The Department of Justice and the real estate platform RealPage just made a deal, and since it doesn’t completely dismantle RealPage, it’s not going to be seen as a total victory for tenants who hate RealPage. But it’s something, and it will most likely weaken the platform’s power to raise rents, as it will now be prevented from shuffling together nonpublic information from competing landlords when setting prices.
According to the New York Times RealPage still denies having done anything wrong, per statements from Stephen Weissman, an attorney representing RealPage. The company is glad the government was willing to “bless the legality of RealPage’s prior and planned product changes,” Weissman said, “There has been a great deal of misinformation about how RealPage’s software works and the value it provides for both housing providers and renters.”
RealPage, founded in 1998, is a multifaceted tool for landlords, not just a pricing aid. Its suite of features has been, according to press coverage and the federal charges that led to this settlement, an unseen poltergeist in renters’ lives for years, making life generally more miserable, even while most tenants had no idea it exists. For instance, according to a 2020 investigation by the New York Times and The Markup, RealPage was using flawed algorithms to perform background checks, and landlords were denying people homes based on nonexistent criminal charges.
When it came to rents, RealPage itself at one point claimed that the landlords who used it faithfully were “driving every possible opportunity to increase price even in the most downward trending or unexpected conditions.”
Then in August of last year, the Justice Department—along with eight state attorney generals—slapped RealPage with an antitrust suit. The legal filing makes for immensely gratifying reading, particularly when you know RealPage settled after being hit with the following accusation:
“At bottom, RealPage is an algorithmic intermediary that collects, combines, and exploits landlords’ competitively sensitive information. And in so doing, it enriches itself and compliant landlords at the expense of renters who pay inflated prices and honest businesses that would otherwise compete.”
The price recommendation systems in RealPage, called YieldStar and AI Revenue Management, worked by asking users—landlords—to enter nonpublic data on rental real estate that only landlords would generally have. That included private data from applications, rent amounts, leases renewed, units sitting unoccupied, and other numbers of this nature that can be used to quantify the state of the market in extremely granular detail. Not all of this data is part of the most recent version of RealPage’s software, but it’s how it worked historically.
All this market information was heaped into a pile and combined with the data piles of other landlords, who are theoretically their competitors. The system would process all of this with an algorithm, and generate bespoke price recommendations for all landlords in an area, all using one another’s data.
Making its data all the more comprehensive was its 80 percent market share, according to the DOJ. That alleged monopoly status theoretically meant landlords paid higher prices for RealPage, which were passed on to renters.
And it apparently made rents go up. A 2022 ProPublica investigation found widespread RealPage adoption, and widespread rent increases to go with it. In Nashville, prices had recently gone up 14.5%, and ProPublica found that landlords were thrilled. In a testimonial, a real estate revenue manager said “The beauty of YieldStar is that it pushes you to go places that you wouldn’t have gone if you weren’t using it,” according to ProPublica.
So instead of competing with one another to earn rents from people who need housing, the lawsuit claimed that, landlords joined forces with other landlords, and turned their competitive drives against their tenants. They didn’t actually set foot in a room with one another to engage in sinister price-fixing meetings. The software allegedly took care of it all for them.
If the settlement is approved by a North Carolina judge, RealPage will no longer be allowed to use information from current leases to train its algorithm, or to mix nonpublic data from different landlords together when making price recommendations.
Gail Slater, the DOJ’s antitrust division leader was quoted in a government news release as saying, “Competing companies must make independent pricing decisions, and with the rise of algorithmic and artificial intelligence tools, we will remain at the forefront of vigorous antitrust enforcement.”
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