these options is ideal. But here’s the thing – dynamic pricing doesn’t mean wild fluctuations or constant changes. It means making thoughtful, data-driven adjustments that keep you competitive while treating tenants fairly.
Smart operators use dynamic pricing to navigate market changes gradually. When markets fall, they might offer renewals at slight reductions, keeping good tenants happy while maintaining revenue. When markets rise, they capture value incrementally, not through sudden jumps.
It’s like how Woolworths adjusts strawberry prices week by week – $3.50 this week, $3.90 next week, back to $3.20 the week after. Small, logical movements based on supply and demand that shoppers accept as normal market functioning.
The alternative – rigid pricing that ignores market reality – that’s what creates problems. Dynamic pricing, done ethically, actually smooths out these market bumps for everyone.
Why Different Prices Are Actually Fair
Let me share five scenarios where different pricing is not just ethical, but logical:
1. The Time Factor
Sarah signed her lease in July 2024. Mike signed his in January 2025 when the market was 10% stronger. Same apartment type, different rents. Unethical?
Hardly. It is just a reflection of the market at different points in time.
2. The Devil in the Details
Those “identical” apartments? They’re not. One faces the construction site, the other overlooks the park. One has been renovated, the other has original 2010 fixtures. One’s on the 15th floor with harbour views, the other’s on the 3rd floor facing the bins. Even small differences in inclusions and layouts can affect renter demand.
My favourite analogy: Some airlines charge different prices for middle seats versus window seats. Same destination, same arrival time, vastly different experience. Nobody calls that unethical.
3. Lease Duration Mathematics
Emma wants a 6-month lease. James wants 18 months. Should they pay the same?
Consider the operator’s perspective: Emma’s apartment will be vacant twice more while James is still happily settled. That’s marketing costs, vacancy losses, and admin time. A premium for short-term leases isn’t gouging – it’s basic business math.
But here’s where it gets interesting. Sometimes operators offer DISCOUNTS for 6-month leases that end in peak season. Why? Because in some locations a vacancy in November (pre-Christmas) is worth more than one in February (when nobody moves). That’s not manipulation – that’s smart inventory management. As a tenant, you can use this to your advantage by asking for a discount if you agree to end your lease when seasonal demand is high.
4. The Loyalty Dividend
Here’s where the philosophy gets spicy. Should renewing tenants pay less than new tenants?
Most industries reward loyalty. Your telco gives existing customers worse deals than new ones (annoying but accepted). Your gym offers joining specials that existing members can’t access. Even your coffee shop has a loyalty card.
When a tenant renews, the operator saves thousands in marketing and vacancy costs. Passing some of that saving to the tenant isn’t favouritism – it’s shared value creation. The operator wins, the tenant wins, and housing stock is used more efficiently.
The flip side? Sometimes market rents rise faster than renewal increases. That new tenant paying more isn’t being gouged – they’re paying market rate while the existing tenant enjoys below-market rent as a loyalty benefit.
5. The Algorithm Question
“But using computers to calculate rent feels wrong!”
Really? Is it more ethical for a 25-year-old analyst to guess at rents based on a spreadsheet they updated in 2019? Or for sophisticated software to analyse millions of data points and find the true market price?
The ethics aren’t in the method – they’re in the outcome. A computer can be programmed to be fair, transparent, and consistent. Humans? We’re walking bias machines.
When Dynamic Pricing Goes to the Dark Side
Before you think I’m a pricing evangelist with no moral compass, let’s talk about when dynamic pricing becomes genuinely unethical.
Remember the Sydney train shutdown I mentioned? Uber’s surge pricing hit 10x normal rates. People trying to get home were quoted $300+ for normal $30 trips. That wasn’t dynamic pricing – that was disaster profiteering.
The difference? Exploitation versus optimisation. Ethical dynamic pricing responds to normal market conditions. Unethical pricing exploits desperation, emergencies, or information asymmetry.
