A group of senators is urging the Department of Justice to investigate RealPage’s rent-setting software, which they say is driving rapid inflation for rental properties amid an already-strained housing market.
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The call for action is the latest in a string of lawsuits and federal inquiries around the Richardson, Texas-headquartered company’s algorithm-based YieldStar software, sparked by a ProPublica article from October 2022.
Democratic U.S. Sens. Elizabeth Warren, Tina Smith, Bernie Sanders and Ed Markey sent a letter to the DOJ’s Antitrust Division on March 2, sharing additional information to aid in the division's investigation into RealPage. The investigation began in November.
“The rise of institutional investors and rent-setting algorithms have weakened competition in the already strained housing market, resulting in substandard services and unnecessarily high housing costs for American families,” the letter states. “It is therefore essential that the Department use all of its tools to ensure that renters do not fall victim to corporate landlords and anti-competitive forces.”
The presence of institutional investors has grown at a rate of about 3% per year since 2010, and large institutional investors have amassed hundreds of thousands of homes. The homes are often in high-growth regions, leading to dwindling competition and increasing investor power to set rents, the letter said.
RealPage’s YieldStar aids those investors in controlling housing markets, the letter states.
“The [ProPublica] investigation highlighted that the algorithm’s consideration of non-public pricing information when calculating rent recommendations has effectively created a ‘cartel’ of landlords that is able to take advantage of non-public information to fix rents,” the senators wrote.
RealPage’s publicly available information shows the software is used to help set prices for more than 4 million units, which would account for 8% of all rental units. It also has access to “transactional apartment data from the rent rolls of 13+ million units.”
The DOJ announced in February it would heighten its scrutiny of competing companies’ pricing and information sharing practices due to concerns they could “enable illegal collusion.”
A week after the ProPublica investigation was published in October, a class-action lawsuit was filed on behalf of multifamily renters against RealPage and landlords Greystar Real Estate Partners, Lincoln Property Co., FPI Management, MAA, Equity Residential, Essex Property Trust and Security Properties, among others.
According to the senators’ letter, Greystar, the largest property management company in the U.S., uses YieldStar to set rents for more than 150,000 apartments.
Another lawsuit filed in November alleges that several commercial real estate firms, including Greystar and Cushman & Wakefield, colluded by using YieldStar to set the prices for student housing rentals.
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