New limits for rent algorithm that prosecutors say lets landlords drive up prices : NPR
The Justice Department logo is seen before a news conference at the Justice Department on August 23, 2024, in Washington.
Mark Schiefelbein/AP
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Mark Schiefelbein/AP
Landlords could no longer rely on rent pricing software to discreetly track everyone’s movements and raise rents using confidential data, under a deal between RealPage Inc. and federal prosecutors aimed at ending what critics called illegal “algorithmic collusion.”
The settlement announced Monday by the Justice Department follows a yearlong federal antitrust trial, launched under the Biden administration, against the Texas-based software company. RealPage would not have to pay any damages or admit to any wrongdoing. The settlement still needs to be approved by a judge.
RealPage software provides daily recommendations to help owners and their employees nationwide price their available apartments. Landlords are not required to follow the suggestions, but critics say that because the software has access to a vast trove of confidential data, it helps RealPage clients charge the highest rent possible.
“RealPage replaced competition with coordination, and tenants paid the price,” said DOJ antitrust chief Gail Slater, who stressed that the deal avoided a lengthy and costly trial.
Under the terms of the proposed settlement, RealPage can no longer use this real-time data to determine pricing recommendations. Instead, the only non-public data that can be used to train the software’s algorithm must be at least one year old.
“What does this mean for you and your family?” Slater said in a video statement. “That means more real competition in local real estate markets. That means rents set by the market, not some secret algorithm.”
RealPage’s attorney, Stephen Weissman, said the company was pleased that the DOJ worked with them to settle the case.
“There has been a lot of misinformation about how RealPage software works and the value it brings to both housing providers and tenants,” Weissman said in a statement. “We believe that RealPage’s historical use of aggregated, anonymized non-public data, which includes rents generally lower than advertised rents, has led to lower rents, fewer vacancies, and more pro-competitive effects.”
In recent months, more than two dozen property management companies have reached various agreements regarding their use of RealPage, including Greystar, the nation’s largest landlord, which agreed to pay $50 million to settle a class-action lawsuit and $7 million to settle a separate lawsuit filed by nine states.
The governors of California and New York signed laws last month to crack down on rent-fixing software, and a growing number of cities, including Philadelphia and Seattle, have passed ordinances against the practice.
Ten states – California, Colorado, Connecticut, Illinois, Massachusetts, Minnesota, North Carolina, Oregon, Tennessee and Washington – had joined the DOJ antitrust lawsuit. These states were not part of Monday’s settlement.
