Target of DOJ rent-fixing lawsuit registers as Hawaii business : Maui Now

RealPage Inc. registered as a corporation with the Hawaii Department of Commerce and Consumer Affairs on September 11, 2024, 19 days after the U.S. Department of Justice announced an antitrust lawsuit against the Richardson, Texas-based property management software company.

The Hawaii business registration application lists Dana Jones as CEO, president, and director; along with executive directors Vinit Doshi, David Monk, and Akash Raj. Each has profiles on the RealPage Inc. website, “meet our management team.”

The lawsuit, filed Aug. 23 with the attorneys general of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee and Washington, accuses RealPage Inc. of engaging in an illegal scheme to manipulate rental prices using algorithmic pricing software.

According to Toni Schwartz, public information officer for the Hawaii Department of the Attorney General, the Justice Department has not asked the state of Hawaii to join the lawsuit.

“Neither the Attorney General’s Department’s research nor information received from the U.S. Department of Justice indicated widespread use of this software in Hawaii,” she wrote in an email Friday morning in response to a Maui Now inquiry.

RealPage Inc. did not respond to Maui Now’s emailed request for comment as of Friday morning.

The company is pursuing a similar antitrust lawsuit in U.S. District Court in Nashville, Tennessee. Among other things, the company argues that the plaintiffs’ case against rental housing owners and managers presents an “implausible theory” that “any RealPage revenue management software licensing company, including the 49 defendants (in the Tennessee case)… did nothing more, entered into a rental price-fixing agreement that constitutes in itself violation of antitrust laws.”

Maui attorney and housing policy expert Jason Economou brought the recent Department of Justice antitrust lawsuit against RealPage to the attention of Maui County Council members Monday evening during a rent stabilization discussion before the Housing and Land Use Commission.

The committee will reconvene on 25 September at 9am. The report with the comments made to the committee can be found here.

The public and council’s interest in rent stabilization comes amid Maui’s ongoing housing crisis. The University of Hawaiʻi Economic Research Organization’s third-quarter 2024 forecast shows rent costs on Maui are up 11% from a year ago, with typical rents running about $4,000 a month, based on Zillow estimates that overlapped with the Federal Emergency Management Agency’s Direct Lease Program for residents displaced by wildfires. Under that program, FEMA offered renters well above market rates to encourage vacation rental operators to convert them to accommodate wildfire survivors, UHERO reported.

In an email exchange with Maui Now, Economou said he did not know if RealPage algorithmic pricing software is used by Maui rental management companies or if other applications experience similar issues.

“However, it is still important for consumers and government officials to recognize that tools like RealPage are developed and used by real estate agents and property managers across the country as part of their standard practices in order to gain an advantage over consumers and take advantage of the ‘free market,’” he said in an email.

Meanwhile, real estate lobbyists, including the Realtors Association of Maui, “also oppose government intervention that could help consumers in the housing and rental markets because it violates the sanctity of the ‘free market,’” he said. “These ‘free market’ arguments are inherently dishonest because they don’t mind intervention when it benefits them.”

Maui Real Estate Association President Lynette Pendergast issued a statement condemning the use of pricing technology similar to that allegedly used by RealPage.

“We do not use RealPage or any similar technology and are committed to transparency and fair practices,” Pendergast said in a statement. “We are not aware of any pricing technology in Maui County. Our Multiple Listing Service (MLS) focuses on sales transactions, with minimal rental use. We strongly oppose any activity that undermines the integrity of our marketplace.”

Economou, a former director of government affairs for the Realtors Association of Maui, said national real estate groups have created “the most sophisticated and well-organized lobbying apparatus in the country” aimed at influencing government officials and creating a market landscape that “maximizes the benefits for their members, regardless of the effects on anyone else.”

“This was true of their commission-splitting practices, and it’s true of their use of technology,” he said. “These lobbying organizations, disguised as nonprofits, are quick to oppose interventions that could negatively impact the profitability of their industry, arguing for the importance of the ‘free market,’ and are willing to throw a lot of money at politicians who challenge their practices at any level. Lobbying for real estate agents is like playing for the Harlem Globetrotters. The game is rigged so that there’s really no question who will win at the end.”

The Department of Justice said the purpose of RealPage’s algorithmic pricing software is to unlawfully reduce competition among landlords in pricing and to monopolize the market for commercial revenue management software that landlords use to set prices.

“RealPage’s alleged conduct deprives tenants of the benefits of competitive rental housing and harms millions of Americans,” the department said in a statement.

The lawsuit was filed in the U.S. District Court for the Middle District of North Carolina. It alleges that RealPage violated Sections 1 and 2 of the Sherman Act. Section 1 prohibits combinations or conspiracy in restraint of trade, and Section 2 prohibits monopolization, according to the National Association of Attorneys General.

The department’s complaint says RealPage enters into agreements with competing landlords who agree to share nonpublic, sensitive information about rental rates and other lease terms with the software company. That information is used to train and operate RealPage’s algorithmic pricing software, which then makes recommendations, including rental prices and other terms, to participating landlords.

“In a free market, these landlords would compete independently to attract tenants based on prices, discounts, concessions, lease terms, and other dimensions of rental properties,” the complaint says. “RealPage also uses this scheme and its extensive data sets to maintain a monopoly in the commercial revenue management software market. The complaint seeks to end RealPage’s illegal conduct and restore competition to the benefit of tenants in states across the country.”

“Americans should not have to pay more rent because a company has found a new way to scheme with landlords to break the law,” said Attorney General Merrick B. Garland. “We allege that RealPage’s pricing algorithm allows landlords to share confidential, competitively sensitive information and adjust rents. Using software as a sharing mechanism does not exempt them from liability under the Sherman Act, and the Department of Justice will continue to aggressively enforce the antitrust laws and protect the American people from those who violate them.”

The complaint cites internal documents and sworn statements from RealPage and commercial landlords that clearly demonstrate RealPage’s and the landlords’ goal of maximizing rental prices and profitability at the expense of tenants. For example:

• RealPage has admitted that its software is designed to maximize prices for property owners, referring to its products as “taking advantage of every possible opportunity to raise prices,” “avoiding a race to the bottom in depressed markets,” and “a rising tide lifts all ships.”
• A RealPage executive noted that the company’s products help landlords avoid competing on the merits, noting that “the greater good is for everyone to be successful rather than for everyone to simply compete with each other in a way that actually undermines the entire industry.”
• A RealPage executive explained to a property owner that using competitor data can help identify situations where a property owner “could get a $50 increase instead of $10 per day.”
• Another owner commented on RealPage’s product: “I’ve always liked the product because your algorithm uses proprietary data from other subscribers to suggest rentals and time periods. It’s classic pricing…”

RealPage also encourages loyalty to the algorithm’s recommendations, including through “auto-accept” functionality and pricing advisors that monitor landlord compliance. As a result, RealPage’s software tends to maximize price increases, minimize price reductions, and maximize landlords’ pricing power. RealPage also trains landlords to limit concessions (e.g., free months of rent) and other discounts to tenants. The complaint also cites internal documents from RealPage and landlords that tout the fact that landlords have responded by reducing concessions to tenants.

According to the Department of Justice, RealPage has about 80 percent of the market share for commercial revenue management software in multifamily buildings in the United States.

The Justice Department lawsuit has some roots in the online investigative journalism of New York-based ProPublica. See “Rent Going Up? One Company’s Algorithm Could Be Why.”