DOJ Takes Aim at RealPage — and Algorithms as a Price-Fixing Tool

Using software, rather than classic collusion techniques, “does not immunize this scheme from Sherman Act liability,” Attorney General Merrick Garland said.

By Eric Gardner, More Perfect Union

RealPage, a Texas-based real estate software company, is facing federal antitrust charges after its core product allegedly inflated rents and stifled competition in the U.S. multiunit rental market. 

The lawsuit is a remarkable development in one of the defining economic stories of our times: how unregulated algorithmic decision-making is upending the American economy. In this case, it threatens to increase rent prices, with little to no recourse for consumers. 

The Department of Justice, joined by eight states, alleges that RealPage’s YieldStar software enables subscribers — mostly corporate landlords — to share confidential and vital business information to raise prices. The lawsuit alleges that YieldStar enters that data into an algorithm, which then recommends a rent price to maximize the participant’s profitability. 

Multifamily housing rentals are a massive market in America, leading the multifamily rental industry to argue a handful of firms can’t collude around prices. While it’s true the national rental market is large, it’s also intensely local. RealPage may not have much power in rural parts of the country, but it’s estimated that RealPage customers control 70 percent of the metro market in Phoenix. In D.C., rent prices at 90 percent of units in large buildings are believed to be set by the company. Since 2019, U.S. rent prices have been up nearly 20 percent nationally. 

The case is the first federal antitrust case to center on an algorithm’s role in antitrust violations. “Using software as the sharing mechanism does not immunize this scheme from Sherman Act liability,” Attorney General Merrick Garland said in a statement. 

RealPage’s system collects and analyzes vast amounts of private data from its subscribers, including floor plans, lease agreements, discounts, and expiration dates, according to the Justice Department’s complaint. The private data is then supplemented by 50,000 monthly phone calls made by RealPage to 52,000 properties in America. 

The algorithm uses that information to generate a “smoothed” market minimum and maximum for each unit, creating a stable and uniform low and high rate across properties. The system will not suggest rent rates below the market minimum but will regularly offer above the maximum to inch the price upwards. The system is designed to push most landlords to auto-accept rent recommendations while requiring leasing agents to jump through several bureaucratic hoops to offer less than the algorithm suggests. According to the complaint, this design gives pricing authority to one central business: RealPage.

The attorneys general of Washington D.C. and Arizona filed similar complaints earlier this year; D.C. Attorney General Brian Schwalb told More Perfect Union at the time that RealPage was a key player in what he described as a “housing cartel” involving corporate landlords.    

According to communications unearthed by the Department of Justice, RealPage subscribers may agree. “Your algorithm uses proprietary data from other subscribers to suggest rents and terms,” one participant said. “That’s classic price fixing.” 

The scheme was first brought to life by a 2022 ProPublica investigation, but the Department of Justice’s complaint is the first detailed inside look at the system's functionality. 

One of the key allegations in the complaint is that the algorithm doesn’t just set prices; it gently massages supply and demand across the industry to the benefit of subscribers. The broader revenue optimization industry has long denied this is the case, despite claims to the contrary by tenant activists. 

In a free and competitive market, landlords do not have detailed information on pricing and availability. This checks against price increases, as the fear of costly vacancies allows tenants to negotiate discounts. 

RealPage’s software effectively removes this problem for landlords. 

Since RealPage has access to private data across specific geographies, its algorithm knows if an onslaught of renewals is hitting the market at once. In this scenario, the system first pushes subscribers to offer 11 or 13-month leases—spreading demand throughout the year, and limiting tenant leverage.

The second strategy is through “revenue protection" mode, which instructs landlords to remove vacant units from the market rather than lower prices. In one instance cited in the complaint, RealPage defended this approach to a landlord wondering why prices weren’t dropping in the face of mass vacancies, stating that "the model still sees the way to make more revenue is to lease fewer units at higher prices."

This last caveat is especially important because the company and industry have long disputed the plausibility of a housing cartel enabled by algorithmic price fixing. Instead, the groups have largely blamed high rental prices on a lack of housing supply; it’s the number one reason on RealPage’s public policy website for high rents.

But even before the DOJ’s lawsuit, RealPage’s skeptics weren’t buying it. In April, More Perfect Union spoke with Arizona Attorney General Kris Mayes, who is also suing the company on behalf of the state.

“That’s bunk,” she said of RealPage’s argument. “We’ve got apartment units all over Phoenix that aren’t being rented right now because people can’t afford them.”