Feds accuse RealPage of price-fixing rent

RALEIGH, N.C. (CN) — The Justice Department on Friday sued RealPage, a company that provides pricing software to apartments, arguing its software is depriving renters of fair competition and creating collusion between landlords.

In its lawsuit, the Justice Department said the Texas-based company’s revenue management software is fueled by sensitive information shared between landlords, which is then used to generate price recommendations for units and floor plans. If landlords were to share such information in person rather than through software algorithms, they would without question be violating antitrust laws.

RealPage’s system depends on collecting information from competing landlords. The company also uses a so-called system of “checks and balances” to make companies and property managers comply with price recommendations, the DOJ said in its suit.

“Renters are entitled to the benefits of vigorous competition among landlords,” the agency said. “In prosperous times, that competition should limit rent hikes; in harder times, competition should bring down rent, making housing more affordable. RealPage has built a business out of frustrating the natural forces of competition.”

RealPage, which was the subject of a ProPublica investigation in 2022, contendson its website that it often recommends lowering rents, doesn’t restrict unit availability and doesn’t share competitive data.

Its systems make price recommendations in all directions, the company says, including by encouraging clients to lower rental prices. The company also insists it never recommends keeping vacant units off the market.

But the Justice Department argues RealPage’s behavior is harming the multifamily rental industry because competing companies are sharing data and using the company’s tools to set rental prices. RealPage’s behavior completely distorts competitive pricing and hurts renters, the agency says.

In the United States, around 80% of multi-family rental properties use RealPage’s management software. The DOJ says the company’s hold on the industry has encouraged landlords to decrease discounts and benefits for consumers and instead focus on increasing profits. Landlords are able to avoid competing by following RealPage’s price recommendations, it says.

According to the DOJ, RealPage acknowledges that driving up prices is a company goal.

“There is a greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down,” the Justice Department quotes one RealPage representative as saying.

RealPage’s strategy is in opposition to the free market, where competition is supposed to strengthen business and benefit all parties, the feds further argue. Instead of free markets, the DOJ says RealPage is using data on demand and unit prices to manipulate the rental market and help landlords benefit at the expense of renters.

As RealPage’s business has grown, advocacy groups have raised similar concerns.

“Access to affordable housing options is becoming increasingly difficult,” said Monica Burks, policy counsel at the Center for Responsible Lending. “Anti-competitive practices that inflate already high housing costs disadvantage individuals and families working hard to secure this basic need.”

RealPage’s pricing software tracks future apartment availability and changes in competitors’ rates and occupancy. As a competing landlord increases their rents, RealPage’s software notifies other companies in the area to also increase theirs.

The DOJ calls RealPage predatory and exclusionary, arguing that no other management company can match its widespread access to private rental data. RealPage has collected rental information from over 16 million units across the country, even including data from landlords that don’t participate in RealPage’s revenue management process. And its programs restrain rather than promote competition, the feds argue.

“RealPage is an algorithmic intermediary that collects, combines, and exploits landlords’ competitively sensitive information," the DOJ says. “In so doing, it enriches itself and compliant landlords at the expense of renters who pay inflated prices and honest businesses that would otherwise compete.”

According to the government, one of RealPage’s algorithms is designed to keep prices up even when landlords have vacant units. This keeps landlords from responding to a cooler market by decreasing prices when their occupancy drops, the DOJ argues.

The feds also say RealPage’s systems are designed to keep prices high for participating landlords, reducing the risk that other properties would undercut them. They say the systems set a “hard floor” for rental rates, benefiting landlords and preventing rents from decreasing.

All of this, the DOJ says, constitutes violations of the Sherman Act, a core antitrust law that limits monopolies and bans unreasonable contracts that restrict trade.

Violations come with criminal penalties up to $100 million — a punishment that can be increased to twice the amount gained from illegal acts. The DOJ claims RealPage uses vertical agreements to align pricing and monopolize the commercial revenue management software market.

The Justice Department is asking the courts to prevent RealPage from engaging in anti-competitive practices and restore competition in affected markets, including in North Carolina where the suit was filed.

RealPage is not new to antitrust challenges: The company has faced numerous lawsuits across the nation over what critics call large-scale rent fixing.

One former RealPage employee has also had personal experience with price-fixing litigation.

Jeffrey Roper, a principal scientist who joined the company in 2004, helped to design one of RealPage’s revenue management systems, YieldStar. Before he worked for RealPage, Roper served as a revenue management director for Alaska Airlines, where the company’s fare-setting software also resulted in an antitrust suit.

The feds’ case against RealPage, filed in the U.S. District Court for the Middle District of North Carolina, was joined by attorneys general from North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee and Washington.

“Few things are as important as our homes — but too many North Carolinians struggle to afford their apartment,” said North Carolina Attorney General Josh Stein, a Democrat. “Rents are already too high. I will not tolerate any company scheming to block healthy competition among landlords.”

RealPage did not respond to a request for comment.

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