In a landmark move with potential implications for rental markets globally, a major US real estate software firm has agreed to curb its controversial pricing algorithm following allegations it enabled landlords to illegally coordinate and drive up rents.
The End of Algorithmic Collusion?
The Department of Justice (DOJ) announced a proposed settlement on Monday, 25th November 2024, with Texas-based RealPage Inc. This concludes a yearlong federal antitrust lawsuit initiated during the Biden administration. RealPage did not admit any wrongdoing or pay damages as part of the deal, which still requires a judge's final approval.
Prosecutors argued that the company's software facilitated what critics termed "algorithmic collusion." The platform provided daily rent recommendations to landlords across the United States. While landlords were not forced to follow the suggestions, the DOJ contended that because the software used a vast trove of confidential, real-time data from its clients, it effectively replaced market competition with coordination.
"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 costly trial.
What the Settlement Means for Renters
The core of the settlement imposes strict new limits on how RealPage's algorithm can function. The company is now prohibited from using real-time, nonpublic data to determine its price recommendations. Moving forward, the only nonpublic data permitted to train the software's algorithm must be at least one year old.
"What does this mean for you and your family?" Slater said 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."
However, RealPage's attorney, Stephen Weissman, presented a contrasting view. He stated the company was pleased to settle the matter and claimed there had been "a great deal of misinformation" about the software. "We believe that RealPage’s historical use of aggregated and anonymised nonpublic data... has led to lower rents, less vacancies, and more procompetitive effects," Weissman argued.
A Wider Crackdown on Rent-Setting Software
This federal settlement is part of a broader regulatory and legal offensive against the use of such pricing software in the rental sector. Over recent months, more than two dozen property management companies have reached their own settlements related to their use of RealPage.
Notably, Greystar, the nation's largest landlord, 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.
Legislative action is also gaining momentum. The governors of California and New York signed laws last month to crack down on rent-setting software, and cities including 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 with RealPage.
