Landlords use underhanded tactics to raise rents, US lawsuit says

The U.S. Department of Justice is cracking down on a stormy tactic that landlords have used to “circumvent strong competition” in the rental market, leading to higher prices for renters across the country.

The Justice Department filed a lawsuit against RealPage, a company that sells software widely used by U.S. homeowners, on August 23. The lawsuit claims the company’s software allows owners to collect “non-public information from competing owners” to make price recommendations.

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“RealPage’s revenue management software ingests non-public rental rates, future apartment availability, and changes in competitor rates and occupancy on a daily basis,” the lawsuit states. “As competing landlords raise their rents, RealPage’s software causes other competing landlords to raise their rents as well.”

The Justice Department claims that RealPage “can eliminate the guessing game” for owners’ pricing decisions, which stifles competition. It also claims that RealPage has successfully closed certain discounts for tenants across the country.

“RealPage also reviews and analyzes other landlord policies, including attempting — and often succeeding — to end tenant-friendly concessions (such as a month’s free rent or tax waivers) to attract or retain tenants,” it says in process. “A significant number of landlords effectively agree to outsource their pricing function to RealPage with automatic acceptance or other settings so that RealPage as the intermediary, and not the open market, determines the price the tenant will pay. “

A photo shows a furnished apartment at the Wedgewood Houston Memorial in Nashville, Tenn.

Image source: + AJ Capital Partners

One landlord who used YieldStar, which is one of RealPage’s yield management systems, told RealPage that within a week of using the system, he was able to terminate concessions and increase his rents by over 25% in – an interval of 11 months, according to the process.

He stated that he was now pricing rents at the top of his company peers, which “brought in the rest of the Comps rents.”

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“Tenants are entitled to the benefits of vigorous competition among landlords,” the Justice Department said in the lawsuit. “In prosperous times, that competition should limit rent growth; in tougher times, competition should drive down rent, making housing more affordable. RealPage has built a business out of frustrating the natural forces of competition.”

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Rents continue to rise across the country

The lawsuit comes at a time when consumers are struggling with inflated rents, which is a trend that started during the Covid pandemic in 2020. According to a recent analysis from NerdWallet, rent prices are now 33.4% higher than they were before the pandemic and are still on the rise. In July, rents were 3.4% higher than in the same period in 2023.

The Justice Department lawsuit appears to be part of President Joe Biden’s latest efforts to “end corporate fraud,” which involves promoting competition, ending “unfair and illegal” pricing and protecting consumers in the American economy.

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