For those who have rented apartments in the United States in recent years, there has been a growing sense that something is amiss in the rental market. Rent prices seem to be increasing in a coordinated manner across various buildings and cities, leading many renters to believe that they are being taken advantage of. A recent civil lawsuit filed by the US Department of Justice has shed light on the possible culprit behind this phenomenon: RealPage, a Texas-based company that provides commercial revenue management software to landlords.
According to the DOJ’s lawsuit, RealPage’s algorithm is being used by landlords to manipulate rental prices and stifle competition in the market. The software takes in rental rate and lease term data from landlords and then generates a suggested price, effectively enabling coordination among landlords to keep rental prices inflated. This practice not only restricts competition but also violates antitrust laws that have been in place for over a century.
RealPage’s reach is extensive, controlling around 80 percent of the market for this type of software. This means that the prices of approximately 3 million rental units across the country are being influenced by RealPage’s algorithm. The company is already facing multiple lawsuits, including one from the state of Arizona and another from Washington, DC, where RealPage software is used to price more than 90 percent of units in large apartment buildings.
The DOJ’s civil lawsuit, joined by the attorneys general of eight states, marks a significant escalation in legal action against RealPage. This case is unique in that it is the first civil action where the algorithm itself is being targeted as the primary means of violation. RealPage executives have been quoted acknowledging the anticompetitive nature of their product, further solidifying the allegations brought forth by the DOJ.
Despite the mounting legal challenges, RealPage has vehemently denied any allegations of antitrust violations. The company has gone to great lengths to defend its reputation, publishing digital pamphlets and FAQ pages on dedicated public policy websites. RealPage insists that their software benefits both housing providers and residents, and that the attacks on their revenue management practices are based on “demonstrably false information.”
In a press conference discussing the lawsuit, Deputy Attorney General Lisa Monaco made it clear that algorithms are not exempt from the law. The case against RealPage highlights the potential dangers of algorithmic pricing in the rental market and serves as a warning to other companies engaging in similar practices. As the legal battle unfolds, it remains to be seen how RealPage will navigate the scrutiny and whether the company will be held accountable for its alleged anticompetitive behavior.
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