Justice Department Sues RealPage Over AI-Powered Scheme to Hike Rents

By Emma Rault, Columnist

The Department of Justice or DOJ — along with eight states, including California — is suing software company RealPage, alleging that their AI rent-setting software has inflated rents across the country. Earlier this year, Random Lengths was the first to report on the use of RealPage’s algorithm by corporate landlords in Los Angeles.

RealPage collects private information that landlords don’t usually share with their competitors, such as lease expiry dates, vacancy rates, and rents being paid by current tenants. Its algorithm then uses this pooled information to tell landlords how much to charge.

In March, President Biden said in his State of the Union Address, “For millions of renters, we’re cracking down on big landlords who break antitrust laws by price-fixing and driving up rents.” That same month, the Department of Justice launched a criminal investigation into RealPage and some of its corporate customers.

Price fixing is when a number of players from the same industry get together and figure out what to charge. Technology is changing what this looks like: it’s not a group of landlords getting together “in a smoke-filled room” anymore, as Washington, D.C. Attorney General Brian Schwalb told NPR.

But regulators are coming to the conclusion that price fixing by algorithm is still price fixing. 

Critics say the algorithm artificially pushes rents up beyond market rate — and because it is used by major players with real-estate portfolios worth billions of dollars, it has had a major impact on the rental market, hurting millions of Americans who are struggling to keep their heads above water. The New York Times reports that annual rent growth nationwide peaked in 2022 at nearly 16 percent. A recent UCLA survey found that 4 in 10 renters in LA County worry about becoming homeless. 

Several of the corporations named in class-action lawsuits previously filed against RealPage also manage apartment buildings all over Los Angeles. 

Corporate giant Greystar, for example, manages more than 500 units in San Pedro alone. Leasing managers for three of Greystar’s four San Pedro buildings confirmed to Random Lengths that RealPage’s AI software was being used to set rents. 

At a campaign event in North Carolina earlier this month, Vice President Kamala Harris, the Democratic presidential nominee, mentioned algorithmic price-fixing in her remarks on the affordability crisis. “It’s anticompetitive, and it drives up costs. I will fight for a law that cracks down on these practices,” she said.