The Department of Justice (DOJ) on Friday filed a lawsuit against a rental software company that offers an artificial intelligence (AI) tool for landlords to use in assessing rental market prices as they determine what to charge renters.
It also accused the company of maintaining a monopoly in the market for commercial revenue management software, and the DOJ seeks to “end RealPage’s illegal conduct and restore competition for the benefit of renters.”
RealPage has denied those allegations, saying that its software merely advises landlords about whether they should set rent for a given unit higher or lower.
“In fact, in 2017 when the DOJ granted antitrust clearance for our acquisition of LRO, the DOJ also analyzed extensive information about our revenue management products without objecting to them in any way.
We continue to educate the DOJ about our revenue management products, which operate fundamentally the same as they did at the time of that 2017 review.”
RealPage also noted that as of May 2023, only 6.7% of rental units nationally used its AI Revenue Management (AIRM) or YieldStar tools, while 3.7% used its Lease Rent Operations.
Norquist added that the software’s suggestion is not compelling landlords or renters to offer or sign leases at the suggested rate.
“The most important thing they could do to lower rental prices is to stop borrowing trillions of dollars a year,” Moore said.
On Friday, the Department of Justice (DOJ) brought legal action against a rental software provider that provides landlords with an artificial intelligence (AI) tool to help them determine what to charge tenants based on rental market prices.
By entering into agreements with “competing landlords who agree to share with RealPage nonpublic, competitively sensitive information about their apartment rental rates and other lease terms to train and run RealPage’s algorithmic software,” which offers recommendations on apartment pricing and terms, the DOJ suit claims that RealPage violated antitrust law. RealPage was also charged with maintaining a monopoly in the commercial revenue management software market. The DOJ is attempting to “end RealPage’s illegal conduct and restore competition for the benefit of renters and its tenants.”. “. .
The lawsuit was filed amid congressional pressure by the Biden-Harris administration last month to compel corporate landlords to pick between maintaining federal tax credits and adhering to a 5 percent rent increase cap. The campaign of vice president Kamala Harris has also demanded that rental companies refrain from using algorithms, claiming that doing so allows them to “collude with each other and jack up rents dramatically.”. “. .
Claiming that its software only counsels landlords on whether to set rent higher or lower for a particular unit, RealPage has refuted those accusations. The company further stated that it only uses nonpublic data in anonymized forms to prevent landlords from learning about the prices of their competitors, which it believes complies with antitrust law, and that it does not encourage them to keep units off the market.
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The company provided a statement to FOX Business saying, “RealPage’s revenue management software is purposely built to be legally compliant, and we have a history of working constructively with the DOJ to show that.”. “To be exact, the DOJ examined a great deal of data regarding our revenue management products in 2017 and gave its approval for our acquisition of LRO without raising any concerns. Since our revenue management solutions still function essentially the same as they did during that 2017 review, we keep educating the DOJ about them. “.”.
Customers “decide their own rent prices, always have 100 percent discretion to accept or reject software price recommendations, are never punished for declining recommendations, and accept recommendations at widely varying rates that are far lower than has been falsely alleged,” according to written statements on the company’s website. “. .
In May 2023, 3.7 percent of rental units nationwide used RealPage’s Lease Rent Operations tool, while only 6.7 percent used its AI Revenue Management (AIRM) or YieldStar tools.
Changes in the housing market are imminent; buyers and sellers may be impacted.
The founder and president of Americans for Tax Reform, Grover Norquist, told FOX Business that the DOJ’s investigation into AI rental software companies “smells of an effort to set up national rent control, which has been discussed by other parts of the Democratic Party.”. “.”.
Furthermore, according to Norquist, neither renters nor landlords are required to accept or sign leases at the recommended rate by the software’s recommendation.
“If it doesn’t make sense, everyone can and will ignore it,” he stated. This is why it’s absurd for those who believe that prices should be set by the government to imply that when someone says, “Here are the prices as of right now,” there is collusion and an issue. “. .
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The best prices on goods, such as travel and accommodation, are found by consumers using algorithms, according to Stephen Moore, a senior visiting fellow in economics at the Heritage Foundation, who spoke with FOX Business. This is because algorithms are effective at matching supply and demand and are useful in the housing industry.
Moore stated that the Department of Justice is advocating for making it unlawful for landlords to use software and algorithms to determine the rental prices of their properties. “If that’s the case, we ought to forbid customers from doing the same. These algorithms also have advantages because they effectively match the seller who wishes to sell a product with the customer who values it the most. Here, it’s a rental apartment. ****.
He went on, “Having a really effective, real-time pricing management system where prices can change moment by moment, just like the price of a stock does, enhances consumer and business welfare at the same time.”.
Moore suggested that a better approach to dealing with high housing costs would be to address inflation and the high interest rates that follow.
“Stop borrowing trillions of dollars a year is the most important thing they could do to lower rental prices,” Moore stated. Since the mortgage rate increased dramatically—from 3% to 6.5 percent after Trump took office—people are paying twice as much for their mortgage payments, which severely hinders their ability to afford a new home—in this case, an apartment. This is the reason why rental and housing prices are rising. “. .
