The U.S. Department of Justice is cracking down on a sneaky tactic landlords have been using to allegedly “sidestep vigorous competition” in the rental market, leading to higher prices for renters nationwide.
The Justice Department filed a lawsuit against RealPage, a company that sells software widely used by landlords in the U.S., on Aug. 23. The lawsuit alleges that the company’s software allows landlords to collect “nonpublic information from competing landlords” to make pricing recommendations.
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“RealPage’s revenue management software ingests on a daily basis nonpublic rental rates, future apartment availability, and changes in competitors’ rates and occupancy,” reads the lawsuit. “As competitor-landlords increase their rents, RealPage’s software nudges other competing landlords to increase their rents as well.”
Justice Department claims RealPage blocks discounts
The Justice Department claims that RealPage “can eliminate the guessing game” for landlords’ pricing decisions, which stifles competition. It also alleges that RealPage has successfully ended certain discounts for renters nationwide.
“RealPage also reviews and weighs in on landlords’ other policies, including trying to — and often succeeding in — ending renter-friendly concessions (like a free month’s rent or waived fees) to attract or retain renters,” reads the lawsuit. “A significant number of landlords then effectively agree to outsource their pricing function to RealPage with auto acceptance or other settings such that RealPage as a middleman, and not the free market, determines the price that a renter will pay.”
Image source: + AJ Capital Partners
According to the lawsuit, one landlord who used YieldStar, one of RealPage’s revenue management systems, allegedly told RealPage that within a week of using the system, he was able to end concessions and raise his rents by more than 25% in 11 months.
He stated that he was now pricing rents at the top of his company’s peers, which “brought the rest of the Comps rents up” as well.
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“Renters are entitled to the benefits of vigorous competition among landlords,” said the Justice Department in the lawsuit. “In prosperous times, that competition should limit rent hikes; in harder times, competition should bring down rent, making housing more affordable. RealPage has built a business out of frustrating the natural forces of competition.”
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Rents continue to rise across the country
The lawsuit comes when consumers are battling inflated rents, a trend that started during the Covid pandemic in 2020. According to a recent analysis from NerdWallet, rent prices are now 33.4% higher than they were before the pandemic and are still on the rise. In July, rents were 3.4% higher than during the same period in 2023.
The lawsuit from the Justice Department seems to be part of President Joe Biden’s latest efforts to “end corporate rip-offs,” which involves promoting competition, ending “unfair and illegal” pricing, and protecting consumers in the American economy.
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