Training Algorithms to Fix Rents? That’s Illegal, Justice Department Tells Software Company

You’re renting, and saving up to buy. You’d like to hold the deed to your home. You crave an opportunity to “get on the ladder” and build wealth through home equity. And you’ve had it up to here with rent hikes.

You’ve read up on inflation. You regularly check in on mortgage interest rates. The last thing on your mind is artificial intelligence (AI).

But rental companies can use AI to figure out how to charge you more. That makes it harder for renters all over the country to save money.

Now, the Department of Justice is suing a vendor of AI software.

RealPage Software Forces Rents Up, DOJ Alleges

The Justice Department has sued a software corporation, RealPage Inc., on antitrust grounds. The DOJ alleges a scheme to aggregate properties’ data to keep rents elevated. Justice Department officials allege that RealPage deploys algorithms to:

• Undermine competition and enable collusion among rental property owners.

• Set elevated rental prices across markets.

• Behave as a monopoly, applying sensitive commercial information to keep its grip on the market.

• Maximize profits to the detriment of millions of U.S. renters.

• Sideline property management businesses that refuse to go along.

A multitude of property owners have been sharing their sensitive business data with RealPage so they can get into the game and avoid fair competition. It’s algorithmic price-fixing in the apartment rental space.

So, RealPage tech helps profit-seekers get around antitrust law — and ignore standard business ethics. In a Justice Department press release, Deputy A.G. Lisa Monaco declared: “Training a machine to break the law is still breaking the law.”

What Triggered a Federal Case Over This?

ProPublica published an investigation two years ago. The article pointed to price-setting technology as a factor in rental cost surges.

Since then, state attorneys general for Arizona, the District of Columbia, California, and North Carolina have all sued the Texas-based rental management software firm RealPage. The governments of Colorado, Connecticut, Minnesota, Oregon, Tennessee, and Washington are suing, too.

In July 2024, a city took a pioneering step. Its Board of Supervisors acted to protect its residents from having to contend with algorithmic price fixing. San Francisco’s new ordinance changes the administrative code with its Ban on Automated Rent-Setting. The point is to “prohibit the sale or use of algorithmic devices to set rents or manage occupancy levels for residential dwelling units located in San Francisco.”

And in August, speaking in North Carolina, VP Kamala Harris highlighted a situation where “corporate landlords collude with each other to set artificially high rental prices, using algorithms and price-fixing software.”

That brings us to the present case. Now, the AI firm faces a civil antitrust lawsuit in the U.S. District Court for the Middle District of North Carolina, filed by the Justice Department and multiple states.

How the Company Defends Its Practices

RealPage, owned by the private-equity firm Thoma Bravo, admits its software is “driving every possible opportunity to increase price” for landlords who use it. But it doesn’t see anything wrong in that.

The DOJ quotes a RealPage executive who seems proud that the software frees property owners from competition. The exec touts the “greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down.”

Everybody succeeding? Depends who you ask.

RealPage insists that it’s just being made into an example, noting:

• A number of other companies sell software to help rental companies bolster profits, too.

• Anyway, using software to help bolster profits isn’t necessary breaking the law.

• The customers who use RealPage software could just turn down its automatic price hike prompts.

RealPage slams law enforcement’s contrary position, claiming that the government “seeks to scapegoat pro-competitive technology that has been used responsibly for years.” 

Well, a devil’s advocate might ask, shouldn’t businesses get an edge if they pay for AI software? Not in this case, says the Department of Justice. The DOJ points to RealPage’s tremendous scope and influence. This one firm, says the DOJ, has a hold on 80% of the rental market.

And this isn’t just about using data profitably. The government describes something more intricate than that, and more sinister.

Not Just Public Data: RealPage’s Insider Advantage

RealPage doesn’t just crunch numbers sourced from public databases. It harvests private data from its property-owning clients. It asks the property managers to supply data such as:

• Their individual apartments’ physical layout and details.

• Detailed information on each apartment’s rent and lease status.  

• How many prospective renters have toured a vacant unit; and how many are applying to live there.  

All these data points get updated daily. They go into the software, generating new pricing. Each day, units waiting to be filled get new rent pricing prompts.  

RealPage reps tell landlords just how much they can increase their daily income by opting into this system. Once in, the investor-owners face pressure to go along with the AI tool’s top-dollar pricing. Sure, they can opt out. But, says the DOJ, it takes multiple steps to keep the AI tool from logging an automatic acceptance. The “auto accept” feature makes agreeing to rent hikes a default mode.

Property managers who’d like to override automatic recommendations get contacted by someone called a RealPage pricing adviser. The adviser hovers over clients’ shoulders to “stop property managers from acting on emotions.”

Those who refuse to go along with automatic pricing prompts will be excluded from the financial cabal. Government attorneys see it as a cartel-style setup.

In practical terms, it means units stay vacant unless and until applicants are willing to meet the price point. It’s clear that this system helps keep renters in a cycle of overpaying. What’s lost? Their ability to save for their own deeds, no doubt. And a lack of access to fairly priced units — RealPage would, allegedly, rather keep those units empty than discounted. Adding insult to injury, RealPage urges property managers to drop special offers, like a free month for signing up. See for yourself.

Make It Stop. Regulate It.

Antitrust litigation must be followed by regulation. Follow San Francisco’s example. Because it’s crystal clear that some software firms will be fair only when unfairness stops being cost-effective.