RealPage Accused of Nationwide Home Rental Price-Fixing Scheme and Monopoly

At the heart of the DOJ's complaint is RealPage’s algorithmic pricing software, a tool marketed as a revolutionary way for landlords to maximize profits.

This software, used by a significant portion of the rental market, is designed to set optimal rent prices based on a variety of data inputs, including current rent rates, vacancy levels, and lease expiration dates.

While on the surface, this might appear as a benign use of technology to streamline rental management, the DOJ contends that RealPage's software has been weaponized to collude, effectively enabling landlords to set rents above market value.

Garland’s remarks underscore the DOJ’s assertion that RealPage’s software doesn’t just facilitate data-driven pricing but actively encourages landlords to engage in coordinated efforts that undermine market competition.

The lawsuit, filed in federal court in North Carolina, has drawn attention for its implications on antitrust law enforcement in the digital age.

The crux of the DOJ’s argument lies in how RealPage’s software allegedly functions as a tool for collusion rather than just an advanced pricing engine.

According to the lawsuit, the software collects and analyzes vast amounts of sensitive data, such as competitors' rent prices, occupancy rates, and upcoming lease expirations. It then uses this information to generate rent recommendations that landlords are encouraged to follow.

These recommendations, the DOJ claims, effectively align the pricing strategies of multiple landlords, leading to artificially high rents.

One of the most concerning aspects of the DOJ’s allegations is the claim that RealPage has a stranglehold on the market.

The company reportedly controls about 80% of the market for this kind of pricing software, giving it substantial influence over rental pricing practices nationwide.

The DOJ argues that this dominance allows RealPage to push its recommendations onto landlords who might otherwise compete with each other, thereby reducing the natural competitive pressures that would typically keep rents in check.

Eric Dunn, a tenants' rights lawyer with the National Housing Law Project, has pointed out that RealPage’s software doesn’t merely suggest prices; it enforces them.

According to the complaint, landlords using the software are encouraged to set it to automatically accept RealPage’s pricing suggestions. If they choose to override a recommendation, they must provide a detailed explanation, which is then sent to a regional manager for review.

This process, Dunn argues, creates a form of peer pressure among landlords to adhere to the recommended prices, further entrenching the anti-competitive effects of the software.

In a case that could dramatically reshape the landscape of rental housing in the United States, the Department of Justice (DOJ), alongside the attorneys general of eight states, has filed a lawsuit against Texas-based software company RealPage.

The Allegation per Politico

RealPage is accused of facilitating a nationwide price-fixing scheme that has allowed landlords to unfairly inflate rents, depriving millions of Americans of the benefits of a competitive rental market, per Politico.

The Justice Department alleges that RealPage’s algorithmic pricing lets landlords of multifamily dwellings effectively collude and set rents above market rate, which "deprives renters of the benefits of competition on apartment leasing terms and harms millions of Americans.”

According to the complaint, that information includes things like current rents, vacancy rates and lease expiration dates. Then, on a daily basis, the software uses the data and artificial intelligence to suggest what rent a landlord should charge.

RealPage has pitched this software as maximizing landlords’ profits, and boasted that it lets them “outperform the market.”

RealPage did not respond to a request for comment. But in the past it has denied that its pricing software is anticompetitive, and said it lowers rents when demand drops and can help reduce vacancy rates.

Garland noted the lawsuit was brought under the Sherman Antitrust Act, a law passed more than a century ago when “an anticompetitive scheme might have looked like robber barons shaking hands at a secret meeting.”

Landlords colluding through mathematical algorithms may be new, he said, but it violates the same bedrock principle of a free market fostering competition.

RealPage has not responded to the specific allegations in the current lawsuit, but it has consistently defended its pricing software in the past. The company has argued that its technology is not anticompetitive, asserting that it simply provides recommendations based on data, which landlords are free to accept or reject.

RealPage has also claimed that its software can lead to lower rents when demand decreases and that it helps reduce vacancy rates, benefiting both landlords and tenants.

However, the DOJ’s lawsuit paints a different picture, suggesting that the software’s design inherently pressures landlords to follow its recommendations, leading to a de facto standardization of rents across markets.

This, the DOJ argues, is a clear violation of antitrust laws, which are designed to promote competition and protect consumers from monopolistic practices.

The case has also sparked concern among other companies in the real estate technology sector. Vidur Gupta, CEO of Beekin, a competitor of RealPage, expressed worries that the lawsuit could cast a shadow over the entire industry. This sentiment reflects a broader anxiety within the industry that the DOJ’s scrutiny of RealPage could lead to tighter regulations on all AI-driven pricing tools, potentially stifling innovation and affecting a wide range of housing providers.

The implications of the DOJ's lawsuit extend far beyond RealPage itself. In a market where affordable housing is already a critical issue, the possibility that a single company could manipulate rents on such a large scale is alarming.

In many markets across the country, particularly in urban areas, housing costs have been skyrocketing, contributing to widespread concerns about housing affordability and homelessness.

The DOJ’s allegations suggest that these rising costs may not be solely the result of natural market forces, but rather the product of coordinated actions enabled by advanced technology.

RealPage’s influence is particularly troubling in light of the current housing crisis. The lawsuit alleges that in some markets, half or more of the landlords use RealPage’s software to set their rents, meaning that the company's algorithms could be directly impacting the prices paid by millions of renters.

If the DOJ’s allegations are proven in court, it would indicate that the rising tide of rent prices across the country is not just a symptom of supply and demand but a deliberate strategy orchestrated by landlords using RealPage’s software.

As the DOJ's case against RealPage unfolds, it could set a crucial precedent for how antitrust laws are applied in the era of big data and artificial intelligence.

The lawsuit represents a significant test of whether traditional antitrust principles can be effectively enforced in a digital marketplace where algorithms and data-driven decision-making are increasingly dominant.

For renters across the United States, the outcome of this case could have a direct impact on their daily lives. If the DOJ succeeds, it could lead to a rollback of rent increases in markets where RealPage’s software has been influential.

Moreover, the case could prompt broader changes in how rent prices are determined, potentially restoring some of the competitive pressures that have been lost in recent years.

In the meantime, the lawsuit has thrust RealPage into the spotlight, raising questions about the ethical use of technology in the real estate market.

As the legal battle continues, it will be watched closely by industry stakeholders, housing advocates, and renters alike, all of whom have a vested interest in the case’s outcome.

The DOJ’s lawsuit against RealPage over alleged rent price-fixing could reshape the U.S. rental market, highlighting concerns about AI-driven pricing tools and their impact on housing affordability.

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Mark Derho is a seasoned expert in the Internet industry with over 25 years of experience in NYC's software development, digital marketing, and advertising sectors. A certified Google Partner, Mark specializes in content creation, AI chatbot development, open-source software, modern website design, and SEO/SEM marketing. He leads PR Website Agency and lives in Puerto Rico with his dog, Luno.

politico.com/rental-housing-market-doj-investigation

ftc.gov/price-fixing-algorithm-still-price-fixing