The legal troubles keep mounting for RealPage, the Texas-based PropTech firm. Three Congressional Democrats are calling on the U.S. Department of Justice to investigate whether the company’s rent price-setting software is undermining competition and a violation of antitrust rules. RealPage has been in hot water since a ProPublica investigation in October revealed that the software YieldStar uses rent data to power an algorithm that suggests rent prices for landlords and could be engaging in possible anticompetitive business practices.
The inner workings of YieldStar likely aren’t much of a surprise to multifamily professionals, but the ProPublica report drew enough widespread anger across the nation to lead to three separate lawsuits already. The recent letter to the DOJ from Senators Amy Klobuchar, Richard Durbin, and Corey Booker says, “We are concerned that the use of this rate setting software essentially amounts to a cartel to artificially inflate rental rates in multifamily residential buildings.” The letter then encourages the DOJ to take action to protect renters and competition in the multifamily market.
Interestingly, the DOJ reviewed RealPage’s plans five years ago to acquire one of its biggest rivals in pricing software, Lease Rent Options, and they declined to block the merger. The merger led to RealPage doubling the number of apartments it was pricing. RealPage has acquired more than 10 companies since 2016.
In October, a class-action lawsuit was filed against RealPage and seven apartment operators, along with another recent lawsuit alleging price collusion in the student housing market. All these lawsuits and a possible federal investigation into RealPage could have enormous implications for the real estate and PropTech industries, including if landlords will be able to use YieldStar and similar programs. Stay tuned.