In a complaint filed by the Justice Department on Friday, antitrust enforcers said RealPage's software, which helps landlords set rental unit pricing, has effectively raised prices on renters illegally. RealPage is a top software provider to the multifamily rental industry.

"RealPage has built a business out of frustrating the natural forces of competition," according to the lawsuit, which cites allegedly anticompetitive remarks by company executives. "A rising tide raises all ships" is more than a marketing mantra, the government said. 

According to the U.S., RealPage's vice president of revenue management advisory services said the mantra meant "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." 

Election Issue

The lawsuit, filed in federal court in North Carolina, represents the Justice Department's first big algorithmic collusion case as alleged schemes become more sophisticated through the use of technology, department officials say.

"Americans should not have to pay more in rent simply because a company has found a new way to scheme with landlords to break the law," Attorney General Merrick Garland said at a press conference after the suit was filed. Deputy Attorney General Lisa Monaco added, "Training a machine to break the law is still breaking the law."

The complaint comes as home prices and rents in the US have surged since the early days of the Covid-19 pandemic, fueling an affordability crisis that has become a central issue in the presidential campaign. Democratic nominee Kamala Harris has called for a rent cap on corporate landlords and down payment assistance for first-time homebuyers, many of whom have been stuck on the sidelines of the housing market as higher interest rates pushed ownership out of reach. 

The average U.S. rent has skyrocketed by 33% since the beginning of the pandemic, according a Zillow index.

RealPage said it is following the law and has worked with the Justice Department to remain in compliance.

"RealPage's revenue management software is purposely built to be legally compliant, and we have a history of working constructively with the DOJ to show that," the company said in a statement, referring to the Justice Department. 

Blessed by DOJ

"In fact, in 2017 when the DOJ granted antitrust clearance for our acquisition of LRO, the DOJ also analyzed extensive information about our revenue management products without objecting to them in any way," RealPage added, referring to its largest competitor, Lease Rent Options, which it acquired in 2017. 

RealPage, based in Richardson, Texas, helps residential landlords market vacant apartments, screen prospective tenants and set rents, among other functions. It serves more than 24 million units around the world, according to the company's website, making it one of the largest software providers to the multifamily industry.

The company, which private equity firm Thoma Bravo acquired in 2021, said its revenue management products operate basically as they did at the time of the DOJ review. Following that transaction, the YieldStar software became the dominant model used by large landlords in many cities. 

RealPage has cornered 80% of the market for commercial revenue management software for conventional multifamily housing rentals in the US, according to the lawsuit, in which the US was joined by North Carolina, California and Minnesota, among several other states.

'Algorithmic Intermediary'

The private data that landlords share with RealPage include a unit's effective rent, rent discounts, rent terms, lease status and unit characteristics such as layout and amenities, according to the complaint. The landlords also share "the number of potential future renters who have visited a property or submitted a rental application."

"RealPage is an algorithmic intermediary that collects, combines and exploits landlords' competitively sensitive information," according to the U.S. "And in so doing, it enriches itself and compliant landlords at the expense of renters who pay inflated prices and honest businesses that would otherwise compete."

In a June statement, RealPage said its software uses anonymous data in an aggregated fashion, and landlords don't have insight into competitors' pricing. The company said the software only suggests rental prices and its customers accept those recommendations less than 50% of the time.