RealPage Fights Back Against Rent-Price Fixing Allegations Amid Legal Battles and Federal Probe

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RealPage Faces Allegations of Manipulating Rental Prices, Defends Its Practices

RealPage, defending its practice of advising landlords on potential rental rates, has launched a counteroffensive amid growing legal battles and a potential federal investigation into accusations of manipulating rental prices. The firm has created a dedicated website and an electronic brochure titled "The Real Story" in an effort to reshape its image and address the claims of rental price manipulation.

In a digital pamphlet spanning six pages, released on their website in the middle of June, RealPage responds to what it describes as "inaccurate and deceptive accusations regarding its software"—a host of complaints related to price manipulation and escalating rental costs—and argues that its software offers advantages to both tenants and property owners while enhancing market competition. The company also mentioned that for new rental agreements, property managers adopt RealPage's suggested pricing less than half the time and that the software provides competitive pricing suggestions aimed at occupancy optimization.

"The core issue at hand," the digital booklet states, "is fundamentally misinterpreted—evidence unmistakably indicates that RealPage is not responsible for setting its customers' pricing. Instead, customers independently decide on the most advantageous strategies for their properties, actively engaging in competition within the marketplace."

Property owners find themselves in a state of uncertainty due to unresolved legal concerns surrounding the use of this software while they proceed with leasing out their properties. "This isn't viewed strictly as a problem with RealPage, but more broadly as an issue with revenue management software," explains Alexandra Alvarado, who serves as the Director of Marketing and Education at the American Apartment Owners Association, which is the premier organization for landlords in the United States.

Alvarado notes that landlords are becoming more cautious and inquisitive before implementing technology. He points out that applications such as RealPage have significantly streamlined the process of comprehending market dynamics. "Technology has been a boon in enhancing the efficacy of our operations. However, we are now at a point where it could be considered excessively efficient," he remarks. Furthermore, Alvarado mentions that members of the AAOA are raising concerns regarding the legal standing of using revenue management systems. "Landlords' initial concern often revolves around the legal implications. They wonder, 'Could I face legal issues for employing this software?' If there's even a slight chance of that happening, they tend to avoid its use," he explains.

In a recent publication, Dana Jones, the chief executive officer of RealPage, emphasized the urgency of correcting several inaccuracies regarding the company's pricing software and the practices of rental housing providers in determining rent costs. RealPage chose not to reply to WIRED's inquiries about the motivations behind the detailed June statement. It seems that authorities are focusing their attention on RealPage, with rumors circulating of an impending lawsuit by the Justice Department, as per a recent Politico article. RealPage has refrained from commenting on the current status of the investigation by the Department of Justice.

Since late 2022, the software firm has been shadowed by claims of collusion in pricing, potentially breaching antitrust laws, following a ProPublica report. This investigation accused RealPage’s software of contributing to rental price increases in several U.S. cities by utilizing confidential, collective data from its clients to recommend rental rates. RealPage, in reaction to ProPublica’s exposé, stated that it “legally utilizes collective market information from diverse sources.”

RealPage's technology stands out because it anonymizes data regarding rentals and offers both private and public insights on rental properties to landlords and property managers, insights that might vary from those listed on public platforms such as Zillow. RealPage argues that it does not participate in price-fixing activities since property owners are not compelled to follow the rental price suggestions made by RealPage's algorithm. In some instances, the company even advises property owners to reduce rental prices, according to RealPage. However, antitrust regulators argue that the act of sharing confidential information through an algorithm for the purpose of pricing suggestions might be just as problematic as secretive agreements made offline, even if the actual rental prices do not align with those suggested. The investigation into these antitrust concerns is currently active.

RealPage's algorithm-based pricing approach is under the microscope, possibly because it plays a role in the real estate sector, where the cost of living has soared due to a shortage of housing. The average rental price in the United States is nearly $2,000, reports Zillow, a significant increase from about $1,500 at the start of 2020. RealPage defends its position, stating, “The issue of affordable housing is a nationwide concern, stemming from economic and political factors—not from the deployment of revenue management software.” However, tenants are left in the dark about whether their increasing rents are a result of these algorithms.

"Identifying oneself as merely an observer or as someone directly affected can be quite challenging," states Shanti Singh, who holds the position of legislative and communications director at Tenants Together, an organization in California uniting activists advocating for tenant rights. Singh notes that when tenants reach out to a hotline concerning increased rent or additional charges, "it's not always clear or possible for us to link their situation to their landlord utilizing RealPage."

In February, Arizona initiated legal action against RealPage and nine property owners, alleging that a collaborative scheme between the firm and the landlords resulted in Phoenix and Tucson tenants paying excessively higher rents amounting to "millions of dollars." This legal move came on the heels of a comparable legal challenge from Washington, DC. The attorney general of DC pointed out that in the larger metropolitan area of the capital, RealPage's pricing software was utilized for setting the rents of over 90 percent of the units in sizable apartment complexes.

