The US government has taken legal action against RealPage, a real-estate software company, alleging that it stifles competition and maintains an illegal monopoly over rent-setting software. The civil suit, filed in the Middle District of North Carolina federal court, claims that RealPage’s algorithm enables landlords to share confidential information and align their rents, resulting in artificially high prices for renters.

U.S. Justice Department Sues RealPage, Accusing Company of Illegally Coordinating Rent Prices

The Justice Department complaint alleges that RealPage’s pricing systems are used by landlords overseeing approximately three million units, commanding an 80% market share in commercial revenue management software. The company’s software collects data from millions of apartment units on rent prices, occupancy, lease applications, and other metrics to suggest rent prices and lease terms.

The suit focuses on two of RealPage’s pricing systems that are used by landlords in the Sunbelt states, where asking rents have risen by 20% or more over 12-month periods. Nationally, typical renters spent more than 30% of their income on housing as of 2022, according to a study.

RealPage denies the allegations, stating that its software is designed to be legally compliant and that landlords are not required to use its price recommendations. The company also claims that its software can recommend lowering rents, but critics argue that this would undermine the company’s business model.

The Justice Department action follows earlier lawsuits filed by state attorneys general and a class of tenants against RealPage. Several lawmakers have also called for stricter regulations on the use of algorithmic pricing systems in the housing market, citing concerns about the impact on renters.

RealPage’s denial of allegations

RealPage has rejected the allegations, stating that its revenue management software is designed to be legally compliant and that landlords are not required to use its price recommendations. The company claims that its software can recommend lowering rents, but critics argue that this would undermine the company’s business model.

In a statement, Attorney General Merrick B. Garland said: “Americans should not have to pay more in rent because a company has found a new way to scheme with landlords to break the law.”

Vice President Kamala Harris has also called for a crackdown on the use of algorithms in the housing market, stating that “landlords who collude with each other to set artificially high rental prices” should be held accountable.

The lawsuit is part of the Justice Department’s efforts to deter companies from using software or artificial intelligence to signal to competitors how to set prices. The department has accused Agri Stats, a data provider for the meatpacking industry, of gathering and sharing nonpublic information that allowed its clients to raise prices.

Joining the Justice Department in the suit are several states, including California, Colorado, Connecticut, North Carolina, Minnesota, Oregon, Tennessee, and Washington.