Justice Department Sues RealPage Over AI-Powered Scheme to Hike Rents
By Emma Rault, community reporter
The Department of Justice and eight states, including California, are 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 Joe 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 several 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.
However, 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%. A recent UCLA survey found that 4 in 10 renters in LA County worry about becoming homeless.
Several 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.
Sidebar
RealPage’s AI Pricing Blamed for Rent Inflation in LA Multifamily Housing
The Los Angeles Submarket corresponds to the Census Bureau’s Los Angeles-Long Beach-Anaheim MSA and includes Los Angeles and Orange counties. There are approximately 522,937 multifamily rental units within the Los Angeles Regional Submarket.
Within the Los Angeles Submarket, the following Defendants own or operate multifamily units priced with RealPage RMS: AIR, AMC, Avenue5, Bell, Bozzuto, Brookfield, Camden, CONAM, Equity, Essex, FPI Management, Greystar, Pinnacle, Related, Sares Regis, Simpson, Trammell Crow, UDR, Windsor, and Winn.
The widespread adoption of Defendant RealPage’s RMS has caused rent to increase explosively in recent years, with Los Angeles renters paying 41% more today than they paid in 2016.
Through its suite of business products, including RealPage’s RMS, RealPage collects and shares pricing and occupancy information for a high concentration of multifamily residential apartment units within the Los Angeles Submarket, as self-reported by RealPage on its website: https://www.realpage.com/explore/main/ca/los-angeles-long-beach-glendale.
Property owners and managers who use revenue management software account for
approximately 79% of all multifamily rental units in the Los Angeles Submarket. Given that RealPage’s RMS accounts for over two-thirds of revenue management software used in U.S. the multifamily rental housing industry by both owners and managers, the Owners, Managing Defendants, and Owner-Operators, along with their co-conspirators who use RealPage’s RMS, account for over 52% of the multifamily rental market in the Los Angeles Submarket.
Below is a partial list of apartment complexes organized by residential management companies named as defendants in class-action lawsuits for price-fixing through artificial intelligence:
Apartment Management Consultants
The Renaissance at City Center (Carson)
Union South Bay (Carson)
Elevate Long Beach (Long Beach)
Volta On Pine (Long Beach)
Avenue5 Residential, LLC (“Avenue5”)
Marine View (San Pedro)
Camden Property Trust (“Camden”)
Camden Harbor View (Long Beach)
Equity Residential (“Equity”)
Hathaway Apartments (Long Beach)
Bay Hill Apartments (Long Beach)
Essex Property Trust, Inc. (“Essex”)
Pathways at Bixby Village (Long Beach)
Marbrisa (Long Beach)
FPI Management, Inc. (“FPI Management”)
Banning Villa Apartments (Wilmington)
Greystar
Suncrest at Ponte Vista (San Pedro)
San Pedro Bank Lofts (San Pedro)
Harborview (San Pedro)
Avana Rancho Palos Verdes Apartments (RPV)
Sares Regis Group Commercial, Inc. (“Sares Regis”)
The Linden (Long Beach)
The Pacific (Long Beach)
The Alamitos (Long Beach)
WinnCompanies LLC and WinnResidential Manager Corp. (collectively “Winn”)
Beachwood Apartments (Long Beach)
Park Pacific Towers (Long Beach)
The Don Hotel (Wilmington)
Vista Lee Rosa (Harbor City)
Tierra Vista Communities at Los Angeles AFB (San Pedro – housing on base)