The U.S. Department of Justice (DOJ), alongside eight states, has filed an antitrust lawsuit against Texas-based RealPage, a software company owned by Thoma Bravo, on August 23, 2024. The lawsuit, filed in the Middle District of North Carolina, alleges that RealPage's software has facilitated illegal rent coordination among landlords, contributing to rising rental prices across the country. Attorney General Merrick Garland emphasized that Americans should not face higher rents due to illegal practices by RealPage, asserting that this conduct violates the Sherman Act [20ed7605].
RealPage's YieldStar software is at the center of the controversy, as it reportedly suggests rental prices that exceed competitive market rates. The algorithm allows landlords to share pricing data and occupancy rates, which critics argue leads to coordinated pricing strategies that harm tenants. The DOJ's complaint highlights that RealPage controls about 80% of the commercial revenue management software market and had access to data on millions of apartments, enabling landlords to manipulate market forces, affecting approximately 3 million rental units [20ed7605].
This lawsuit follows a series of investigations and legal actions against RealPage, initiated after a ProPublica investigation in late 2022. Notable cases include those brought by D.C. Attorney General Brian Schwalb in November 2023 and Arizona Attorney General Kris Mayes in February 2024. Legal expert Gene Kimmelman has pointed out the role of algorithms in facilitating illegal collusion, while Jay Ezrielev criticized the DOJ's approach as a significant expansion of antitrust doctrine [581337ff].
In Massachusetts, Senator Elizabeth Warren, alongside Senator Ed Markey and Representative Seth Moulton, has expressed strong opposition to the use of dynamic pricing software like RealPage's in rental markets. They have reached out to 13 property management companies in the state regarding the software's implications. Warren and her colleagues argue that the rising rental prices are not solely due to software but are exacerbated by a broader housing shortage, with home sales at their lowest since 2008 and rental demand increasing as home prices have surged nearly 20% since President Biden took office [82924e5e].
Interestingly, only 7% of U.S. rentals utilize RealPage's pricing software, which reportedly provides recommendations that landlords accept less than half the time. Critics argue that the real issue lies in restrictive zoning policies that limit housing supply, rather than the software itself [82924e5e].
The legal action against RealPage comes amid rising concerns over housing costs, which have become a significant political issue as the November presidential election approaches. Annual rent growth peaked at nearly 16% in early 2022, prompting Vice President Kamala Harris to highlight corporate collusion as a factor contributing to rising rental prices [717f5d5d].
As the legal landscape evolves, the implications of these lawsuits could significantly impact the rental market and the operations of property management software companies. The ongoing scrutiny of RealPage and similar firms underscores the necessity for regulatory oversight to prevent anti-competitive practices in the housing sector, particularly as affordability continues to be a pressing issue for many Americans [717f5d5d].