The Votes Are In!
2024 Readers' Choice is back, bigger and better than ever!
View Winners → Business Aug 24, 2024
| Photo by iLixe48/Envato Elements
by
share with
The U.S. Department of Justice and eight state attorneys general, including California AG Rob Bonta, sued a technology company Friday for allegedly creating software that enables landlords to artificially raise rents — especially in Southern California.
Landlords use RealPage Inc.’s revenue management software to price multifamily rental units.
The federal lawsuit filed in the Middle District of North Carolina alleges RealPage enabled landlords to artificially raise rents by taking part in a pricing alignment scheme that raised rent revenue across the board, according to Bonta’s office. The scheme allegedly was fueled by the illegal sharing of confidential pricing and supply information that affected residents of multifamily buildings in Orange County, Anaheim, Santa Ana, Irvine, Riverside, San Bernardino, Ontario, Rancho Cucamonga, Temecula, Murrieta, San Diego, Carlsbad and other parts of California.
The lawsuit contends that Richardson, Texas-based RealPage harmed consumers by decreasing competition, limiting price negotiation and increasing prices in the rental housing industry, according to Bonta’s office.
“Anticompetitive agreements are illegal, whether done by a human or software program,” Bonta said in a statement. “RealPage misused private and sensitive consumer data to take the competition out of the rental industry, leaving renters no other choice but to pay the intentionally high prices that landlords agreed to set. This means that even if rental home supply was high, rent prices stayed the same, and in some cases, rents went up. This conduct is unacceptable and illegal, and given California’s current housing shortage and affordability crisis, it is causing real harm. Every day, millions of Californians worry about keeping a roof over their head and RealPage has directly made it more difficult to do so.”
According to Bonta’s office, RealPage’s subscription-based software generates rent increases via algorithmic models intended to grow revenue for landlords.
“It does so by amassing competitively sensitive data from competing landlords through its pricing algorithms and sharing this data among subscribers,” according to Bonta’s office. “Landlords understand that their nonpublic data will be used to recommend prices not just for their own units, but also for competitors who use the programs. Landlords agree to provide this information because they understand they will benefit from the information of their rivals. In other words, RealPage knows what competing landlords are charging and can increase profits for landlords by using that information to recommend landlords set or raise their prices uniformly, thereby eliminating competition, and leaving renters no choice but to pay artificially high prices.”
In a prepared statement, RealPage said the lawsuit’s claims were “devoid of merit and will do nothing to make housing more affordable,” according to published reports.
In the last 40 years, demand for housing has vastly outpaced housing production in the state, Bonta’s office reported. The resulting inflation of housing costs has in turn made it increasingly difficult for residents to stay housed. The 17 million renters in the state spend a large amount of income on rent, with an estimated 700,000 Californians at risk of eviction.
Antitrust violations are a key aspect of the lawsuit, which alleges that RealPage violated federal law prohibiting anti-competitive agreements, monopolization and attempted monopolization.
“Monopolization offenses occur when a single firm maintains a monopoly unlawfully, by using its control of the market to exclude rivals and harm competition,” according to Bonta’s office. “RealPage’s unlawful sharing of nonpublic, competitively sensitive data aligns landlords’ pricing and effectively removes the competitive pressure that benefits renters.”
The software eliminates the competitive pressure that drives landlords to decrease rents or offer common discounts such as a free month’s rent or waived fees, the lawsuit contends.
“RealPage’s rivals who lawfully compete on merits cannot guarantee landlords the increased profits that RealPage can provide, this maintains and protects RealPage’s monopoly power,” according to Bonta’s office.
The lawsuit seeks a court order barring RealPage’s software from the market, documents show.
Colorado, Connecticut, Minnesota, North Carolina, Oregon, Tennessee and Washington are the other states involved in the suit.
A copy of the court filing is available online.
