Inside the ‘housing cartel’ accused of driving up the price of YOUR rent: Legal battle breaks out over niche tech firm that helps landlords set prices

A Texas software company is alleged to have been at the center of a ‘rental cartel’ that allowed landlords across the US to artificially raise prices.

Software sold by RealPage is used by many of the largest property management companies in the United States and suggests prices for landlords to charge based on availability and demand in their area.

But plaintiffs in several states have filed lawsuits against the company, alleging that landlords share private and commercially sensitive data with the platform, which is then weaponized against renters to keep costs as high as possible.

In some markets, the majority of property managers in an area are said to use the price guidance and instruction software.

Now legal pressure is mounting against RealPage, which is run by Dana Jones, a University of Michigan graduate who describes himself as a ‘growth-minded CEO’ on LinkedIn.

Software sold by RealPage is used by many of the largest property management companies in the United States and suggests prices that landlords should charge based on availability and demand in their area

The mother-of-two took the top position in 2021, succeeding billionaire founder Steve Winn, who sold the company that year for $10.2 billion to private equity firm Thoma Bravo.

Since then, state and district attorneys have filed civil suits against RealPage, and the Justice Department has opened a criminal investigation into its software and customers.

Founded in 1998 and headquartered in Richardson, RealPage analyzes data provided by landlords on apartment prices and leases to recommend rental unit prices in a specific area.

It can instruct them when to raise the rent and by how much. It can also estimate the optimal prices for new properties entering the rental market.

RealPage founder and longtime CEO Steve Winn sold the company in 2021 for $10.2 billion

In recent years, the Biden administration has sought to target price gouging in various pockets of the American economy – and to file antitrust lawsuits against large companies such as Google and Amazon.

Some of its investigations have also targeted markets such as concert tickets through LiveNation and payment processors with an investigation into Visa.

On its website, RealPage notes that ‘AI Revenue Management delivers data-driven AI machine learning insights to balance supply and demand at your property and makes recommendations that optimize performance.’

In a twist of fate, the plaintiffs have cited in court documents RealPage’s own marketing material to argue that it has been used to drive up prices.

On its website, the firm notes that its pricing methodology enables landlords to ‘outperform the market in good times and bad’.

Kris Mayes, Arizona’s attorney general, suggested in a complaint that “outpace” is code for charging higher prices than would be charged in a market untainted by collusion.

“This is price fixing and it is illegal,” the complaint read.

RealPage also boasts that using its tools can provide returns that ‘exceed the market by 2 percent to 5 percent.’

It’s not the first time a company has found itself in controversy for its use of algorithmic or dynamic pricing, which typically uses data to get a head start on the consumer and maximize profits.

Last month, Wendy’s was thrust into the spotlight after its executives announced plans to roll out dynamic pricing, which would change the price of food items based on demand.

RealPage is headquartered in Richardson, Texas and was founded in 1998

RealPage’s pricing software is used by property managers to guide how much to charge tenants. It can instruct them when to raise the rent and by how much

Last month, North Carolina Attorney General Josh Stein announced that the state was launching its own probe into the software.

“Housing is already too expensive for so many North Carolinians,” he said.

“Companies cannot enter into agreements to illegally raise the rents of tenants. My investigation into RealPage will shed light on whether this company’s operations are in violation of the law and increasing rental costs for residents,” he added.

In response to the lawsuits, the tech firm has denied any wrongdoing, arguing instead that the use of revenue management tools and software is well-established in various industries, by airlines, hotels and car rental companies.

The company did not come under significant scrutiny until 2022 after ProPublica published a series of stories about the tech company’s use of a ‘mysterious algorithm to help landlords squeeze the highest possible rent from tenants.’

It found that use of RealPage’s pricing software was widespread in some markets.

In one zip code in downtown Seattle, 70 percent of more than 9,000 apartments were controlled by 10 property managers, each of whom used RealPage’s software in at least some of its buildings.

And in the Senate, Sen. Ron Wyden of Oregon introduced legislation to prevent algorithmic facilitation of rental housing cartels in January.

“Setting prices with an algorithm is no different than doing it over cigars and whiskey at a private club,” Wyden said at the time.

“While it is my view that these cartels already violate existing antitrust laws, I want the law to be painfully aware that algorithmic rent pricing is a crime.”