For many apartment renters in the US, the feeling of being at the mercy of rising rental prices is all too common. The Department of Justice recently filed a civil lawsuit that sheds light on a disturbing reality: a single company’s algorithm may be behind the synchronized price increases across different buildings in various cities. RealPage, a Texas-based firm, provides commercial revenue management software to landlords, giving them the power to dictate apartment prices. However, according to the lawsuit, this software facilitates price coordination among landlords and stifles competition, ultimately harming renters.
RealPage’s dominance in the market is staggering, with the company controlling 80% of the software used to set prices for approximately three million rental units nationwide. This widespread use of RealPage’s algorithm has caught the attention of authorities in multiple states, leading to legal action in Arizona and Washington, DC. The spotlight on RealPage intensified after a ProPublica investigation in 2022 exposed the inner workings of its YieldStar software, revealing the extent of its influence on apartment pricing.
The DOJ’s civil lawsuit, supported by eight state attorneys general, marks a significant escalation in the fight against RealPage. Unlike previous cases of algorithm-enabled price-fixing, where criminal charges were filed against individual sellers, this lawsuit targets the algorithm itself as the primary culprit. RealPage executives are quoted in the complaint acknowledging the anticompetitive nature of their product, highlighting a blatant disregard for fair market practices.
Despite mounting legal challenges, RealPage remains steadfast in denying any wrongdoing. The company has taken proactive measures to counter the allegations, including publishing digital pamphlets and FAQ pages to present its side of the story. RealPage insists that its revenue management software benefits both landlords and tenants, painting a rosy picture of industry innovation while disregarding the harmful impact of its pricing algorithm.
In response to RealPage’s rhetoric, the Department of Justice emphasizes that algorithms are not immune to legal scrutiny. Deputy Attorney General Lisa Monaco underlines the importance of holding companies accountable for anticompetitive practices, signaling a firm stance against unchecked manipulation of rental markets. As the legal battle unfolds, the outcome will not only impact RealPage but also set a precedent for regulating algorithmic pricing systems in the future.
Overall, the case against RealPage unveils a disturbing truth about the hidden mechanisms that drive apartment pricing. The use of sophisticated algorithms to control rental rates represents a threat to fair competition and consumer welfare. As the legal system grapples with these issues, it is essential to safeguard the integrity of housing markets and protect the rights of renters against unjust practices.