Federal Government Files Lawsuit Against RealPage for Allegedly Increasing Tenants' Rent Prices
Updated Article:
Here's the lowdown on a heated legal battle brewing between the U.S. Department of Justice, several state attorneys general, and the real estate software giant, RealPage. The fuss? Allegations of price-fixing among landlords, thanks to RealPage's rental pricing algorithm.
The buzz is all about a BadAss lawsuit, accusing RealPage of conspiring with landlords to curb competition and jack up rental prices. The Texas-based company reportedly hides competitors' rental info in their sophisticated AI engine, recommending rate hikes to landlords based on their competitors' figures. Result? A race to the highest rent with no loose competitors vying for tenants.
Deputy Attorney General Lisa Monaco served up a hot take, stating, "RealPage has craftily abused a century-old law by inducting an AI brainwash, controlling rental pricing through systemic collusion and undermining fair competitionfor consumers." In simpler terms, training a machine to break the law is still breaking the law, she implies.
The lawsuit alleges that RealPage's execs and landlord clients weren't shy discussing price-fixing brought on by the company's products. One landlord even wrote, "Your algorithm uses proprietary data from other subscribers to suggest rents and term. That's classically fixing prices...," as per the Department of Justice's complaint.
Another landlord, using RealPage's yielding superstar (YieldStar) algorithm, admitted a staggering 25% rent hike in less than a year, influencing competitors' prices too. A RealPage exec was reportedly thrilled, calling it a "great case study."
The company's influence on national rental prices is mind-boggling. Between 2017 and mid-2023, a whopping 85% of rents nationwide matched or were within 5% of RealPage's algorithm-recommended prices. The software was designed to render price-fixing nearly effortless, with default features ready to autosign recommended price hikes if they fit within certain ranges.
RealPage's response to the lawsuit was chirpy, claiming their software was built with legality in mind. The lawsuit was filed by the DOJ and attorneys general from North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee, and Washington in a North Carolina federal court.
Key Takeaways from the Allegations:
- Data sharing and algorithm use: RealPage collects confidential data from landlords, allowing them to mimic competitors' pricing, potentially leading to artificially inflated rates.
- Competitive harm: This practice harms the market by giving landlords an informational edge and promoting higher rents, discouraging price competition.
- Market impact: Despite serving a small percentage of US rental units, RealPage's software can still significantly affect the rental market by setting industry norms.
- Legal stance: The lawsuit intends to tackle the escalating housing affordability crisis, caused by rising rents, and claims such practices contribute to increased rental costs for consumers.
RealPage has defended itself, filing motions to dismiss the charges, claiming the DOJ lacks substantial evidence backing claims of monopolistic practices, and asserts their software helps landlords manage rental risks.
- The allegations against RealPage assert that their tech, including the rental pricing algorithm and YieldStar, have been employed to share data confidentially from landlords, potentially leading to artificially inflated rents.
- The practice of data sharing and algorithm use by RealPage has been accused of harming the market by providing landlords with an informational edge, promoting higher rents, and discouraging price competition.
- Despite servicing a small percentage of U.S. rental units, RealPage's technology has a significant impact on the rental market, as it can set industry norms and affect a majority of rents nationwide between 2017 and mid-2023.
- The lawsuit against RealPage aims to address the escalating housing affordability crisis, mainly caused by the rise in rents, and emphasizes that such practices contribute to increased rental costs for consumers in the future.
