The White House has accused RealPage, the rental price-setting algorithmic software widely used by landlords and managers, of adding an extra $3.8 billion to tenants’ rents last year.
The White House had long accused the software company of tilting the scales in favor of landlords and property managers when setting rent prices, unfairly forcing renters to pay ever-increasing rents. In August, the government’s accusations resulted in an antitrust suit against the company, alleging the company’s pricing algorithm allowed landlords to keep increasing rental prices.
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The Justice Department Drops Its Lawsuit Against RealPage
However, with the change in administration, the DOJ recently dropped its lawsuit. RealPage says that vindicates them. However, the recent finding is the DOJ's attempt to prove that its suit had merit. Needless to say, RealPage disputes their findings.
“Their conclusions are based on the erroneous assumption that all property managers are setting coordinated rents, but that is not how RealPage’s revenue management software (RMS) works,” the software company said.
According to Axios, the government researcher’s methodology was to use RealPage’s software to set prices. They matched this against individual price settings without the software. They found that an algorithm-set rental building charges an average of $70 more per month, increasing in large built-up areas where RealPage software is most prevalent. In Atlanta, for example, where 68% of landlords use RealPage’s software, renters pay an average of $181 extra per month, according to the governmental analysis.
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RealPage’s Contribution To The Housing Crisis
According to The New York Times, the government’s lawsuit came after eight states filed suit against the software company and class-action lawyers filed complaints against the platform. According to the lawsuits, landlords in cities such as Atlanta, Boston, Phoenix, Seattle and Washington, D.C. used RealPage software to prioritize higher rents and accept lower occupancy rates, boosting overall profits and exacerbating the housing crisis.
RealPage would argue that the market itself is to blame for the increasing rents, that the lack of inventory and demand for housing has caused rents to increase naturally and that it simply reflects the conditions. Others, however, such as The Harvard Business Review, argue that there are limits to a “trust the market” approach to housing policy and that greater governmental involvement is needed to curtail the housing crisis and to stop landlords from gauging tenants using RealPage software to help them do it. The HBR article reveals that RealPage’s property manager partners may control as many as 19.7 million rental units out of 22 million desirable, “investment grade” apartment units in the country and that the software company worked with landlords in practically every major city in the nation.
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Cities Ban RealPage Regardless Of The DOJ Case
Even though the DOJ has dropped its lawsuit against RealPage, many cities have already clamped down against the company. The Wall Street Journal reported that San Francisco and Philadelphia passed laws recently to restrict the use of algorithmic rent-pricing systems at residential properties. Legislators in San Diego, New Jersey and other cities and states are considering new laws.
“We are living in a time where we’re not waiting for AI and algorithms to get here. They’re here,” said Nicolas O’Rourke, a city councilman in Philadelphia. O’Rourke sponsored the bill banning the use of certain rent-pricing software that passed the council in a 17-to-0 vote.
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