RealPage, Inc. is a Texas-based company that provides software and data analytics services to the real estate industry. Its solutions cater to property management, accounting, leasing, and other operational needs for multifamily, single-family, commercial, and vacation rental housing. The company has been under scrutiny for its role in potentially anti-competitive practices, particularly related to its YieldStar pricing software, which is used to help set rental prices.
The United States Department of Justice (DOJ) has filed a lawsuit against RealPage, a prominent software company, accusing it of contributing to the country’s housing crisis by manipulating rental data and undermining competition among landlords. The lawsuit alleges that RealPage’s software algorithm enabled landlords to share confidential information, allowing them to coordinate and raise rents illegally.
“Everybody knows the rent is too damn high, and we allege this is one of the reasons why,” stated Attorney General Merrick Garland during a press conference announcing the lawsuit. The DOJ’s legal action is backed by eight states, highlighting the widespread concern over RealPage’s practices.
The U.S. Department of Justice filed an antitrust lawsuit accusing RealPage of helping residential landlords across the country fix rental prices through the use of its revenue management software. https://t.co/hojYWWPy6G
— Law360 Real Estate Authority (@RealEstLaw360) August 24, 2024
RealPage, a Texas-based company owned by private equity firm Thoma Bravo, has come under scrutiny following an investigation by ProPublica, which brought attention to its business practices. The company has already faced lawsuits from renters and prosecutors in Arizona and the District of Columbia earlier this year. Although RealPage did not immediately respond to the lawsuit, it has previously described similar allegations as false and misleading.
The DOJ’s complaint claims that RealPage had access to data on millions of apartments across the United States, using this information to allow landlords to manipulate market dynamics. “RealPage allows landlords to manipulate, distort, and subvert market forces,” the DOJ alleged. The complaint specifically targets a RealPage service that recommends rent prices to property owners, noting that many landlords automatically accept these suggested rates. The DOJ argues that this practice undermines competitive pricing in the rental market.
RealPage is accused of dominating the market for commercial revenue management software, with the DOJ citing the company’s own estimates that it controls about 80% of this market. In response to previous claims, RealPage stated in June that it serves a much smaller portion of the rental market than critics suggest and emphasized that rent prices are ultimately determined by landlords, not by the company.
This lawsuit represents a significant move by the federal government as it addresses the growing influence of pricing algorithms in various sectors of the economy. The DOJ has indicated that it is also examining similar practices in other industries, such as meat processing, to ensure compliance with antitrust laws.
“Modern-day wrongdoers cannot hide behind software algorithms and artificial intelligence to violate the law,” said Assistant Attorney General Jonathan Kanter, who leads the department’s anti-monopoly unit. This statement underscores the DOJ’s commitment to scrutinizing the use of technology in potentially anti-competitive practices.
“It’s the DOJ’s first big algorithmic collusion case and comes as rent in the U.S. skyrockets, climbing 33% since March 2020, according to Zillow”: Justice Department sues RealPage over allegedly helping landlords collude to drive up rents | TechCrunch https://t.co/4Jh6dnzaly
— Christine Hall @BrideOfLinux@mastodon.opencloud.lu (@BrideOfLinux) August 24, 2024
The case against RealPage marks the first major effort by the federal government to challenge the use of pricing algorithms in the rental market, setting a precedent for future actions in this area. As housing affordability continues to be a pressing issue in the United States, the outcome of this lawsuit could have significant implications for the real estate industry and beyond.
More information
- Founding and Growth: RealPage was founded in 1998 by Steve Winn, who aimed to streamline property management through innovative software solutions. Over the years, it has grown into a major player in the real estate tech space, serving thousands of clients across the U.S. and other countries.
- YieldStar Pricing Software: One of RealPage’s most notable products is YieldStar, a revenue management software that uses algorithms to suggest rental pricing for properties. This software has been at the center of controversy, as critics claim it may contribute to rent inflation and reduce competition among landlords.
- Acquisition by Thoma Bravo: In 2021, RealPage was acquired by the private equity firm Thoma Bravo for approximately $10.2 billion. This acquisition was seen as a strategic move to enhance RealPage’s market position and technological offerings.
- U.S. Department of Justice (DOJ) on the lawsuit: “The alleged conduct by RealPage raises significant concerns about anti-competitive practices in the rental housing market. We are committed to ensuring fair competition and protecting consumers from potentially unlawful behavior.”
- Plaintiffs’ Attorney in the Class-Action Suit: “RealPage’s software, which is supposed to optimize rental pricing, may in fact be facilitating collusion among landlords to keep rents artificially high. This is a serious allegation that affects millions of renters nationwide.”
- RealPage’s Response to Allegations: “We strongly deny the allegations in these lawsuits and believe our practices are lawful and contribute to a more efficient rental market. RealPage remains committed to transparency and compliance with all relevant laws and regulations.”
Key Points:
i. The U.S. Department of Justice (DOJ) has sued RealPage, accusing the company of contributing to the housing crisis by using its software to help landlords coordinate and raise rents.
ii. RealPage’s algorithm allegedly allowed landlords to share private rental data, undermining competition and inflating rents across the country.
iii. The lawsuit is supported by eight states and marks the first federal challenge to the use of pricing algorithms in the rental market, with the DOJ citing RealPage’s market dominance.
iv. RealPage has previously denied similar accusations, claiming it serves a smaller market share and that landlords, not the company, set rental prices.
v. The DOJ’s action reflects a broader effort to regulate the use of algorithms and artificial intelligence in various industries to prevent anti-competitive practices.
RM Tomi – Reprinted with permission of Whatfinger News
