The US Department of Justice has announced a major victory for tenants, reaching a settlement with a software firm over its controversial 'secret algorithm' used by landlords to set rental prices.
The End of Algorithmic Collusion?
Under the proposed deal with RealPage Inc., landlords will be barred from using the company's rent-pricing software to covertly track competitors' pricing strategies. This settlement, which still requires judicial approval, aims to conclude what critics have labelled illegal 'algorithmic collusion' that artificially inflated the cost of renting a home.
The agreement follows a yearlong federal antitrust lawsuit initiated during the Biden administration against the Texas-based software company. Notably, RealPage will not pay any damages or admit wrongdoing as part of this settlement.
How the Software Worked
RealPage's software provided daily pricing recommendations to landlords and their employees across the United States for pricing vacant apartments. While property managers were not forced to follow these suggestions, opponents argued that the software's access to a massive database of confidential data enabled RealPage's clients to consistently charge the maximum possible rent.
'RealPage was replacing competition with coordination, and renters paid the price,' stated DOJ antitrust chief Gail Slater. She emphasised that the settlement avoided a protracted and expensive trial.
Terms of the Settlement and Wider Fallout
The proposed settlement imposes strict new rules on RealPage. The company can no longer utilise real-time, nonpublic data to generate its price recommendations. Instead, the algorithm can only be trained on data that is at least one year old.
'What does this mean for you and your family?' Slater asked in a video statement. 'It means more real competition in local housing markets. It means rents set by the market, not by a secret algorithm.'
RealPage's attorney, Stephen Weissman, said the company was pleased to have resolved the matter with the DOJ. He countered that there had been 'a great deal of misinformation' about the software's function and asserted that its use of aggregated data had historically led to 'lower rents, less vacancies, and more procompetitive effects.'
This federal action is part of a broader crackdown. Over recent months, more than two dozen property management companies have reached settlements related to their use of RealPage. This includes Greystar, the nation's largest landlord, which agreed to pay $50 million to settle a class action lawsuit and a further $7 million to resolve a separate case brought by nine states.
Furthermore, the governors of California and New York signed laws last month to restrict rent-setting software, and cities like Philadelphia and Seattle have passed local ordinances against the practice. Ten states had joined the DOJ's original antitrust lawsuit, though they were not party to this specific settlement.
