RealPage accused of helping landlords raise rents: NPR

The US Department of Justice announced on Friday that it is filing a lawsuit against real estate company RealPage, accusing the company of participating in price fixing to increase rents.

The attorneys general of eight states – North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee and Washington – have joined the Justice Department’s antitrust lawsuit filed in federal court in North Carolina.

The Justice Department says RealPage's “alleged conduct deprives tenants of the benefits of competition in apartment leasing terms and harms millions of Americans.”

The Justice Department alleges that RealPage's algorithmic pricing allows multifamily landlords to collude and set above-market rents, “depriving tenants of the benefits of competition in apartment rental terms and harming millions of Americans.”

“Americans should not have to pay more rent just because a company found a new way to collude with landlords and break the law,” U.S. Attorney General Merrick Garland said in a statement. “We allege that RealPage's pricing algorithm allows landlords to share confidential, competitively sensitive information and adjust their rents.”

According to the complaint, this 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 to a landlord what rent they should charge. RealPage has touted this software as maximizing profits for landlords, boasting that it allows them to “outperform the market.”

RealPage did not respond to a request for comment, but in the past the company has denied that its pricing software is anti-competitive, saying it lowers rents when demand falls and can help reduce vacancy rates.

Garland noted that the lawsuit was brought under the Sherman Antitrust Act, a law passed more than a century ago when “an anti-competitive scheme might have looked like robber barons shaking hands in a secret meeting.” While landlords colluding using mathematical algorithms is new, he said, it violates the same basic principle of a free market that promotes competition.

The Justice Department also alleges that the company has a monopoly position, controlling about 80 percent of the U.S. market for such software. And although RealPage says its program only provides a price recommendation, the lawsuit suggests that this is difficult to disprove.

“Landlords are encouraged to configure the product to automatically accept RealPage's referrals,” says Eric Dunn, a tenant rights attorney with the National Housing Law Project. “And if a property manager does not want to accept the referral, they must provide a statement,” which is then sent to a regional manager.

Dunn also sees a kind of peer pressure that can build up among landlords. The complaint describes RealPage holding online training sessions where property managers chat with each other, and it also says landlords communicated directly in other ways. The company has boasted that by coordinating rather than competing, landlords can “avoid concessions” such as lower rents or a month free. Instead, as RealPage put it, “a rising tide lifts all ships.”

In some markets across the country, at least half of landlords use RealPage's pricing algorithm, real estate experts say. Friday's lawsuit is not the first to target the company's software — there are about 20 other lawsuits pending across the country.

In a recent and related case, Las Vegas hotels were accused of sharing information through various pricing software and using it to artificially inflate room prices. A judge threw this case on the grounds that the plaintiffs had not proven that the hotels had agreed on prices among themselves.

Some other pricing software companies fear the Justice Department's lawsuit could damage their reputations.

“AI helps not only for-profit landlords, but also operators and developers of affordable housing,” said Vidur Gupta, CEO of Beekin, in a statement on the lawsuit.

There is now a bill in Congress that would restrict the use of this type of artificial intelligence.