RealPage, a property management software company based in Richardson, Texas, is facing a significant legal challenge. The U.S. Justice Department, along with eight attorneys general, has filed a lawsuit against the company, alleging that it has facilitated collusion among apartment and building managers across the country to artificially drive up rental prices.
The accusations against RealPage are centered around the company’s use of recommendation algorithms in its software. It is alleged that RealPage entered into agreements with rival landlords, allowing it to gather information about their rental rates and lease terms. This data was then used to train RealPage’s recommendation algorithms, which property owners often rely on for guidance on pricing and other terms.
By colluding with rival landlords and monopolizing the market for commercial revenue management software, RealPage allegedly discouraged competition among property owners. This resulted in higher rental prices for tenants and limited their options for finding affordable housing.
What makes this case particularly significant is that it is the first major lawsuit by the U.S. Justice Department involving algorithmic collusion. As technology plays an increasingly prominent role in various industries, including real estate, it is essential to address potential anticompetitive practices that may arise from the use of algorithms.
The timing of this lawsuit is also noteworthy, as rental prices in the United States have experienced a significant increase. According to Zillow, rents have climbed by 33% since March 2020. This surge in rental prices has put a strain on tenants, particularly in cities with high housing costs.
RealPage’s dominance in the market for commercial revenue management software for conventional multi-family housing rentals is a key aspect of the lawsuit. The company is said to command 80% of the market share in this sector. The allegations against RealPage underscore the potential for abuse of market power when a single company holds such a significant position.
In response to the lawsuit, RealPage has denied any wrongdoing. It remains to be seen how the legal proceedings will unfold and what implications they may have for the wider property management software industry.
This case serves as a reminder of the importance of competition and fair practices in the real estate market. As technology continues to shape the industry, it is crucial to ensure that algorithms and software solutions do not enable anticompetitive behavior. The outcome of this lawsuit could have far-reaching implications for the regulation of algorithms and the prevention of collusion in the real estate sector.