Rent prices are high across the United States, but the reason may not be the only one DEMAND OR inflation. According to lawsuits filed across the country, including one recently filed in Arizona, a pricing algorithm may be to blame.
On Wednesday, Arizona Attorney General Kris Mayes filed a lawsuit vs. RealPage, a $9 billion software company that provides landlords with price recommendations on 4.5 million residential units across the US
Mayes supposed that landlords worked with RealPage and nine other property management companies listed as co-defendants to stifle competition and essentially create a “rental monopoly” in Arizona's biggest cities — causing families to see rent increase of 30% to 76% within six years in process.
For context, the average monthly rent for a 2-bedroom apartment was $1,013 in general in the US in January 2017, according to Statista estimates. By November 2023, that average had risen to $1,317, about a 30% increase. A 76% increase in rent nationwide would make the average rent $1,782.88.
According to the Arizona Attorney General's Office, RealPage “used its revenue management algorithm to illegally set prices” for the network of owners who used its services.
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Arizona Attorney General Kris Mayes. Photo by Mario Tama/Getty Images
“They weren't competing at all,” Mayes said. “They were colluding with each other. Using this sensitive data RealPage directed competitors on which units to rent, when to rent them and at what price. This was not a fair market at work, this was a fixed market.”
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Mayes is not the first to voice concerns about RealPage or to take legal action against the company.
Earlier this month, DC Attorney General Brian Schwalb also brought a lawsuit against RealPage for over 50,000 DC apartments using the company's software that allegedly charged inflated rents for years.
“Owners are obligated, under the terms of their agreement with RealPage, to pay what RealPage tells them,” Schwalb told CNBC in that time.
Although RealPage told the media that its customers are not required to use the rent increases its algorithm, a 2022 investigation by ProPublica found that owners accepted up to 90% of the algorithm's suggestions.
TENANTS in San DiegoCalifornia first filed a federal lawsuit against RealPage in 2022. Lawyers for RealPage and the other defendants stated in response at the time that users were under no obligation to follow its software and that the fact that RealPage and other co-defendants participated in online groups and associations “does not imply collusion.”
Since then, more than 20 lawsuits have been filed in the case by defendants in various cities, including Seattle, Boston and New York. joined in a complaint in a Nashville federal court last year. Latest records from Arizona and DC join the wave of antitrust complaints RealPage faces all over the country.
Decisions in these cases could have ripple effects across the U.S. affecting the way landlords set rents. Multifamily investment consultant Tony Konstant has written that a judgment could set a precedent for what kind of software is allowed and what is not, and prevent future misuse of potentially anticompetitive technology.