Your Ethical Framework for Dynamic Pricing
Here’s your practical guide to staying on the right side of the ethical line:
The Three Pillars of Ethical Pricing
1. Transparency
- Publish your pricing methodology (not your algorithm, but your principles)
- Give advance notice of renewal increases
- Be upfront about why prices vary between apartments
- Never, ever bait and switch
2. Fair Caps
- Set maximum increase percentages for renewals (we recommend 10-12% annually)
- Implement surge caps for high-demand periods
- Consider hardship provisions for long-term tenants and protections for vulnerable residents
3. Value Creation
- Use pricing to improve occupancy, not just extract maximum rent
- Reinvest revenue gains into property improvements
- Offer options that benefit different tenant needs
- Focus on sustainable, long-term returns over short-term gouging
Red Lines: What Never To Do
- Never coordinate prices with competitors (that’s not dynamic pricing, it’s collusion – and it might land you in court)
- Never exploit emergencies (natural disasters, transport failures, or health crises are not “opportunities”)
- Never use race, religion, gender or disability in pricing decisions (that’s not optimisation, it’s discrimination)
- Never hide your true prices (if you’re ashamed of your pricing strategy, it’s probably unethical)
The Reality Check
Here’s the brutal truth: If you’re not using some form of dynamic pricing, you’re already making ethical compromises. You’re either:
- Overcharging tenants who happened to sign at the wrong time
- Undercharging and leaving money on the table that could improve your properties
- Creating arbitrary inequities based on luck rather than logic
The question isn’t whether to use dynamic pricing – it’s how to use it ethically.
Your 30-Day Ethical Pricing Action Plan
Week 1: The Mirror Test
- Audit your current pricing disparities
- Document why different tenants pay different amounts
- Identify any patterns that make you uncomfortable
Week 2: Policy Development
- Set your maximum increase caps
- Define your emergency protocols
- Create your transparency commitments
- Build in hardship provisions
Week 3: Communication Prep
- Draft tenant communications about pricing philosophy
- Prepare FAQs for common concerns
- Train your team on ethical talking points
- Create templates for increase notifications
Week 4: Implementation
- Document everything
- Monitor tenant feedback
- Adjust based on response
The Competitive Advantage of Ethics
Here’s what the hand-wringers don’t understand: Ethical dynamic pricing isn’t just morally superior – it’s commercially superior.
Tenants aren’t stupid. They know when they’re being gouged versus treated fairly. Operators with transparent, ethical pricing policies enjoy:
- Higher renewal rates (because tenants trust them)
- Better reviews (because surprises are minimised)
- Lower regulatory risk (because they can defend every decision)
- Stronger brands (because integrity matters)
The cowboys might make a quick buck exploiting information asymmetry, but sustainable businesses are built on trust.
The Bigger Impact: More Housing for Everyone
Here’s the argument that should end every ethical debate about dynamic pricing: It helps solve the housing crisis.
Let me connect the dots for you. When BTR projects go to investment committees, they live or die on one metric: ROI. A project promising 5% returns gets shelved. One promising 7% gets built.
Dynamic pricing can lift ROI by through better yield management. That’s the difference between “no” and “yes” in a boardroom. Between empty land and 200 new apartments.
Think about that for a moment. Every BTR operator using fixed pricing is literally reducing the amount of housing that gets built. In markets crying out for more supply, that’s the real ethical question.
The maths is simple:
- Better pricing = Higher returns
- Higher returns = More projects approved
- More projects = More housing supply
- More supply = More affordable options for everyone
This isn’t trickle-down economics fairy tales. It’s basic supply and demand. When Melbourne added 25,000 BTR units over five years, rental growth slowed across the entire market. When London restricted new development, rents exploded.
So, when someone questions the ethics of dynamic pricing, ask them this: Is it more ethical to leave money on the table and build fewer homes? Or to optimise revenue and add desperately needed housing supply?
In a housing crisis, inefficiency isn’t just bad business. It’s bad ethics.
The Choice is Yours
You can continue with fixed pricing, creating random winners and losers while leaving money on the table. You can implement dynamic pricing badly, generating headlines and regulatory scrutiny. Or you can embrace ethical dynamic pricing – optimising revenue while treating tenants fairly.
The residents in your building are already paying different amounts. The question is whether those differences are based on logic and fairness, or accidents and inertia.
In a world crying out for more housing, can you really afford not to optimise your pricing? And in a world demanding corporate responsibility, can you afford to do it unethically?
The answer to both questions is the same: No.
It’s time to stop worrying about whether dynamic pricing is ethical, and start focusing on doing it right.
__________________________________________________________________________________________
If you’re ready to implement ethical dynamic pricing but want to ensure you stay on the right side of the line, get in touch. At Price Wizard, we’ve built our algorithms with ethics at the core – because sustainable revenue beats short-term exploitation every time.
