A series of lawsuits have been filed across the United States challenging the use of RealPage’s rental pricing software, with plaintiffs alleging that it facilitates illegal collusion among landlords. The lawsuits argue that RealPage’s YieldStar software, which allows property owners to share rental pricing and occupancy data, enables landlords to coordinate and increase rents beyond competitive market levels.
RealPage, a Texas-based company owned by private equity firm Thoma Bravo, is accused of using its software to suggest rental prices that are typically higher than what might be set in a more competitive market. The software aggregates data from various landlords and uses algorithms to recommend pricing strategies. Plaintiffs claim that this process effectively promotes collusion by suggesting higher prices, which landlords then implement, passing the costs on to tenants.
In response, RealPage has denied these allegations, attributing rent increases to broader economic factors such as an undersupply of rental housing. A company spokeswoman emphasized that the software also recommends rent reductions in some cases.
The controversy surrounding RealPage’s software has intensified following a ProPublica investigation in 2022. Antitrust experts suggest that if the allegations are proven, they could represent a clear violation of federal antitrust laws, which prohibit price-fixing agreements among competitors. Peter Carstensen, an emeritus professor at the University of Wisconsin, noted that the use of such software could significantly facilitate coordination among landlords.
The legal pressure on RealPage began in late 2022 with lawsuits filed by tenants in cities like Seattle, Albuquerque, and Austin, Texas. These cases seek class-action status and allege that the software enables landlords to illegally coordinate pricing strategies. The District of Columbia’s Attorney General Brian Schwalb has also filed a lawsuit, marking the first major public agency action against RealPage and several large landlords.
The Justice Department has not initiated formal legal action but filed a brief in support of the tenants’ lawsuits, signaling federal interest in the issue. The Department’s antitrust division has expressed concerns about the legality of using algorithms to set prices, reflecting a broader scrutiny of the multifamily housing industry.
The District of Columbia lawsuit revealed that RealPage’s software is widely used in the area, with about 60% of large apartment buildings using it, and up to 90% in the broader metropolitan area. The lawsuit accuses the software and its users of creating what is described as a “housing cartel” that exacerbates high rent levels.
In addition to the lawsuits, investigations by various state attorneys general, including those from Arizona and North Carolina, are examining RealPage’s practices. The Justice Department has also shown interest, with the FBI recently conducting a search related to potential antitrust violations in the multifamily housing sector.
RealPage has responded to the mounting legal and public scrutiny, with some of its customers, like Pinnacle, settling claims related to inflated rental prices. However, no lawsuits have yet gone to trial, and the legal battles are ongoing. The outcome will depend on whether plaintiffs can provide sufficient evidence of illegal collusion facilitated by the software.
Antitrust experts emphasize that these cases will need to carefully explore how RealPage’s algorithms are used to determine pricing and whether this constitutes a violation of antitrust laws.
