The U.S. Department of Justice and eight state attorneys general have filed an antitrust suit against the real estate software company RealPage accusing it of colluding with landlords to decrease competition and artificially inflate rental prices, Gizmodo reported.
The complaint alleges that the Texas-based company feeds nonpublic information about rent rates and lease terms between competing landlords into its algorithms, which then recommend rate increases to landlords based on their competitors’ information. The result, the DOJ says, is that landlords don’t compete against each other to attract tenants and rents go up across entire markets.
“By feeding sensitive data into a sophisticated algorithm powered by artificial intelligence, RealPage has 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,” Deputy Attorney General Lisa Monaco said in a statement. “Training a machine to break the law is still breaking the law.”
The U.S. Department of Justice posted a press release titled: “Justice Department Sues RealPage for Algorithmic Pricing Scheme that Harms Millions of American Renters”
…The complaint cites internal documents and sworn testimony from RealPage and commercial landlords that make plain RealPage’s and landlords’ objective to maximize rental pricing and profitability at the expense of renters. For example:
RealPage acknowledged that its software is aimed at maximizing prices for landlords, referring to its products as “driving every possible opportunity to increase price,” “avoiding the race to the bottom in down markets,” and “a rising tide raises all ships.”
A RealPage executive observed that its products help landlords avoid competing on the merits, noting that “there is greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down.”
A RealPage executive explained to a landlord that using competitor data can help identify situations where the landlord “may have a $50 increase instead of a $10 increase for the day.”
California Attorney General Rob Bonta posted information regarding RealPage:
California Attorney General Rob Bonta today, alongside the U.S. Department of Justice, and a bipartisan coalition of eight attorney’s general, filed a lawsuit against RealPage, a revenue management software company used by landlords to price multifamily rental housing units.
The lawsuit alleges RealPage enabled landlords to artificially raise rents in a pricing alignment scheme that increased their rent revenue across the board, enabled by the illegal sharing of confidential pricing and supply information.
“Anticompetitive agreements are illegal, whether done by a human or a software program. RealPage misused private and sensitive consumer data to take competition out of the rental industry, leaving renters no other choice but to pay the intentionally high prices that landlords agreed to set,” said Attorney General Rob Bonta.
“This means even if the rental home supply was high, rent prices stayed the same, and in some cases rents went up. This conduct is unacceptable and illegal, and given California’s current housing shortage and affordability crisis, it is causing real harm. Every day, millions of Californian’s worry about keeping a roof over their head and RealPage has directly made it more difficult to do so.”
In my opinion, it appears that the landlords, who decided to give themselves a raise through RealPage, should be ready to face legal charges from the U.S. Department of Justice.