US Government Sues RealPage, Alleging Role in Inflating Rents Through Algorithmic Coordination

The U.S. Department of Justice (DOJ) has filed a lawsuit against RealPage, a prominent software company, accusing it of contributing to the nation’s housing crisis by facilitating rent hikes through illegal coordination among landlords. The DOJ alleges that RealPage’s algorithm allowed landlords to share private rental data, undermining competition and driving up rent prices across the country.

Attorney General Merrick Garland, speaking at a press conference, emphasized the gravity of the situation: “Everybody knows the rent is too damn high, and we allege this is one of the reasons why.” The lawsuit marks a significant move by the federal government to address the rising use of pricing algorithms in various sectors of the economy.

RealPage, headquartered in Texas and owned by private equity firm Thoma Bravo, has not yet responded to the lawsuit but has previously dismissed similar accusations as false and misleading. The company has been under increased scrutiny following an investigation by ProPublica, which highlighted its practices. Earlier this year, RealPage was also targeted by lawsuits filed by renters and prosecutors in Arizona and the District of Columbia.

The DOJ, along with eight states, claims that RealPage’s software had access to data on millions of rental properties nationwide, allowing landlords to manipulate market forces. The complaint specifically criticizes a feature that recommends rental rates to property owners, with many landlords allegedly opting to “auto accept” these suggestions. The DOJ further contends that RealPage controls about 80% of the market for commercial revenue management software.

In its defense, RealPage has argued that it serves a much smaller portion of the rental market than claimed and maintains that landlords, not the company, are responsible for setting rental prices. However, this lawsuit represents a first for the federal government in its efforts to tackle the influence of pricing algorithms on the economy.

Assistant Attorney General Jonathan Kanter, who leads the DOJ’s anti-monopoly unit, warned that modern-day violators cannot “hide behind software algorithms and artificial intelligence to violate the law,” indicating that the government is also examining similar practices in other industries, such as meat processing.