The DOJ’s long awaited lawsuit against RealPage

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The DOJ and eight states have sued RealPage, accusing the company of enabling illegal rent coordination through its software. RealPage has consistently denied these claims. Could this case result in stricter regulations on AI pricing tools?

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Now, let’s dig in!

The DOJ’s Long Awaited Lawsuit Against RealPage

On Friday, the Department of Justice (DOJ) and eight states filed a lawsuit against the real estate software company RealPage, accusing it of violating federal antitrust laws through its product’s rent-setting algorithm, which they say allows residential landlords to illegally coordinate price increases. The suit, which was not a surprise, comes months after news leaked that the Texas-based company was being investigated by the DOJ.

The complaint alleges that in a number of cities, especially in housing markets in the Sunbelt, landlords using RealPage’s pricing system own 30 percent or more of the rental apartments. The suit cites several statements made by RealPage and landlords who use the company’s software about how the pricing system helps increase rents while curbing competition. In one instance included in the complaint, executives at two different real estate companies traded emails about how to use revenue management to raise rents.

RealPage denied the allegations in the lawsuit, telling the Wall Street Journal that its software was designed to comply with the law. “We believe the claims brought by DOJ are devoid of merit and will do nothing to make housing more affordable,” a spokesperson for the company said.

Other major software companies that offer rental revenue management products, like Yardi Systems, have also come under scrutiny since the ProPublica story. A class-action lawsuit filed in September 2023 alleged Yardi and 18 apartment management companies of running afoul of antitrust laws. While the DOJ and elected officials call price-setting software illegal, RealPage and others in the industry say revenue management software is misunderstood. RealPage has said that its landlord customers aren’t required to take its rental price suggestions and that its software also often recommends rent reductions.

The spotlight on RealPage began in the fall of 2022, after the nonprofit investigative news site ProPublica ran an in-depth story that explored how RealPage’s software for rental property owners and operators works. After it was published, the story got a lot of attention from elected officials, including several Democratic senators, who asked the Justice Department to investigate RealPage over anti-competitive concerns.

RealPage is already facing numerous lawsuits for alleged price-fixing. Earlier this year, Arizona’s attorney general sued RealPage and nine major apartment landlords over the revenue management software, and last fall, Washington, D.C. Attorney General Brian Schwalb sued more than a dozen of the city’s largest landlords for colluding to inflate rental prices based on RealPage software systems. That lawsuit claimed that RealPage's software had set the rent at more than 30 percent of apartments in multifamily buildings in D.C. and 60 percent of units in large multifamily buildings.

No matter what happens next with the DOJ lawsuit and the others that have been filed against RealPage, the widespread attention the software has gotten from lawmakers and the public is certainly something that will have an impact on the companies that make the products and the people and companies who use them. Companies in the space will likely be more cautious going forward and it could spur more software contract user protections. It also put a spotlight on what many lawmakers believe is a need for more regulations around AI-powered software.

Propmodo Technology: Valuation & Appraisal

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