Justice Department Takes Aim at Major Landlords in Rental Price-Fixing Battle

The Department of Justice has taken significant action by suing six major landlords, alleging they used a pricing algorithm in collusion to inflate rents nationwide. This lawsuit builds on an antitrust complaint initiated in August, which accused RealPage, a property management software developer, of engaging in illegal price-fixing, limiting competition among landlords, and driving rents higher.

The investigation spanned two years, triggered by a 2022 ProPublica article revealing how RealPage’s systems enabled landlords to set rental prices collaboratively, potentially mimicking cartel behavior. Together, the landlords involved manage over 1.3 million apartments across 43 states and the District of Columbia. So far, one of the landlords has reached a settlement.

Acting Assistant Attorney General Doha Mekki remarked, “While Americans across the country struggled to afford housing, the landlords named in today’s lawsuit shared sensitive information about rental prices and used algorithms to coordinate to keep the price of rent high.” The lawsuit aims to disrupt this practice, prioritizing public interest over profits.

The Justice Department’s action follows years of scrutiny and legislative efforts to ban rent-setting algorithms similar to those used by RealPage. Tenants have also initiated numerous federal lawsuits in response, and several cities, including San Francisco, Philadelphia, and Minneapolis, are prohibiting landlords from utilizing comparable algorithms to establish rental prices.

Federal prosecutors have accused RealPage of gathering nonpublic pricing data from various property managers and employing it to recommend rent levels, violating antitrust laws. Additionally, the landlords allegedly communicated directly to coordinate their pricing strategies through calls, emails, and “user group” forums held by RealPage.

RealPage’s Senior VP, Jennifer Bowcock, criticized the lawsuit as “flawed” and emphasized the company’s commitment to defending itself and its clients. The company has already made changes to its software to eliminate nonpublic data, insisting that its technology promotes competition rather than stifling it.

Three landlords named in this lawsuit were highlighted in ProPublica’s prior report, including Greystar, the largest landlord in the U.S., and Camden Property Trust. Camden’s CEO, Ric Campo, previously commented on the complexities of the Houston apartment market when questioned about price-fixing allegations. He noted a significant revenue increase correlating with the adoption of rent-setting technology despite an uptick in tenant turnover.

In a statement, Greystar expressed disappointment at being included in the lawsuit, asserting no engagement in anti-competitive practices and pledging a vigorous defense. In contrast, Cortland has accepted a settlement, agreeing to cease using competitors’ nonpublic data for its pricing algorithms.

The lawsuit has also gained support from the attorneys general of Illinois and Massachusetts, among others, increasing the coalition of states involved to ten. These states encompass regions with a significant number of renters, including California, which alone accounts for approximately 17 million residents.

RealPage contends that less than 10% of U.S. rental units rely on its software for price suggestions, with less than half of its recommendations being accepted. However, a White House report suggests that the actual number may be higher, indicating that about one in four rental properties might utilize RealPage’s pricing algorithms.

Research highlights the financial impact of algorithmic pricing, estimating that renters could be paying an additional $70 per month on average, translating to a cumulative cost of roughly $3.8 billion in 2023 due to these practices. RealPage rebuffed the report, labeling it erroneous and asserting that the White House failed to consult them before publication.

The upcoming administration’s stance on the DOJ’s lawsuit remains uncertain as President-elect Donald Trump has appointed an experienced antitrust attorney to lead the division.