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 in Washington on August 23, 2024.

Mark Schiefelbein/AP

hide caption

toggle caption

Mark Schiefelbein/AP

Under a settlement between RealPage Inc. and federal prosecutors to end what critics called illegal “algorithmic collusion,” landlords can no longer rely on rent-pricing software to quietly track each other’s activities and use confidential data to drive up rents higher.

The deal announced Monday by the Justice Department follows a year-long federal antitrust lawsuit against the Texas-based software company launched during the Biden administration. RealPage will not have to pay any damages or admit any wrongdoing. The settlement must still be approved by a judge.

RealPage software provides daily recommendations to help landlords and their employees across the country price their available apartments. Landlords are not required to follow the tips, but critics argue that because the software has access to vast stores of confidential data, it helps RealPage’s customers charge the highest possible rent.

DOJ antitrust chief Gail Slater said, “RealPage was replacing competition with coordination, and renters paid the price.” He emphasized that the settlement avoided an expensive, time-consuming trial.

Under the terms of the proposed settlement, RealPage can no longer use that real-time data to set price recommendations. Instead, the only non-public data that can be used to train the software’s algorithms must be at least a year old.

“What does this mean for you and your family?” Slater said in a video statement. “It means more real competition in local housing markets. It means rents determined by the market, not by some secret algorithm.”

RealPage attorney Stephen Weissman said the company was pleased the DOJ worked with them to settle the case.

“There has been a lot of misinformation about how RealPage’s software works and what value it provides for both housing providers and tenants,” Weissman said in a statement. “We believe that RealPage’s historical use of aggregated and anonymized non-public data, including rents that are generally lower than advertised rents, has led to lower rents, fewer vacancies, and greater competitive effects.”

Over the past few months, more than two dozen property management companies have reached various settlements over 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 fare-setting software, and a growing list 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’s antitrust lawsuit. Those states were not part of Monday’s agreement.