- Four senators urged U.S Assistant Attorney General Jonathan Kanter to direct the Department of Justice to ensure that renters “do not fall victim to corporate landlords and anti-competitive forces,” in a letter sent last week.
- The group of senators, which includes Elizabeth Warren (D-MA), Tina Smith (D-MN), Bernie Sanders (I-VT) and Edward J. Markey (D-MA), recently completed an investigation of RealPage’s YieldStar product to determine how the software affects the rental market.
- “Given these findings, the DOJ should act to protect American families and closely review rent-setting algorithms like YieldStar to determine if they are having anti-competitive effects on local housing markets that have seen increased institutional investor activity,” the senators said in the letter.
Overall, RealPage’s software is used to help set prices for more than 4 million units, approximately 8% of all rental units nationwide, according to the letter. In addition, the software uses transactional data from the rent rolls of more than 13 million units. It is prevalent in some of the areas with the largest rent increases, according to the senators.
The senators charged that the rise of institutional investment in rental housing and rent-setting algorithms has weakened competition, resulting in substandard services for renters and leading to unnecessarily high housing costs.
During the investigation, RealPage told the senators that its algorithm is built on the idea that an individual apartment community’s “internal supply and demand dynamics are much more important than external factors, such as rents offered by other properties.”
Although the software uses publicly available information to generate a range of rents, “YieldStar supplements these rents with data, where available, on achieved effective rents based on executed leases,” according to the senators.
The DOJ is already taking a look at information sharing, recently rescinding a trio of policy statements outlining permissible conduct related to information sharing in the healthcare industry, according to Bloomberg Law.
“This guidance provided a safe harbor to companies like RealPage, and we now know – based on the findings of our investigation – that safe harbor may have provided potential opportunities for de facto collusion and price setting,” according to the senators.
RealPage said that it participated in the investigation.
“RealPage appreciates the opportunity to work with the senators’ offices and, more generally, we are always willing to engage policy stakeholders to ensure an informed and comprehensive understanding of the benefits we contribute to the rental ecosystem,” a company spokesperson told Multifamily Dive.
Investigative report prompted a closer look
The four senators cited a ProPublica story from last year that accused RealPage of using a “mysterious algorithm to help landlords push the highest possible rents on tenants.”
That story prompted both lawsuits and investigations. Another group of senators — Amy Klobuchar (D-MN), Dick Durbin (D-IL) and Cory Booker (D-NJ) — sent a letter to DOJ urging it to look into RealPage. ProPublica reported that the agency’s Antitrust Division had begun an investigation of the company in November, but the agency wouldn’t confirm the inquiry to Multifamily Dive.
In addition, last fall a group of renters in student housing and conventional apartments filed suit against RealPage and groups of apartment operators. The company vowed to fight the suits.
“Rent prices are determined by various factors, including supply and demand as well as each property owner’s unique circumstances,” RealPage said in an email to Multifamily Dive last fall. “There is a housing supply shortage and that alone drives prices higher. Occupancy has been at an all-time high.”
RealPage noted that revenue management is used across many industries and that it isn’t the only option for property operators in the U.S.
“RealPage’s revenue management software is purposely built to be legally compliant,” the company said in the statement. “It focuses on the internal supply and demand dynamics at a particular property and does not consider or have any visibility into availability [supply] at competing properties.”
Click here to sign up to receive multifamily and apartment news like this article in your inbox every weekday.