The U.S. Justice Department on Friday sued a major real estate firm, alleging that the company's algorithmic software allows landlords across the country to set rents at artificially high rates.
The lawsuit, which has been joined by several states including California, centers on software from Texas-based RealPage. Many landlords use the software to set rental prices for vacant units and renewal fees for existing tenants.
In a truly competitive market, officials said, landlords would be forced to compete against each other, helping to lower rental costs for Americans.
However, according to the lawsuit, RealPage allowed the opposite.
By becoming a client, supposedly competing landlords share non-public information (such as occupancy and rents on executed leases) with RealPage, which then uses that data to recommend rentals at individual properties.
“As Americans struggle to afford housing, RealPage is making it easier for landlords to coordinate to raise rents,” Assistant Attorney General Jonathan Kanter said in a statement.
RealPage did not immediately respond to a request for comment.
The company previously called similar allegations false and misleading, saying customers can reject its recommendations, which sometimes include lowering rent.
But in its complaint, the Justice Department pointed to instances in which RealPage described its software as a tool to maximize rents and outperform the market. Authorities also said the company made it difficult for landlords to reject its recommendations rather than accept them.
“There is a greater good in everyone succeeding rather than trying to compete with each other in a way that actually keeps the entire industry on the ground,” a RealPage executive said, according to the lawsuit.
At another point, RealPage described its tools as ensuring that landlords “take advantage of every possible opportunity to increase prices even under the most bearish or unexpected conditions,” the complaint says.
The Biden administration has focused on antitrust enforcement. The Justice Department has sued large companies such as Google and Apple, alleging they have engaged in anticompetitive conduct.
Vice President Kamala Harris also criticized the use of rent-setting algorithms during her presidential campaign.
In a statement, Attorney General Merrick B. Garland said the Justice Department would continue to aggressively enforce antitrust laws.
“Americans should not have to pay more in rent because a company found a new way to conspire with landlords to break the law,” Garland said.
