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Richardson-based RealPage Is Facing a DOJ Investigation Into Its Rent Pricing Software

The real estate software company RealPage has been accused of using its rent pricing software to help landlords inflate market rents. Now it faces 11 lawsuits and an investigation by the U.S. Department of Justice.
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It’s been more than a month since a ProPublica story brought to light how RealPage uses its proprietary rent management software in a way that suggests possible collusion with landlords to inflate rental rates. The Richardson-based real estate tech firm is now facing 11 class-action suits and an investigation by the U.S. Department of Justice’s Antitrust Division.

The report was published October 15. By October 18, RealPage and eight other multifamily landlords—including Dallas-based Lincoln Property Co.—were sued for the first time by five plaintiffs from California and Washington. Since then, 10 more suits have been filed, all alleging that RealPage’s YieldStar software allows landlords to artificially inflate rent prices.

YieldStar uses data analytics to suggest appropriate pricing based on apartment availability. But property managers can let units sit vacant and off the market, which the algorithm interprets as a supply crunch that warrants higher prices. The program allows landlords to see anonymized, aggregated data showing competitor pricing. Many property managers that use the software control thousands of apartment units in individual markets, and the ProPublica story alleges that RealPage executives and developers were aware of the impact YieldStar had on pricing.

According to a review of Pacer.gov, the 11 lawsuits have been filed in federal courts in California, Illinois, New York, and Washington. The bulk were filed between November 2 and 18, with two more filed right before the Thanksgiving holiday. The most recent came on November 23 in California Central District Court.

This month, Sen. Amy Klobucha (D-Minnesota), who chairs the Senate Subcommittee on Competition Policy, sent a letter to the DOJ’s Antitrust Division asking that the agency investigate the matter.

“We are concerned that the use of this rate setting software essentially amounts to a cartel to artificially inflate rental rates in multifamily residential buildings,” said the letter, which was also signed by Sen. Richard Durbin (D-Illinois) and Sen. Cory Booker (D-New Jersey).

Congressional leaders also sent two other letters to the DOJ and the Federal Trade Commission. By November 23, the DOJ had opened an investigation into RealPage’s software. RealPage did not respond to a request for comment.

This marks the second time the Antitrust Division has examined the company, ProPublica reported last week. 

Citing an unnamed source, ProPublica said the matter has also renewed questions regarding the merger between RealPage and its largest competitor, Rainmaker Group, in 2017. That source said that some DOJ staff flagged the merger for further scrutiny then but were overruled by Trump appointees who chose not to challenge the merger in court. 

“The investigation fell at a time when the DOJ’s Antitrust Division was preparing to sue to block a proposed merger between AT&T and Time Warner, which promised to take up a lot of the division’s resources,” the report said. “‘It was a resource constraint issue he was trying to balance,’ the source said of Makan Delrahim, the former assistant attorney general charged with overseeing the division at the time. In addition, RealPage did not have the same reach then as it does today, the source said.”

Prosecutions for antitrust violations like price fixing fell to historic lows during the first three years of the Trump administration. Fines for violations also dropped dramatically. Those declines follow a reduction in staffing in the division, where attrition in all five criminal enforcement units fell by a fifth since Trump took office.

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Bethany Erickson

Bethany Erickson

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Bethany Erickson is the senior digital editor for D Magazine. She's written about real estate, education policy, the stock market, and crime throughout her career, and sometimes all at the same time. She hates lima beans and 5 a.m. and takes SAT practice tests for fun.

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