Rental prices are high across the United States, but the reason may not just be demand or inflation. According to lawsuits filed across the country, including one filed most recently in Arizona, a pricing algorithm may be to blame.
On Wednesday, Arizona Attorney General Kris Mayes filed a lawsuit against RealPage, a $9 billion software company that provides landlords with price recommendations in 4.5 million housing units across the United States.
Mayes said the landlords worked with RealPage and nine other property management companies listed as co-defendants to suppress competition and essentially create a “rental monopoly” in Arizona’s largest cities, resulting in families seeing increases of rents from 30% to 76% within six years in the process.
For context, the average monthly rent for a 2-bedroom apartment was $1,013 overall in the United States in January 2017, according to Statista estimates. By November 2023, that average had grown to $1,317, an increase of about 30%. A 76% rent increase nationwide would have brought the average rent to $1,782.88.
According to the Arizona U.S. Attorney’s Office, RealPage “used its revenue management algorithm to illegally fix 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 conspiring with each other. Using this sensitive data RealPage told competitors which units to rent, when to rent them and at what price. This was not a fair market, it was a fixed market.”
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Mayes isn’t the first to express concerns about RealPage or take legal action against the company.
Earlier this month, D.C. Attorney General Brian Schwalb also filed a lawsuit against RealPage over more than 50,000 D.C. 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 charge what RealPage tells them,” Schwalb told CNBC at the time.
Although RealPage told the outlet that its customers are not required to use the rent increases recommended by its algorithm, a 2022 investigation by ProPublica revealed that landlords accepted up to 90% of the algorithm’s suggestions .
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Renters in San Diego, California first filed a federal lawsuit against RealPage in 2022. Lawyers for RealPage and other defendants said in response at the time that users were not obligated to follow its software and that the fact that RealPage and other co-defendants took part in online groups and associations “does not imply collusion.”
Since then, more than 20 lawsuits on the issue by defendants in several cities, including Seattle, Boston and New York, were consolidated into a complaint in federal court in Nashville last year. The latest filings from Arizona and DC join the wave of antitrust complaints RealPage faces across the country.
The rulings in these cases could have ripple effects across the United States by affecting how landlords set rents. Multifamily investment advisor Tony Konstant wrote that a ruling could set a precedent for what type of software is allowed and what is not, and prevent future misuse of the technology that could be potentially anticompetitive.