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The U.S. Department of Justice (DOJ) on Friday filed a lawsuit against a rental software company that offers artificial intelligence (AI) tools that landlords can use to assess rental market prices when determining the rent they should charge tenants.
The DOJ's lawsuit alleges that RealPage violated antitrust laws by “contracting with competing landlords to share nonpublic, competitively sensitive information about apartment rents and other rental terms, and to train and run RealPage's algorithmic software” to provide recommendations on apartment prices and terms. The company is also accused of maintaining a monopoly in the commercial revenue management software market, and the DOJ seeks to “end RealPage's unlawful conduct and restore competition to the benefit of renters.”
The lawsuit comes as the Biden-Harris administration pressured Congress last month to force corporate landlords to choose between a 5% cap on rent increases or losing their federal tax break. Vice President Kamala Harris' campaign has also called for a ban on rental companies' use of the algorithms, which it claims allow them to “collude to dramatically inflate rents.”
RealPage denies these allegations, saying its software simply advises landlords whether they should set higher or lower rents for particular properties. The company added that it doesn't recommend properties be taken off the market, but rather uses anonymized, non-public data to prevent landlords from learning about competitors' pricing, which it believes is in compliance with antitrust laws.
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The Justice Department has filed a lawsuit against a software company that provides an AI-driven pricing platform to landlords, alleging that the company violated antitrust laws banning conspiracy. (Photo by Saul Martinez/Bloomberg via Getty Images/Getty Images)
“RealPage's revenue management software is purposefully built to comply with the law, and we have a track record of working constructively with the DOJ to demonstrate this,” the company told FOX Business in a statement. “In fact, when the DOJ granted antitrust approval to our acquisition of LRO in 2017, it also analyzed extensive information about our revenue management products but did not raise any objections. We continue to describe our revenue management products to the DOJ, and our products function essentially the same way they did at the time of our 2017 review.”
The company said on its website that customers “determine their own rental prices, are always 100% free to accept or reject software pricing recommendations, are not penalized for rejecting recommendations, and accept recommendations across a wide range of rates, much lower than falsely claimed.”
RealPage also noted that as of May 2023, only 6.7% of rental properties nationwide were using AI Revenue Management (AIRM) or YieldStar tools, and 3.7% were using lease leasing operations.
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Vice President Kamala Harris has called for legislation to restrict landlords' use of algorithms to derive rental recommendations. (Photo: Michael McCol/San Francisco Chronicle via Getty Images/Getty Images)
Grover Norquist, founder and president of the Alliance for American Tax Reform, criticized the Justice Department's investigation into the AI rental software company, telling Fox Business that the investigation “smacks of an effort to create nationwide rent control, something that other factions of the Democratic Party have been talking about.”
Norquist added that the software proposal does not force landlords or tenants to offer or sign rental agreements at the proposed rates.
“If it doesn't make sense, everyone can and will ignore it,” he said. “That's why it's so ridiculous for people for whom government-imposed mandatory prices are the answer to claim that when someone says, 'This is the price now,' that it's some kind of collusion and that it's causing the problem.”
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The Biden-Harris administration proposed broad rent control this summer. (Photographer: Yuki Iwamura/Bloomberg via Getty Images/Getty Images)
Stephen Moore, a senior visiting scholar in economics at the Heritage Foundation, told FOX Business that consumers use algorithms to determine the best deals on items they buy, like airfare and hotel rates, because they are an efficient tool for matching supply and demand, making them valuable in the housing sector as well.
“What the Department of Justice is saying is that it should somehow be illegal for landlords to use algorithms or software to determine how much to rent their properties,” Moore said. “And if that's the case, then they should prohibit consumers from doing the same thing. And these algorithms have the benefit of efficiently matching consumers who are most likely to value an item with sellers who want to sell an item — in this case, apartments for rent.”
“Having a highly efficient real-time pricing system, where prices change minute by minute just like stock prices, benefits consumers and businesses alike,” he added.
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Moore said addressing inflation and the high interest rates that come with it is a better way to deal with soaring home prices.
“The most important thing they can do to bring down rental prices is to stop borrowing trillions of dollars a year,” Moore said. “Rent prices and home prices are going up because mortgage rates have gone up dramatically. They were 3 percent when Trump left office and now they're 6.5 percent. That means people are paying twice as much on their mortgage. That's severely impeding their ability to afford a new home, or in this case an apartment.”
