The Justice Department’s antitrust division has reportedly opened an investigation into RealPage, the real estate technology company accused of contributing to higher-than-normal rents. According to a report of ProPublicthe DOJ is investigating whether the company’s rental software will allow landlords to coordinate and raise rents across the country.
This comes next last month’s report ProPublic, which revealed that RealPage’s YieldStar software uses an algorithm to “help landlords force the highest possible rents on tenants.” As noted by ProPublic, YieldStar’s algorithm uses the non-public rental rates collected from the landlords and property managers that are its clients. YieldStar then repackages that information in an anonymized form to provide rental price recommendations to its users, giving landlords indirect access to their competitors’ prices.
The “rate-setting software essentially amounts to a cartel to artificially inflate rents in multi-family homes”
ProPublic‘s report states that the design of the algorithm “has raised questions among real estate and legal experts about whether RealPage spawned a new breed of cartel that allows the nation’s largest landlords to indirectly coordinate prices, potentially in violation of with federal law.” These experts have also raised concerns with the RealPage User Group, an online forum where apartment managers using the service can communicate with each other.
Rents have increased by 20 percent since the beginning of 2020 The New York Times. While data from Apartment list indicates that rents have fallen slightly in recent months, but are still rising at an annual rate of 5.7 percent, and a report from CNBC indicates that rents will continue to rise until 2023. RealPage is reportedly aware that its software is helping drive up rents, ProPublic reports, and it discourages landlords from negotiating with tenants.
In 2017, the DOJ requested more information from RealPage when the company announced its plans to acquire Rainmaker Group, a competing real estate software company that developed the rent setting software, Lease Rent Options (LRO). According to ProPublicSteve Winn, RealPage’s CEO at the time, said the $300 million acquisition would allow the service to increase the number of units it costs from 1.5 million to 3 million.
Several US lawmakers have already called on federal agencies to investigate ProPublic‘s findings. Senators Amy Klobuchar (D-MN), Richard Durbin (D-IL), and Cory Booker (D-NJ) wrote a letter to U.S. Assistant Attorney General Jonathan Kanter, to express their concerns about RealPage, pointing out that the “rate-setting software essentially amounts to a cartel to artificially inflate rents in multifamily homes.” Clobuchar later sent a tweet stating that she is “asking the DOJ to investigate.”
Meanwhile, 17 representatives including Jesús García (D-IL), Jan Schakowsky (D-IL), Cori Bush (D-MO), Alexandria Ocasio-Cortez (D-NY), Pramila Jayapal (D-WA) and others have succeeded with a letter urging the Federal Trade Commission and Department of Justice to investigate RealPage. “Our voters cannot afford anti-competitive — and possibly necessarily illegal — practices driving up prices for essential goods and services at a time when a full-time minimum wage doesn’t give a worker enough money to rent a two-bedroom home. apartment in every city in this country,” the lawmakers wrote.
So are Senators Bernie Sanders (D-VT) and Elizabeth Warren (D-MA). asked a number of questions last week to Dana Jones, CEO of RealPage, giving RealPage until December 1 to respond. In addition, RealPage faces a number of class action lawsuits accuses the company of rent increase. Neither the DOJ nor RealPage responded immediately The edge‘s request for comment.