DOJ Could Intervene In Rent-Setting Lawsuit Against RealPage

The Department of Justice could soon weigh in on the rental rate algorithm saga that has ensnared two of multifamily’s biggest data providers and dozens of apartment operators.

The DOJ Antitrust Division has been looking into whether RealPage’s practices unlawfully drive up rents and is considering enforcement action, people familiar with the matter told The Wall Street Journal. 

RealPage’s revenue management tool has come under fire for allegedly helping landlords collude to inflate rents, which translates to higher costs for tenants. 

The data provider, as well as a host of major REITs and multifamily property managers, was named in more than 30 lawsuits that have been consolidated in Nashville federal court since April, bringing together cases filed by renters from Seattle and Colorado to Boston and New York.

Another class-action lawsuit leveled against Yardi Systems and 18 property management firms also accuses the groups of scheming to eliminate competition by raising rents across properties while keeping vacancies low. 

Possible DOJ intervention in the RealPage case comes after members of Congress called on the department to investigate the company for a possible violation of the Sherman Act, which prohibits businesses from engaging in practices that stifle competition.

Last week, the DOJ alerted RealPage that it might attempt to guide the outcome of the court’s decision by submitting a “statement of interest,” but in order to minimize disruption, the department said it will likely wait to file its statement until after the case is settled, according to Propmodo.

Many landlords say they rely on algorithms to guide pricing, which RealPage claims is necessary to prevent “costly reactionary pricing behaviors.” The firm pointed to a decline in apartment vacancy rates as proof that its data doesn’t result in higher prices that would, in turn, create more vacancy.

For the plaintiffs to prevail, they will have to prove RealPage and Yardi Systems control an outsized share of the rental market, Peter Carstensen, a former antitrust attorney at the DOJ and professor emeritus at the University of Wisconsin Law School, told the WSJ.

RealPage’s website at one point claimed its pricing system was tied to 4 million units, though its transaction database is much larger, the WSJ reported.