A Phil Hall Op-Ed: On Friday, the Biden-Harris Department of Justice (DOJ) announced a civil antitrust lawsuit today against RealPage Inc., the Richardson, Texas-based property management software company, which was accused of being at the center of a grand cabal of landlords who scheme together to jack up rents.
The 115-page complaint alleged that RealPage enables “competing landlords” to share their private data about apartment rental rates. RealPage’s algorithmic pricing software, according to the DOJ’s press announcement of the lawsuit, “generates recommendations, including on apartment rental pricing and other terms, for participating landlords based on their and their rivals’ competitively sensitive information.”
The DOJ also insists that if RealPage’s software did not exist, landlords would be in a jolly free-market competition against each other to attract tenants with competitive pricing and concessions.
“RealPage replaces competition with coordination,” said the lawsuit. “It substitutes unity for rivalry. It subverts competition and the competitive process. It does so openly and directly—and American renters are left paying the price.”
While I am not an attorney, I have been involved in both the real estate and technology worlds since the late 1980s. And having read the DOJ’s filing, it is difficult to appreciate its contents and motives.
For starters, the DOJ noted that RealPage software “generates recommendations” for the property management companies that use the product. Lest we forget, a recommendation is not a direct order and RealPage is not a landlord. The landlords who are using this company’s products are under no obligation to accept its recommendations – and considering the software’s users are the ones raising rents, one might think they should be the ones stoking the DOJ’s ire.
Curiously, the DOJ lawsuit does not include any of the untold number of landlords using RealPage’s products as defendants. This is peculiar, especially when one considers that President Biden (before he was removed as the Democratic Party’s presidential nominee by an interparty coup) and Vice President Harris (who was hastily substituted as his replacement) have both decried the greed by “corporate landlords” in jacking up rents.
But that omission from the lawsuit is hardly an accident since many of these corporate landlords – the hedge funds, real estate investment trusts and banks, along with their very-well-paid executives – are longtime donors to the Democratic Party, so it is unlikely that the beholden politicians will bite the hands that stuff them with money.
The DOJ issued a press statement that attributed this quote to Acting Associate Attorney General Benjamin C. Mizer: “RealPage’s egregious, anticompetitive conduct allows landlords to undermine fair pricing and limit housing options while stifling necessary competition. The Department remains committed to rooting out illegal schemes and practices aimed at empowering corporate interests at the expense of consumers.”
For the record, RealPage’s software has been around for two decades – including eight years of an Obama-Biden administration that never considered it was doing anything wrong. As for “limiting housing options while stifling necessary competition,” that notion has no acquaintance with reality.
The folks at RealPage accurately noted on their website that the genuine problems impacting the rental housing market include such issues as a “persistent undersupply of rental housing units; increasing demand for rental housing in many areas of the country; inflationary pressures that affect costs to build, insure, and manage housing properties; inefficient or unnecessarily onerous permit and zoning requirements; higher mortgage rates and home prices driving more people to rent rather than own their own homes; and changes in where and how people choose to live.”
The detail-free Harris campaign platform has included a vague promise to ban algorithmic price-setting tools, a proposal that smells unconstitutional. How will she achieve this ban? Who knows? The evasive and elusive Harris has yet to sit down and offer an in-depth explanation for her vision for the future.
But having the announcement of the RealPage lawsuit on the day after Harris’ acceptance speech at the Democratic National Convention was not a coincidence in timing. RealPage has been in the DOJ crosshairs for some time and the lawsuit could have been put forth weeks ago. If anything, the timing of the announcement that bolsters one of Harris’ campaign promises right after she was handed her party’s presidential nomination suggests Merrick Garland’s lawfare-happy DOJ is trying to give the Harris presidential campaign a degree of seriousness that it has yet to show.
Phil Hall is the editor of Weekly Real Estate News. He can be reached at [email protected]. Readers who are interested in submitting their own opinion pieces are invited to contact us regarding the article submission process.
Photo courtesy of Cinema Crazed
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My thoughts exactly! Data services have been publishing rental rates, occupancy, concessions, amenities, etc. for at least 40 years since I have been in commercial real estate. The fact that they have a program that can be used voluntarily to estimate rents is nothing more than AI! Welcome to 2024.
“While I’m not an attorney…” yup you’re not and it’s quite obvious you’re electioneering here.
Instead of always coming after ‘greedy villains’ in one field or another, the government should focus on creating an environment where more housing supply can easily be built or adapted. This naturally results in competition in rent pricing in a free market.
Why bring politics into this? The DOJ is looking out for the people and the greed of Wall Street are mostly Republican’s who want more tax cuts for the wealthy. Oh, and let’s not forget history here, when a candidate for President was, and is, a Real Estate Developer who manipulated rents in NY and forced low income residents to live in disgusting conditions for decades. Developers must build healthier affordable housing and Landlords must keep the rents low so families can live and work and positively contribute to society (and maybe have more kids – which JD Vance and Elon Musk want us to do) instead of being forced out on the street, or worse, asking for government help!
In my 40 plus years of experience with commercial rentals both multifamily and other commercial, we always have studied rent comps, in an effort not to fix, and collude to raise rental rates , but to stay competitive with the market, and keep our properties “fully occupied”. Vacancy and makeover costs are too high to make charging excessive rents transmit to the bottom line. There are “street rents”, asking rents, and then there are the “actual rates” you negotiate and charge the renters. IMO, real page is simply giving the subscribers an idea of the market rents at a point in time, with the actual rates up to the landlord.
This lawsuit is not about checking rent comps but is about a group of competitors that join together to share nonpublic data to fix rent prices in local submarkets. A “recommendation” or “suggestion” of what prices to charge in this type of setting is always an antitrust red flag. Can you imagine your local Realtor Association beginning each meeting or CE event with a statement that based upon current MLS data we are “suggesting” or “recommending” the following commission rates for your submarket, but of course you need not follow our recommendation? In fact, in the DC lawsuit (another civil action) it is alleged that if a landlord did not use the “recommended” rate at least 75% of the time, they were kicked out. For a good explanation of the lawsuit (it does contain an ad) see:
https://www.msn.com/en-us/money/companies/justice-department-alleges-realpage-landlords-colluded-to-raise-rental-prices/vi-AA1pwYUV?ocid=entnewsntp&pc=U531&cvid=b81dcd9621d74ee09cb6168c40126ff7&ei=53
Better yet, for your own take on the complaint, you can read it here:
chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.justice.gov/opa/media/1364976/dl?inline
RealPage seems to be doing what I, as a certified general appraiser, do when hired to provide a market rental analysis. I gather and collate rental data then make recommendations as to likely market rents. Lenders and landlords pay me for my professional opinion. The “so called” non-public data is readily available in a number of published sources but, of course, you have to subscribe (pay a fee) to those sources. Lenders often won’t make investment property loans without an appraiser’s market rental analysis.