ProPublica is a nonprofit news company that investigates abuses of power. Sign up to receive the biggest stories as soon as they’re published.
The Justice Department on Tuesday sued six of the nation’s largest landlords, accusing them of using pricing algorithms and unfairly collaborating to raise rent prices across the country.
The lawsuit expands on an antitrust complaint filed by the department in August, alleging that realpage, a maker of real estate management software, illegally sold prices to reduce competition among landlords and inflate prices and profits. They accused him of manipulation. Authorities cited a 2022 ProPublica report showing how Real Page was helping landlords across the country set rents in a way that legal experts said could lead to cartel-like conduct. Following the article, we conducted a two-year study of the plan.
Together, the six landlords manage more than 1.3 million apartments in 43 states and the District of Columbia. Prosecutors are already negotiating a settlement with one of them.
“As Americans across the country struggle to afford a home, the landlords named in today’s lawsuit are sharing confidential information about rental prices,” said Acting Assistant Attorney General Doha Mekki of the Justice Department’s Antitrust Division. “They used algorithms to adjust rent prices to keep them high.” . The lawsuit seeks to end “their practice of prioritizing profits over people” and make housing more affordable.
The legal action is the latest development following ProPublica’s initial investigation. Starting in 2022, senators have introduced legislation to ban the use of rental algorithms similar to RealPage, and tenants are currently filing dozens of federal lawsuits. Cities across the country, including San Francisco, Philadelphia and Minneapolis, are also moving to ban landlords from using similar algorithms to set rents.
RealPage’s popular software collects non-public price information from multiple property managers and feeds it into a common algorithm that recommends optimal rent levels for tenants; prohibiting such adjustments. Federal prosecutors argued that it violated regulations. They also accused landlords of inappropriately communicating directly about pricing through phone calls, emails, and participation in “user group” forums hosted by RealPage.
Good journalism makes a difference.
Our nonprofit, independent newsroom has one job: to hold those in power accountable. Here’s how our research is driving real-world change.
We are trying something new. Was it helpful?
Officials say the company is encouraging landlords to use the software’s “auto-accept” feature, making it tedious for property managers to reject the company’s offers.
RealPage senior vice president Jennifer Bowcock said the federal lawsuit is “flawed” and the company is “committed to vigorously defending itself and our customers against the Department of Justice’s charges.” said. RealPage has already changed its software to remove non-public data, she said, despite the company’s view that its technology is legal and “pro-competitive.”
“Stop scapegoating RealPage, and now our customers, for housing affordability issues when, as we have said from the beginning, the root cause of rising home prices is a lack of housing supply. “The time has passed,” she said.
Three of the landowners sued in this week’s lawsuit were featured in ProPublica’s 2022 article, including Greystar and Camden Property Trust, the nation’s largest landowners.
Camden CEO Rick Campo told news outlets at the time that the apartment market in Houston, where the company is headquartered, is so large and diverse that “any allegation of price manipulation would be It will be difficult,” he said.
But when Camden implemented its initial rent-setting technology in 2006, the company found its profits were increasing even as more tenants were leaving.
“The net effect of driving revenue and kicking people out was $10 million in revenue,” Campo told a trade publication at the time. (He later said that this quote did not reflect how he or Camden view renters today.)
Neither Campo nor Camden responded to requests for comment.
Greystar, the largest rental company operator and owner in the United States, said in a statement that it is “disappointed” that the Justice Department has added it to the lawsuit.
“Greystar has never engaged in any anti-competitive conduct,” the South Carolina-based company said in a statement. “We will vigorously defend this lawsuit.”
ProPublica’s 2022 data analysis also found that Willow Bridge Property Company (formerly Lincoln Residential) manages dozens of buildings in markets that have seen rapid rent growth. The company did not respond to requests for comment on the Justice Department’s lawsuit.
Cortland Co., one of the property owners and managers, has already agreed to stop using private competitor data to train and run its pricing models under a settlement with federal prosecutors. are. The proposed agreement has been submitted to the court for consideration.
Atlanta-based Cortland manages more than 80,000 rental properties in 13 states. A spokesperson said the related federal criminal investigation that led to the May 2024 headquarters raid has concluded.
A spokesperson said the company was “delighted” to announce the settlement.
“We believe we were able to achieve this result because Cortland has spent years developing a proprietary revenue management software tool that does not rely on data from external, private sources and has invested significant internal resources. ” said the spokesperson.
Revenue management software helps landlords manage rent “efficiently” and avoid discrimination, said a spokesperson for Cushman & Wakefield, which also owns Pinnacle. A spokesperson said the company, as a mere manager, does not “set strategy, pricing or occupancy goals” or decide what software to use or whether to accept software recommendations. Ta.
The lawsuit also names Blackstone’s LivCor as a defendant. Blackstone did not immediately respond to a request for comment.
In addition to naming the landowners as defendants, the lawsuit also includes the attorneys general of Illinois and Massachusetts as co-plaintiffs, bringing the total number of participating states to 10. The state also includes California, the most populous state in the country with 17 million people. Lessor.
RealPage states, “Less than 10% of all rental homes in the U.S. use RealPage software for rental price recommendations, and less than half of our software’s recommendations are accepted.” Masu.
But a December White House report said that number could be even higher. RealPage and Census data suggest that one in four rental properties nationwide uses RealPage’s pricing algorithm, the company said. Additionally, the company’s penetration is higher in some markets.
Justice Department files antitrust lawsuit against RealPage, maker of rent-setting algorithms
Using a model that shows what a competitive market would look like, the researchers found that algorithmic pricing means that renters in units where it is used pay, on average, $70 more per month, or 4% more in rent. I discovered that it costs a lot of money. In six major metropolitan areas, the cost exceeds $100 per month, according to the report.
The report estimates that the use of such algorithms will add up to approximately $3.8 billion in additional costs to renters in 2023.
RealPage said its analysis was “full of flawed assumptions” and that the White House never contacted it about the report.
The fate of the Justice Department’s lawsuit under the next administration is unclear. President-elect Donald Trump has nominated Gail Slater, a veteran antitrust lawyer and economic advisor to J.D. Vance, to head the department’s antitrust division.
