The Justice Department plans to file an antitrust lawsuit as soon as Friday against the real estate software company RealPage, claiming its software enabled landlords to collude to raise rents, two people with knowledge of the lawsuit said.
The suit, which will be joined by California, Colorado, Minnesota, North Carolina, Washington and other states, was expected to accuse RealPage of facilitating a price-fixing conspiracy that boosted rents beyond market forces, according to the people, who spoke on the condition of anonymity because of the sensitivity of the case.
The suit would escalate the government’s efforts to regulate what it sees as misuse of technology. Officials have sued Google, Amazon, Meta and Apple over what they said were monopolistic behaviors that harm consumers.
RealPage’s YieldStar product, which gathers confidential real estate information, has been at the heart of the government’s concerns. Landlords, who pay for the software, share information about rents and occupancy rates that is otherwise confidential. Based on that data, an algorithm generates suggestions for what landlords should charge renters, and those figures are often higher than they would be in a competitive market, according to allegations in prior lawsuits against RealPage by state attorneys general.
A spokeswoman for the Justice Department declined to comment.
Owned by the private equity firm Thoma Bravo, RealPage has advertised its software to landlords as a tool that can help them outperform the market by 3 percent to 7 percent. It says its software is used in metro areas around the country.
RealPage did not immediately respond to requests for comment. A spokesperson for Thoma Bravo did not immediately respond to a request for comment.
RealPage has previously denied allegations of illegal collusion, arguing that landlords are not obliged to accept its software’s suggestions when setting rents. Other economic factors, like an undersupply of housing units, are to blame for driving up rents nationwide, the company has said.
The cost of housing has become a political issue in the lead-up to the November presidential election. Rent increases have been a driver of unusually strong inflation. Annual rent growth nationally peaked at nearly 16 percent in early 2022, according to data from real estate site Zillow.
“We’ve had multiple years of high growth in housing prices,” said Sandeep Vaheesan, legal director at the Open Markets Institute, a research and advocacy group focused on antitrust issues. “There’s no single factor accounting for the rise in rents, but I think RealPage is an underrated contributor.”
In a speech this month, Vice President Kamala Harris, the Democratic nominee for president, cited collusion among corporate landlords, including via price-setting software, as an anticompetitive practice that drives up rental costs.
In November, Attorney General Brian Schwalb of the District of Columbia sued RealPage and 14 of the largest landlords in the district, the first such lawsuit by a public agency. The Arizona attorney general, Kris Mayes, followed in February, accusing RealPage and nine landlords of illegally conspiring to raise rents for hundreds of thousands of renters in the Phoenix and Tucson areas.
Regulators have been more broadly examining the impact of algorithms on prices throughout the economy. Algorithms are used to help effectively set prices by ride hailing companies that deploy “surge pricing” during high demand, and by colleges, where administrators calculate how much money to offer applicants in financial aid.
“The algorithm itself can serve as a mechanism for communication,” said Diana Moss, director of competition policy at the Progressive Policy Institute. “That is as approachable and actionable under U.S. antitrust as any form of communication we’ve seen in past cases in the nondigital era.”
The Federal Trade Commission in July began a study of how companies use data from customers to set prices. It asked eight firms about their practices, including Mastercard, JPMorganChase and the consulting giants McKinsey & Company and Accenture.