In a bombshell antitrust lawsuit filed today, the U.S. Department of Justice has accused real estate technology giant RealPage of orchestrating a vast rent-fixing conspiracy that has inflated housing costs for millions of Americans. The complaint, filed in the U.S. District Court for the Middle District of North Carolina, alleges that RealPage’s popular pricing software enabled landlords to illegally share sensitive data and coordinate rent increases, subverting normal market competition.

At the heart of the case is RealPage’s AI-powered revenue management software, which is used to set rents at an estimated 4 million apartment units across the country. According to the lawsuit, this software serves as a vehicle for unlawful information sharing between competing landlords, allowing them to align their pricing strategies and push rents higher than a truly competitive market would allow.

The DOJ’s complaint paints a damning picture of RealPage’s business practices, citing numerous examples of the company’s own executives boasting about their ability to manipulate the rental market. In one particularly striking instance, a RealPage Vice President of Revenue Management Advisory Services allegedly stated that “there is greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down.” The same executive reportedly claimed that if enough landlords used RealPage’s software, they would “likely move in unison versus against each other.”

These statements appear to fly in the face of antitrust law, which is designed to protect consumers by ensuring robust competition between businesses. The Justice Department argues that RealPage’s practices have replaced healthy competition with coordination, substituting “unity for rivalry” to the detriment of renters nationwide.

The lawsuit details how RealPage’s software, known as AI Revenue Management (AIRM) and YieldStar, collects vast amounts of confidential data from landlords on a daily basis. This includes highly sensitive information such as actual rental rates from executed leases, occupancy rates, and even future apartment availability. RealPage then aggregates this data and uses it to generate pricing recommendations for all participating landlords.

Crucially, the DOJ alleges that landlords understand and expect that their data will be used to inform pricing for their competitors, and vice versa. This creates a feedback loop that tends to push rents ever higher. As one landlord quoted in the complaint put it, RealPage’s software “can eliminate the guessing game” when it comes to pricing decisions.

The lawsuit cites specific examples of how this plays out in practice. For instance, RealPage allegedly explained to one client that by using competitors’ data, “we may have a $50 increase instead of a $10 increase for that day.” The company refers to this as “stretch and pull pricing,” a practice that allows landlords to extract maximum revenue from tenants without fear of being undercut by competitors.

Perhaps most alarmingly, the DOJ claims that RealPage’s software is designed to resist normal market forces that would typically bring rents down during periods of low demand. The complaint quotes RealPage materials stating that their tool “helps curb [landlords’] instincts to respond to down-market conditions by either dramatically lowering price or by holding price when they are losing velocity and/or occupancy.” Instead, the software allegedly “ensures that [landlords] are driving every possible opportunity to increase price even in the most downward trending or unexpected conditions.”

To further bolster this effect, RealPage reportedly built in several “guardrails” to its software that artificially keep prices high or minimize decreases. These include a “hard floor” that prevents recommendations below a certain price point, a “revenue protection mode” that reduces target occupancy rather than lowering prices, and a feature called “the governor” that favors price increases over decreases.

The lawsuit also alleges that RealPage actively discourages landlords from offering discounts or negotiating with potential tenants. The company’s “best practices” guide for clients reportedly states simply: “Eliminate concessions.” This stance, when adopted across multiple competing properties, further reduces renters’ ability to find affordable options.

Beyond the software itself, the DOJ claims that RealPage facilitated direct communication between competing landlords through “user group” meetings. At these gatherings, representatives from rival property management companies allegedly discussed sensitive topics such as managing lease expirations, pricing amenities, and strategies for handling market downturns.

The complaint cites a particularly egregious example from a May 2021 user group meeting. Over a period of about 15 minutes, representatives from 15 different landlords reportedly shared their plans for rental increases and use of concessions in a group chat. Comments included statements like “increasing, back to normal,” “major rent growth on the west coast,” and “we are pushing to get back to normal. Sending increases.”

The Justice Department argues that these practices have allowed RealPage to not only harm renters but also to monopolize the market for commercial revenue management software. The company allegedly controls at least 80% of this market, with its closest competitor holding just 12% share.

If the allegations in the lawsuit are proven true, the implications for the rental housing market could be enormous. The case could potentially resolve the rapid and sometimes inexplicable rent increases that many Americans have experienced in recent years, particularly in major urban areas.

The lawsuit seeks to end RealPage’s allegedly anticompetitive practices and restore normal market competition in rental housing. This could lead to more affordable rents for millions of Americans who have struggled with rising housing costs.

As of this writing, RealPage has not publicly responded to the allegations. However, the case is likely to be closely watched by both the real estate industry and consumer advocates concerned about housing affordability. If successful, it could reshape how apartment rents are set across the country and potentially provide relief to renters who have been squeezed by ever-increasing housing costs.

As this landmark case unfolds, it serves as a stark reminder of the power of big data and artificial intelligence to shape markets – and of the need for vigilant enforcement of antitrust laws to ensure these tools are not used to unfairly manipulate prices at the expense of consumers.