Justice Department Settlement Curbs RealPage’s Rent-Pricing Algorithm
A landmark settlement between the Department of Justice and realpage Inc. aims to dismantle what critics called illegal “algorithmic collusion” in the rental market, potentially leading to more competitive pricing for renters nationwide.
The deal, announced on August 23, 2024, follows a yearlong federal antitrust lawsuit initiated by the Biden governance against the Texas-based software company. Under the terms of the proposed settlement, which still requires judicial approval, RealPage will be restricted from using real-time data to generate rent recommendations for landlords. Instead, the software’s algorithm will only be able to utilize nonpublic data at least one year old.
The Justice Department alleged that RealPage’s software facilitated a coordinated effort among landlords to raise rents, effectively replacing market competition with a system of shared data and price alignment. “RealPage was replacing competition with coordination, and renters paid the price,” stated a senior official from the DOJ’s antitrust division, emphasizing the importance of avoiding a protracted and expensive trial.
The core of the issue lies in RealPage’s ability to access a vast database of confidential rental facts. While landlords are not obligated to follow the software’s suggestions, critics argue that the access to this data allowed RealPage’s clients to maximize rental income.The settlement seeks to level the playing field by limiting the software’s access to current market data.
According to a company release, RealPage attorney Stephen Weissman expressed satisfaction with the collaborative approach taken with the DOJ. Though, Weissman also asserted that the company believes its past use of aggregated and anonymized data-including rents frequently enough lower then advertised rates-has actually contributed to lower rents, reduced vacancies, and increased competition.
The impact of the settlement extends beyond RealPage itself.Over the past several months, more than two dozen property management companies have reached settlements related to their use of the software. Notably, Greystar, the nation’s largest landlord, agreed to pay $50 million to resolve a class action lawsuit and an additional $7 million to settle a separate suit filed by nine states.
The growing concern over rent-setting software has also prompted legislative action at the state and local levels. Last month, the governors of California and New York signed laws designed to crack down on the practice, and cities like Philadelphia and Seattle have passed ordinances restricting its use. Ten states-California, Colorado, Connecticut, Illinois, Massachusetts, Minnesota, North Carolina, Oregon, Tennessee, and Washington-originally joined the DOJ’s antitrust lawsuit, though they were not directly involved in Monday’s settlement.
The outcome of this case signals a broader trend of increased scrutiny over the use of algorithms in essential markets, and a commitment to ensuring fair competition for consumers. The department of Justice’s action underscores the potential for technology to be used in ways that undermine market principles, and the need for proactive regulation to protect renters from artificially inflated prices.
