A new case filed in the U.S. District Court for the middle district of North Carolina takes aim at real estate software company RealPage. Prosecutors say RealPage’s software, YieldStar, allows landlords to price fix rent, stifling market competition and natural supply and demand conditions. In doing so, RealPage’s YieldStar keeps rent prices elevated regardless of market conditions.
Price fixing thwarts free market conditions of supply and demand. Atlanta, Georgia’s average rent has skyrocketed 80% since 2016, despite clocking all-time high vacancy rates of 8.3%.
Typically, higher vacancies push landlords to lower rent prices to attract new tenants. But rents in The Big Peach marched upward and onward, regardless of shifts in supply and demand.
Specifically, the case claims that the RealPage company violated the Sherman Act, an antitrust law that’s been in place since 1890 and takes aim at unfair monopolies.
RealPage allows landlords to share information about their rental prices and other data. The software’s algorithm then generates rental price “recommendations,” allegedly influencing rent prices for participating landlords.
One component of the case charges that RealPage’s crowdsourcing A.I. algorithm adversely impacts tenants. In effect, RealPage keeps rent prices artificially high even when market conditions should decrease with reduced demand.
“Americans should not have to pay more in rent because a company has found a new way to scheme with landlords to break the law,” said Attorney General Merrick Garland in a press statement on the case.
“We allege that RealPage’s pricing algorithm enables landlords to share confidential, competitively sensitive information and align their rents. Using software as the sharing mechanism does not immunize this scheme from Sherman Act liability, and the Justice Department will continue to aggressively enforce the antitrust laws and protect the American people from those who violate them.”
Critics of RealPage point to wording from the company suggesting that the goal is to avoid a ‘race to the bottom’ in down rental markets. This is coupled with statements “driving every possible opportunity to increase price,” and
In addition to making anti-competitive information available, RealPage also has reportedly instituted an ‘auto accept’ setting in the software. Critics say that in effect, the software determines the price for tenants. Justice officials claim RealPage also influences landlords by trying to make them comply with certain practices promoted by the software.
In addition to the U.S. Department of Justice, various states have joined the effort, including North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee, and Wisconsin. Last month, the city of San Francisco banned the use of RealPage and similar software to set rent prices.
Moreover, RealPage and Thomas Bravo, the private equity firm that bought it for $10.2 billion in 2021 have been sued for rent price gouging before. The plaintiffs in a 2023 lawsuit called “RealPage and its clients have formed an illegal price-fixing cartel.”
In June, the FBI raided corporate property manager Cortland in relation to a nationwide rent price fixing scheme involving RealPage. Cortland is contracted by mega investment company Blackstone that directly profits from high rent and housing prices. Blackstone manages more than $1 trillion in assets — with more than $600 billion in real estate.
Earlier this year, Blackstone announced “what is expected to be an extremely active deployment period, with over $200 billion of dry powder.”
With housing a chronic nationwide crisis, even Vice president Kamala Harris weighed in on the problem.
“Some corporate landlords collude with each other to set artificially high rental prices, often using algorithms and price-fixing software to do it,” Harris says. “It’s anti-competitive, and it drives up costs.”
Beyond the price fixing itself, there’s also a market share element to the lawsuit. RealPage reportedly has around 80% of market share for multifamily dwellings in the United States.
A U.S. Justice Department press release cites a “self-reinforcing feedback loop that strengthens RealPage’s grip on the market, and makes it harder for honest businesses to compete on the merits.”
Participation by large scale property management parties with significant market clout is also part of the issue, according to prosecutors.
With rent prices being a central focus for many American nationwide, the lawsuit be important to voters in a looming election season.
Related: Fed Charges Rocket Mortgage, Maverick Appraisal Group With Housing Discrimination
