Colorado Attorney General Phil Weiser is joining a Justice Department antitrust lawsuit against real estate software company RealPage Inc., accusing it of an illegal scheme that allows landlords to coordinate to hike rental prices in Colorado and elsewhere.
The lawsuit, filed Friday alongside seven other attorneys general in states including North Carolina and California,alleges the company is violating antitrust laws through its algorithm that landlords use to get recommended rental prices for millions of apartments across the country.
Rents across the U.S. saw ahuge spike in 2021 and 2022, and though their growth has since tapered off, they remain stubbornly high for many tenants, thanks in part to a huge lack of housing supply.
Justice Department officials allege that RealPage is another reason for the high rents since the algorithm allows landlords to align their prices and avoid competition that would otherwise keep rents down.
“Americans should not have to pay more in rent simply because a company has found a new way to scheme with landlords to break the law,” Attorney General Merrick Garland told reporters.
In Colorado, advocates had called on Weiser to investigate RealPage earlier this summer; its algorithm is used by companies that operate thousands of apartment units here.
“Renters should benefit from healthy competition between landlords to find an apartment that fits their budget and needs,” Weiser said in a statement Friday. “But RealPage’s software and market dominance have enabled collusion between landlords to fix rents, set the number of apartments available in the market, and harm renters by forcing them to pay rents above competitive levels. This anticompetitive conduct is driving rent increases.”
In a statement, RealPage said the Justice Department’s claims were “devoid of merit and will do nothing to make housing more affordable.”
“We are disappointed that, after multiple years of education and cooperation on the antitrust matters concerning RealPage, the DOJ has chosen this moment to pursue a lawsuit that seeks to scapegoat pro-competitive technology that has been used responsibly for years,” the company said.
Attorneys general in several states have separately sued RealPage alleging an illegal price-fixing scheme over its algorithmic pricing software.
Earlier this year, Colorado lawmakers advanced a bill to ban algorithms like RealPages from being used in setting rents. The legislation cleared the House but stalled in the Senate, where a group of Democrats joined with Senate Republicans to insert an amendment from RealPage’s lobbyist that scuttled the bill.
Lawmakers have said they plan to bring the bill back in 2025.
The Biden administration’s point-person on antitrust enforcement, Federal Trade Commission chair Lina M. Khan, was in Denver last month. She met with Weiser at the offices of the Community Economic Defense Project, a tenant advocacy and legal aid group that had called on Weiser to investigate RealPage. The group heard from tenants, attorneys and advocates about predatory landlord practices and other issues facing renters.
The use of data to help property managers set their rents isn’t new or, on its face, illegal. But state prosecutors argue that RealPage is different. According to lawsuits filed in the past year by the attorneys general for Arizona and Washington, D.C., RealPage doesn’t just use publicly available data — it uses confidential data that RealPage’s clients have agreed to privately share to help RealPage’s software to determine the highest price.
That amounts to cartel-like illegal price collusion, prosecutors say. Only this time, instead of cartel members meeting inside a proverbial “smoke-filled room,” the price-fixing is done by AI, they say.
RealPage came under scrutiny after a 2022 ProPublica investigation into the company’s practice suggested that it could be to blame for some of the rapid increases in housing costs. Since then, RealPage has drawn the ire of Democratic lawmakers, including Sen. Amy Klobuchar, who in February introduced a bill to bar companies from using algorithms to collude and fix prices.
And last week, in a speech in Raleigh, North Carolina, Democratic presidential nominee Vice President Kamala Harris pledged to crack down on “corporate landlords (who) collude with each other to set artificially high rental prices (by) using algorithms and price-fixing software.”
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Originally Published: August 23, 2024 at 10:00 a.m.
