When you rent an apartment in the United States, you may have noticed a concerning trend – prices always seem to be on the rise, not just in your building, but across the city. A recent civil lawsuit filed by the US Department of Justice exposes what many renters have suspected all along: the game is rigged. RealPage, a Texas-based company that provides commercial revenue management software for landlords, is at the center of it all. This software, used by landlords to set rental prices, allegedly utilizes an algorithm that enables coordination among property owners and stifles competition.
RealPage holds a staggering 80 percent share of the market for this type of software, impacting the pricing of approximately three million housing units nationwide. The company is facing multiple lawsuits, including allegations from the states of Arizona and Washington, DC. In the nation’s capital, RealPage’s software reportedly dictates the prices for over 90 percent of units in large apartment complexes.
The spotlight on RealPage’s algorithmic pricing practices intensified after a 2022 ProPublica investigation shed light on how their software, known as YieldStar, operates. The civil lawsuit filed by the DOJ, in collaboration with eight states’ attorneys general, marks a significant escalation in legal action against the company. This lawsuit is groundbreaking, as it is the first civil case where an algorithm itself is implicated as the primary tool for anticompetitive behavior.
Despite the mounting allegations, RealPage has vehemently denied any wrongdoing, even publishing a digital pamphlet and FAQ section on its public policy website to combat the accusations. The company claims that its revenue management software benefits both landlords and tenants. However, the DOJ remains firm in its stance, with deputy attorney general Lisa Monaco stating, “Algorithms don’t exist in a law-free zone,” during a press conference discussing the case.
The allegations against RealPage paint a troubling picture of how technology can be misused to manipulate markets and harm consumers. As the legal battle unfolds, it remains to be seen how this case will impact the future of algorithmic pricing in the real estate industry.