New Limits for Rent Algorithm
Prosecutors say let landlords up prices
By R.J. RICO, Associated Press
Landlords could no longer rely on rent-pricing software to quietly track each other’s moves and push rents higher using confidential data, under a settlement between RealPage Inc. and federal prosecutors to end what critics said was illegal “algorithmic collusion.”
Introduction to the Settlement
The deal announced Monday by the Department of Justice follows a yearlong federal antitrust lawsuit, launched during the Biden administration, against the Texas-based software company. RealPage would not have to pay any damages or admit any wrongdoing. The settlement must still be approved by a judge.
How RealPage Software Works
RealPage software provides daily recommendations to help landlords and their employees nationwide price their available apartments. The landlords do not have to follow the suggestions, but critics argue that because the software has access to a vast trove of confidential data, it helps RealPage’s clients charge the highest possible rent.
Impact on Renters
“RealPage was replacing competition with coordination, and renters paid the price,” said DOJ antitrust chief Gail Slater, who emphasized that the settlement avoided a costly, time-consuming trial.
Terms of the Proposed Settlement
Under the terms of the proposed settlement, RealPage can no longer use that real-time data to determine price recommendations. Instead, the only nonpublic data that can be used to train the software’s algorithm must be at least one year old.
Benefits for Renters
“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 set by the market, not by a secret algorithm.”
Reaction from RealPage
RealPage attorney Stephen Weissman said the company is pleased the DOJ worked with them to settle the matter.
“There has been a great deal of misinformation about how RealPage’s software works and the value it provides for both housing providers and renters,” Weissman said in a statement. “We believe that RealPage’s historical use of aggregated and anonymized nonpublic data, which include rents that are typically lower than advertised rents, has led to lower rents, less vacancies, and more procompetitive effects.”
Criticism of the Settlement
However, the deal was slammed by some observers as a missed opportunity to clamp down on alleged algorithmic price-fixing throughout the economy.
“This case really was the tip of the spear,” said Lee Hepner, senior legal counsel for the American Economic Liberties Project, whose group advocates for government action against business concentration.
Other Settlements and Laws
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 rent-setting software, and a growing list of cities, including Philadelphia and Seattle, have passed ordinances against the practice.
States Involved in the Lawsuit
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 settlement, meaning they can continue to pursue the case in court.
Conclusion
The settlement between RealPage Inc. and federal prosecutors marks a significant development in the regulation of rent-pricing software. While the settlement has been criticized for its loopholes and lack of damages, it represents a step towards promoting competition in the rental market and protecting renters from alleged algorithmic price-fixing.
FAQs
Q: What is the main issue with RealPage’s software?
A: The main issue is that it allows landlords to track each other’s moves and push rents higher using confidential data, which critics argue is illegal “algorithmic collusion.”
Q: What are the terms of the proposed settlement?
A: RealPage can no longer use real-time data to determine price recommendations, and the only nonpublic data that can be used to train the software’s algorithm must be at least one year old.
Q: How will this settlement affect renters?
A: The settlement aims to promote more real competition in local housing markets, resulting in rents set by the market, not by a secret algorithm.
Q: What other actions have been taken against rent-setting software?
A: Several property management companies have reached settlements, and some states and cities have passed laws and ordinances to crack down on the practice.
