RealPage has agreed to settle an antitrust lawsuit raised by the Department of Justice, alleging that landlords used its tools to coordinate efforts to artificially raise rental prices across the US.
In a press release, the DOJ promised the proposed settlement “would help restore free market competition in rental markets for millions of American renters.”
For years since the pandemic started, rental prices outpaced inflation, and the DOJ suspected that RealPage was the dominant force driving a market that never favored renters. Recent Bureau of Labor Statistics data covering a 12-month period ending this September showed rents are still rising by 3.5 percent amid an affordability crisis, leaving some US renters in fear of housing instability.
In its complaint filed last August, the DOJ alleged that RealPage collected sensitive information daily from landlords, making it easier to see how competitors were pricing units. This information allegedly helped landlords “identify situations” where they could “have a $50 increase instead of a $10 increase” or eliminate “renter-friendly concessions (like a free month’s rent or waived fees)” they may have used “to attract or retain renters.”
“To RealPage, the ‘greater good’ is served by ensuring that otherwise competing landlords rob Americans of the fruits of competition—lower rental prices, better leasing terms, more concessions,” the DOJ alleged.
Under the proposed settlement agreement, RealPage admitted to no wrongdoing and faced no financial penalties. In court filings, the Texas-based company maintained that its “software recommends competitive, or ‘market,’ prices” and that it did nothing to prevent other commercial revenue management software companies from competing.
However, if a court approves the deal, RealPage has agreed to update its software so that rival landlords cannot access “competitively sensitive information to determine rental prices in runtime operation.” Additionally, RealPage will “remove or redesign features that limited price decreases or aligned pricing between competing users of the software.” And the company will “cooperate in the United States’ lawsuit against property management companies that have used its software.”
Moving forward, the company will also stop training its models on “active lease data” and “cease conducting market surveys” that included a broad set of landlords who didn’t even use its software “to collect competitively sensitive information.”
Ars could not immediately reach RealPage for comment. The company’s lawyer, Stephen Weissman, told The New York Times that RealPage sees the settlement as the DOJ blessing “the legality of RealPage’s prior and planned product changes.”
“There has been a great deal of misinformation about how RealPage’s software works and the value it provides for both housing providers and renters,” Weissman said.
To ensure that RealPage complies with the deal, the company agreed to accept a court-appointed monitor to perform audits over the next three years. RealPage will also designate an antitrust compliance officer who will be tasked with such duties as preventing the company’s “Pricing Advisors” from meeting with individual landlords in efforts to subvert compliance.
States joining the US in suing RealPage were not part of the settlement agreement, the DOJ noted.
RealPage’s algorithm used to set prices of 24 million units
In 2022, ProPublica flagged RealPage as potentially responsible for rising rents. The company had quickly become the country’s “dominant provider” of rent-pricing software “after federal regulators approved a controversial merger in 2017,” ProPublica noted.
That report cited comments made by a RealPage vice president, Jay Parsons, at a meeting with a group of real estate tech executives. Boasting that “one of their company’s signature product’s software [uses] a mysterious algorithm to help landlords push the highest possible rents on tenants,” Parsons wooed landlords. In a since-deleted video, he noted that apartment rents had recently increased by 14.5 percent, bragging that “never before have we seen these numbers” and prodding another executive to agree that RealPage was “driving it, quite honestly.” Business Insider dubbed it landlords’ “secret weapon.”
Back then, critics told ProPublica that “at a minimum,” RealPage’s “algorithm may be artificially inflating rents and stifling competition,” noting that “machines quickly learn” to increase prices “above competitive levels” to “win.”
Today, RealPage’s site notes that “its suite of services is used to manage more than 24 million units worldwide.” The DOJ reported that on top of collecting its customers’ sensitive information—which included rental prices, demand, discounts, vacancy, and lease terms—RealPage also collected data by making “over 50,000 monthly phone calls,” conducting “market surveys” of landlords covering “over 11 million units and approximately 52,000 properties.”
Landlords “knowingly share this nonpublic information with RealPage,” the DOJ said, while “rising rents have disproportionately affected low-income residents.” DOJ Antitrust Division Assistant Attorney General Abigail Slater confirmed the settlement would ensure that RealPage can no longer rely on such nonpublic data to help landlords collude to set rental prices, while advancing the DOJ’s mission of preventing price-fixing algorithms from harming Americans.
“Competing companies must make independent pricing decisions, and with the rise of algorithmic and artificial intelligence tools, we will remain at the forefront of vigorous antitrust enforcement,” Slater said.
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