Prosecutors Challenge Rent Algorithm Enabling Landlords to Hike Prices

Federal prosecutors have taken significant steps to challenge a rent algorithm that allowed landlords to raise prices. A settlement between RealPage Inc. and the Department of Justice (DOJ) could reshape the rental market landscape.

Settlement Overview

Announced on August 23, 2024, this settlement concludes a yearlong federal antitrust lawsuit against RealPage, a Texas-based software provider. The lawsuit began during the Biden administration and focused on allegations of “algorithmic collusion.” As part of the agreement, RealPage will neither pay damages nor admit wrongdoing.

Impact on Rent Pricing

RealPage’s software historically aided landlords in pricing strategies by providing daily recommendations based on confidential data. Critics voiced concerns that this practice undermined competition, leading to inflated rents. Gail Slater, the DOJ’s antitrust chief, stated, “RealPage was replacing competition with coordination, and renters paid the price.”

Key Changes in Software Use

Under the new terms, RealPage is prohibited from using real-time data for price recommendations. Instead, any nonpublic data employed to train the software’s algorithms must be at least one year old. This is expected to enhance competition in local housing markets, resulting in rents set by market dynamics rather than algorithms.

Responses from RealPage and Landlords

RealPage attorney Stephen Weissman expressed satisfaction with the settlement, emphasizing the misunderstood nature of the software’s functions. He argued that its historical use of aggregated data actually contributed to lower rents and higher market competition.

Broader Context of Rent Regulation

• More than two dozen property management firms have reached settlements regarding their use of RealPage.
• Greystar, the largest landlord in the U.S., recently settled a class action lawsuit for $50 million.
• Various states, including California and New York, are advancing legislative measures to regulate rent-setting software.

States Involved in the Lawsuit

Ten states, namely California, Colorado, Connecticut, Illinois, Massachusetts, Minnesota, North Carolina, Oregon, Tennessee, and Washington, joined the DOJ’s antitrust lawsuit but are not part of the latest settlement.

This settlement marks a pivotal moment in the rental market. It aims to restore competition and transparency, ensuring that pricing is driven by genuine market factors rather than secret algorithms.