The US Department of Justice claims RealPage’s property management algorithms are distorting and manipulating the US rental market.
The Department of Justice (DoJ) has launched a lawsuit against real estate software provider RealPage which accuses the Texas-headquartered company of stifling competition in the property market by allowing landlords to align their rental rates to the detriment of millions of US residents.
The lawsuit, filed with the US District Court for the Middle District of North Carolina on 23 August, states that RealPage has built a business out of “frustrating the natural forces of competition”, adding that the company’s sophisticated software allows landlords to “manipulate, distort, and subvert market forces”.
The DoJ – which is bringing the lawsuit alongside the attorneys general of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee and Washington, has taken aim at RealPage’s practice of selling software to competing landlords who then share non-public, competitively sensitive information about their rental rates and other lease terms to train RealPage’s algorithms.
Based on this algorithm, the software giant provides daily, near real-time pricing recommendations back to competing landlords. However, according to the DoJ’s 115-page filing, these are not just simply ‘recommendations’.
“RealPage monitors compliance by landlords to its recommendations. RealPage also reviews and weighs in on landlords’ other policies, including trying to, and often succeeding in, ending renter-friendly concessions – like a free month’s rent or waived fees, to attract or retain renters.”
“As competitor-landlords increase their rents, RealPage’s software nudges other competing landlords to increase their rents as well,” the filing states.
As well as reducing competition among landlords in apartment pricing, these practices also serve to monopolise the revenue management software market for multi-family dwellings, in which RealPage commands around 80% of the market share, the DoJ claims, adding that the company’s alleged actions breach Sections 1 and 2 of the Sherman Act.
The suit also contends that, in a free market, the landlords would be competing independently to attract renters. “A free market requires that landlords compete on the merits, not coordinate pricing. Landlords should win renters by offering whatever combination of price and quality they think is most attractive,” the filing asserts.
Attorney General Merrick Garland said in a statement that Americans should not have to pay more in rent because a company has found a “new way to scheme with landlords to break the law”.
“Using software as the sharing mechanism does not immunise this scheme from Sherman Act liability, and the [DoJ] will continue to aggressively enforce the antitrust laws and protect the American people from those who violate them,” Garland commented.
Deputy Attorney General Lisa Monaco added that by feeding sensitive data into an AI-powered algorithm, RealPage had found a modern way to “violate a century-old law” through systematic coordination of rental housing prices, undermining competition and fairness for consumers in the process.
“Training a machine to break the law is still breaking the law. [Our] action makes clear that we will use all our legal tools to ensure accountability for technology-fuelled anticompetitive conduct,” Monaco said.
RealPage did not respond to a request for comment at time of publication.
In 2022, RealPage agreed to pay USD 9.7 million to settle a class action lawsuit after its incorrect background checks led to tenants being erroneously flagged as sex offenders.