Justice Department sues RealPage, alleging software caused skyrocketing rents

The Justice Department has filed an antitrust lawsuit against real estate software company RealPage, accusing it of orchestrating a scheme to team up with other landlords to raise prices across the country using an algorithm that would suggest high recommended rents.

“Everybody knows the rent is too damn high. And we say that’s one of the reasons why,” said U.S. Attorney General Merrick Garland.

The lawsuit was filed jointly with the attorneys general of eight states, including California and North Carolina.

Rents rose sharply across the country in 2021 and 2022. In the 50 largest metropolitan areas, rents rose 19.3% over the year. They have since fallen, but remain high for many renters.

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RealPage came under scrutiny in 2022 when a ProPublica investigation suggested that this could be one reason for the surge.

The Justice Department believes the algorithm helped landlords reach agreements that undermined competition that typically helps keep prices down.

“Competing landlords agree to submit their most sensitive, nonpublic information to RealPage on a daily basis, including rents, lease terms and projected vacancies. RealPage then aggregates this data from competing landlords and feeds it into an algorithm that provides pricing recommendations to competing landlords in real time,” Garland said.

The company is not the only one offering this type of software, but the lawsuit indicates that it is the largest in the industry and controls 80% of the market.

“So make no mistake, training a machine to break the law is still breaking the law. Coordinating prices with AI is still coordinating prices. And monopolizing with an algorithm is still monopolizing,” said Lisa Monaco, assistant attorney general for the U.S.

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Michael Jaafar, a Detroit attorney, says the lawsuit is a sham and unfairly blames the housing market on one private company whose services are not mandatory, even though it has a majority of the market.

“That’s wrong. And I’ll tell you why: because RealPage is just a service. It’s an analytics platform. … It’s not like they’re providing a public utility service that everyone has to use. It’s not like it’s a railroad,” Jaafar said.

In a statement to the AP, RealPage said the lawsuit is “meritless and will not contribute to making housing more affordable.”

It’s the latest in a series of antitrust lawsuits by the Justice Department that seek to combat rising prices, including against Apple and TicketMaster. Jaafar disagrees that it’s the right move to combat high costs.

“The government is not interested in making money. It is interested in getting justice. The problem comes when you have an administration that has a political agenda,” he said.

As Jaafar says, both sides are moving on to the next phase of the dispute, with one more fight ahead of RealPage.

“You either survive or you die. There have been websites that have simply died under the influence of something like this. I don’t think that will happen to RealPage. RealPage will just have to fight it and fight it in the public spectrum,” Jaafar said.