The legal challenges facing RealPage are placing the spotlight on algorithmic pricing, a practice that's becoming increasingly prevalent even as antitrust laws struggle to adapt. There's also heightened scrutiny from regulators over the use of algorithms for what's claimed to be collusion on hotel rates, along with concerns about e-commerce algorithms. Ed Rogers, a partner specializing in antitrust issues at Ballard Spahr, believes that the regulatory worry over the potential anti-competitive use of algorithms is a long-term issue. "RealPage might very well serve as a pivotal case, not only for the housing rental market but also for evaluating the impact of AI and software technologies on market competition," he suggests.

The effects of algorithm-based pricing are widely varied. Amazon has faced accusations of inflating prices through the use of a confidential algorithm, a claim Amazon refutes by stating, "the suggestion that we compel sellers to adopt our optional services is entirely false." Conversely, some algorithms are more transparent, such as those determining pricing for ridesharing services, which do not require the exchange of information between different companies. Not every instance of algorithmic pricing is involved in practices that could be deemed anti-competitive. For example, a lawsuit filed by guests against a number of hotel operators in Las Vegas was dismissed by a Nevada judge in May, on the grounds that there was no evidence of a collaborative effort to fix prices through the use of shared algorithms.

Another American real estate management firm, Yardi Systems, is currently embroiled in a collective legal challenge over accusations of engaging in anti-competitive practices by unnaturally hiking up rental costs. The organization has defended itself by stating it has not engaged in any unlawful activities, explaining that its software does not dictate rental pricing nor does it participate in any form of price-fixing agreements.

According to Zillow, the average cost of renting a property in Phoenix has seen a surge of over $500 monthly from April 2020 to 2024, while in Washington, DC, the increment has been approximately $400 during the same timeframe.

Numerous collective lawsuits have been lodged by tenants against RealPage and various landlords, which have been merged into consolidated cases. Certain property owners involved in those claims have reached settlements earlier in the year. While a case alleging collusion in setting student housing prices was dismissed by the court, it has allowed the collective lawsuit brought by tenants to proceed. Lawyers for some of the individuals suing in the collective case did not reply to inquiries for commentary.

In June, RealPage trimmed its workforce by approximately 4 percent. Jennifer Bowcock, representing the company, stated, "With an intense commitment to innovation and fast-tracking its expansion for 2024 and the years that follow, RealPage has opted to reduce a minor portion of its positions." She also clarified that these job cuts were unrelated to any antitrust legal actions. Thoma Bravo, which holds ownership of RealPage, has not provided any comments regarding this matter when approached.

By 2020, RealPage announced its data collection efforts spanned approximately 16 million rental properties across the United States. The country is home to 44 million households that rent, with close to 22 million of these rental properties being operated by profit-oriented companies. RealPage expanded its operations significantly after successfully purchasing Lease Rent Options (LRO) in 2017, a move that was greenlit by the Justice Department after passing antitrust examinations. The Justice Department declined to provide comments to WIRED regarding its ongoing probe into RealPage, as well as its previous endorsement of the company's takeover of Lease Rent Options in 2017.

In response to inquiries regarding the current state of the investigation, RealPage pointed to a segment of its detailed recent declaration, stating: "In 2017, the Department of Justice conducted a thorough examination of LRO and YieldStar and did not take issue with or formally oppose any aspect of these offerings." RealPage further asserts that its offerings "remain essentially unchanged" from the time they were given the green light for the acquisition.

In June, The New York Times inquired of Jonathan Kanter, assistant attorney general of the US and the leading authority on antitrust at the Justice Department, whether he considered the act of an AI tool sharing pricing information to be equivalent to human collusion. This question was posed in the context of the ongoing investigation into RealPage. Kanter responded by stating, "I frequently mention that if your dog harms someone, you're accountable for your dog's actions. Similarly, if your AI engages in price fixing, you bear the same responsibility."

In the previous year, the Justice Department took a significant step by submitting a statement of interest in the collective lawsuit against RealPage, acknowledging the potential of this case to establish a benchmark in the realm of algorithmic pricing. This submission echoed Kanter's stance, emphasizing that the mechanism for establishing prices is irrelevant, with algorithms representing the most recent development in the collection and distribution of information.

"The Justice Department contended in a statement of interest submitted in the class action suit against RealPage and property owners that the traditional practice of in-person handshakes has evolved first through telephonic and fax communications, and subsequently through email interactions. Now, algorithms represent the latest phase," the statement indicated. "Considering the vast quantities of data algorithms can process and analyze, this modern development is viewed as presenting a more significant threat to competition than previous methods."

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