The federal government continues to set its sights on the rent-setting algorithms used by Richardson-based RealPage.
A contingent of Democrats in the Senate, including Elizabeth Warren, Tina Smith, Bernie Sanders and Ed Markey, sent a March 2 letter to Assistant Attorney General Jonathan Kanter with concerns regarding the role such algorithmic softwares play in rental prices, the Dallas Morning News reported. The letter is the latest in a number of lawsuits and investigations into how RealPage’s software may be influencing landlords to set prices.
The DOJ’s Antitrust Division launched a probe into RealPage late last year, on the heels of a ProPublica article that shed light on the company’s rent-setting software.
Congressional leaders pushed for an investigation following the ProPublica report, which raised suspicions that the software could be pushing rents above competitive levels and enabling landlords to coordinate pricing, in violation of federal antitrust laws. The report also led to RealPage and seven property management firms being hit with a class-action lawsuit for allegedly forming what lawyers called a “cartel” to artificially inflate apartment prices above competitive levels.
One of those landlords is Dallas-based Lincoln Property Company, whose headquarters is a short drive south of RealPage. Toronto-based Cadillac Fairview recently purchased Lincoln’s residential division.
More investigations of RealPage may be in the works now that the United States Senate is taking notice.
“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 senators wrote. “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 rent-setting software in question is YieldStar, which RealPage describes as useful for “comprehensive submarket-level and long-term forecast on occupancy, rent, supply and demand.”
Information provided by RealPage showed that landlords using YieldStar are most common in regions typically targeted by corporate buyers and with the highest rent increases, the letter stated.
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“Even the widespread use of its anonymized and aggregated proprietary rental data by the country’s largest landlords could result in defacto price-setting by those companies, driving up prices and hurting renters,” the senators wrote. “Given these findings, the DOJ should act to protect American families and closely review rent-setting algorithms like YieldStar to determine if they are having anti-competitive effects on local housing markets that have seen increased institutional investor activity.”
RealPages rental software contributes to price decisions for more than 4 million units and factors in lease transactions for more than 13 million units, its website states. The company went public over a decade ago with a $135 million value and was acquired by investment firm Thoma Bravo for $10.2 billion in 2021.
—Erick Pirayesh