The U.S. Department of Justice on Friday sued a major real estate firm, alleging the company’s algorithmic software enables landlords across the country to set rent at artificially high rates.
The lawsuit, joined by several states including California, focuses on software from Texas-based company RealPage. The software is used by many landlords to set rent prices for both vacant units and renewal rates for existing tenants.
In a truly competitive market, authorities said property owners would be forced to compete with each other, helping to drive down rental costs for Americans.
However, according to the lawsuit, RealPage enabled the opposite.
When becoming a client, supposedly competing landlords share nonpublic information — such as occupancy and rents on executed leases — with RealPage, which then uses that data to recommend rents at individual properties.
“As Americans struggle to afford housing, RealPage is making it easier for landlords to coordinate to increase rents,” Assistant Atty. General Jonathan Kanter said in a statement.
RealPage did not immediately return a request for comment.
The company previously called similar allegations false and misleading, saying clients can decline its recommendations, which at times include dropping rent.
But in its complaint, the Justice Department pointed to instances where RealPage described its software as a tool for maximizing rent and outperforming the market. Authorities also alleged the company made it more difficult for landlords to reject its recommendations than accept them.
“There is greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down,” a RealPage executive said, according to the lawsuit.
At another point, RealPage described its tools as ensuring landlords are “driving every possible opportunity to increase price even in the most downward trending or unexpected conditions,” the complaint says.
Anti-trust enforcement has been a focus for Biden Administration. The Justice Department has filed suit against major companies such as Google and Apple, alleged they engaged in anti-competitive behavior.
Vice President Kamala Harris has also criticized the use of rent setting algorithms while running for president.
In a statement, Atty. Gen. Merrick B. Garland said the Justice Department will continue to aggressively enforce anti-trust laws.
“Americans should not have to pay more in rent because a company has found a new way to scheme with landlords to break the law,” Garland said.