UPDATE: The U.S. Department of Justice (DOJ) has just announced a settlement with real estate tech company RealPage over serious allegations of enabling illegal collusion among landlords to inflate rents. This critical development was disclosed in a federal court in North Carolina on Monday, highlighting the urgent need for reform in the housing market.
The settlement requires RealPage to cease its use of “nonpublic, competitively sensitive information” to set rental prices. It will also be mandated to stop using active lease data for training its algorithms, relying instead on information that is at least 12 months old. This action is expected to “help restore free market competition in rental markets for millions of American renters,” according to Gail Slater, DOJ antitrust chief.
The implications of this settlement are profound, as it comes amid a broader governmental effort to reduce skyrocketing housing costs that have strained household budgets nationwide. The DOJ’s agreement allows for remedies while avoiding a protracted trial, which could have taken years to resolve.
The lawsuit, initially filed last year under then-U.S. Attorney General Merrick Garland, accused RealPage of facilitating a system where landlords could prioritize profit over occupancy. This alleged collusion has exacerbated the housing supply crisis and left tenants grappling with soaring rents. The lawsuit claimed that rather than competing for tenants, landlords were allowing algorithms to dictate prices based on confidential rent data submitted by competitors.
Under the terms of the settlement, RealPage will also be restricted from using its models to evaluate geographic market effects below the state level and must eliminate any features that could limit rent price reductions or encourage price alignment among landlords. Furthermore, the Texas-based company will stop soliciting sensitive market data through surveys and discussing market trends based on nonpublic information.
The DOJ’s lawsuit had broad support, initially filed alongside eight states: California, Colorado, Connecticut, Minnesota, North Carolina, Oregon, Tennessee, and Washington. In January 2023, the suit was amended to include six major landlords as co-defendants, including Greystar Real Estate Partners and Blackstone’s LivCor. The DOJ has already reached settlements with some defendants, while actions against others are still ongoing.
This case marks a pivotal moment in the DOJ’s approach to antitrust enforcement, as it is the first instance where antitrust enforcers have targeted algorithmic collusion. The lawsuit pointed out that RealPage had built its business by undermining the natural forces of competition in the rental market. Comments from RealPage executives highlighted their awareness of the software’s impact on competitive practices, with one stating, “There is greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down.”
The settlement still requires court approval to be enacted, but the urgency of this case cannot be overstated as it seeks to protect millions of renters facing unfair market practices. As the DOJ continues to pursue accountability in the housing sector, the impact of this settlement could reshape rental pricing practices across the nation.
Stay tuned for more updates as this story develops.
