by Charlene Crowell
In August, the Department of Justice and eight state Attorneys Generals filed a lawsuit charging RealPage Inc., a commercial revenue management software firm providing apartment managers with illegal price fixing software data that violates antitrust law and artificially increases costs for millions of renters across the nation.
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After a nearly two-year investigation, the agencies found an estimated 80 percent of renters are forced to pay falsely inflated rates while also denying honest landlords an opportunity to compete for these same customers.
The lawsuit claims RealPage’s practices are federal interstate commerce violations provided by the long-standing Sherman Act enacted in 1890.
“When the Sherman Act was passed, an anticompetitive scheme might have looked like robber barons shaking hands at a secret meeting,” stated. “Today, it looks like landlords using mathematical algorithms to align their rents. But antitrust law does not become obsolete simply because competitors find new ways to unlawfully act in concert. And Americans should not have to pay more in rent simply because a company has found a new way to scheme with landlords to break the law.”
Joining the civil lawsuit are the Attorneys General of California, Colorado, Connecticut, Minnesota, North Carolina, Oregon, Tennessee, and Washington.
Falsely-inflated rental costs worsen the already disproportionate financial strain felt by people of color. Tight living spaces that come at sky-high costs especially harm disproportionate numbers of Black and Latino renters. As Harvard’s Joint Center for Housing Studies 2024 State of the Nation’s Housing noted:
“More than half of Black (57 percent), Hispanic (54 percent), and multiracial (50 percent) renter households were cost burdened at last measure in 2022… While racial income inequality explains some of the difference, burden rates remain disproportionately high for lower-income renters of color, at 85 and 87 percent for Black and Hispanic renters, respectively, as compared to 80 percent of their white counterparts.”
The complaint alleges that RealPage contracts with competing landlords who agree to share with the firm nonpublic, competitively sensitive information about their apartment rental rates and other lease terms. This data is then used with RealPage’s algorithmic pricing software to generate recommendations, including apartment rental pricing and other terms, for participating landlords. The use of rivals’ data trove of competitively sensitive information violates interstate commerce law aimed at preventing monopolies.
The complaint further alleges that in a free market, these landlords otherwise would be competing independently to attract renters based on pricing, discounts, concessions, lease terms, and other dimensions of apartment leasing.
“Healthy competition in the rental housing market requires two key ingredients,” added Deputy Attorney General Lisa Monaco. “The market must be dictated by open and honest competition among landlords. And, renters must be able to negotiate prices with landlords — without the specter of collusion…. But RealPage has shut away those ingredients, changed the locks, and thrown away the keys. That’s collusion — and that’s against the law.”
North Carolina Attorney General Josh Stein, whose office filed the joint lawsuit on August 23 in the Middle District of North Carolina, also weighed in on the lawsuit’s importance.
“Few things are as important as our homes – but too many North Carolinians struggle to afford their apartment,” said Attorney General Josh Stein. “Rents are already too high. I will not tolerate any company scheming to block healthy competition among landlords. It raises rent, and it’s illegal.”
For one North Carolina local official, the lawsuit is an opportunity to right a grievous wrong.
“Between 2010 and 2020 the median rent in Wake County jumped up 40 percent,” said Shinica Thomas, Wake County Board of Commissioners Chair. “That costs families an extra $4,200 a year. For a household that’s struggling to make ends meet, that can be the difference between stability and eviction.”
A growing metro market, Wake County is home to the state’s capitol, Raleigh. But according to multiple independent housing research reports, high rental rate increases have occurred throughout the nation, in communities of varying sizes and locales.
For example, monthly rents in Knoxville, TN reached $1,818 in February 2024, a 59.1 percent increase from 2019, according to this spring, SmartAsset.com.
More recently, Apartments.com found posted national rental rate averages by state and city. Nationally, the average national monthly cost of a one-bedroom apartment with 699 square feet is $1,563.
On a statewide basis, average rental costs in California, the District of Columbia, Massachusetts, New Jersey and New York all surpass $2,000 for dwellings with as low as 631 square feet to no more than 727 square feet. Conversely, Oklahoma is one of the states with the lowest average rent of $880 for a 687 square foot unit.
Comparing costs and square footage by city, Apartments.com additionally found New York City had the highest monthly rental cost of $3,865, and the smallest square footage at 598 square feet. The only other city, Boston ($3,450), was the only other city with more than had over $3,000 in average rental costs. All of the following cities average rental costs exceeding $2,000 for less than 700 square feet in Los Angeles, Miami, Oakland, San Diego and Seattle.
“Access to affordable housing options is becoming increasingly difficult,” said Monica Burks, Policy Counsel at the Center for Responsible Lending. “Anti-competitive practices that inflate already high housing costs disadvantage individuals and families working hard to secure this basic need.”
Charlene Crowell is a senior fellow with the Center for Responsible Lending. She can be reached at [email protected].
