New limits for a rent algorithm that prosecutors say let landlords drive up prices

Landlords could no longer rely on rent-pricing software to quietly track each other’s moves and push rents higher using confidential data, under a settlement between RealPage Inc. and federal prosecutors to end what critics said was illegal “algorithmic collusion.”

The deal announced Monday by the Department of Justice follows a yearlong federal antitrust lawsuit, launched during the Biden administration, against the Texas-based software company. RealPage would not have to pay any damages or admit any wrongdoing. The settlement must still be approved by a judge.

RealPage software provides daily recommendations to help landlords and their employees nationwide price their available apartments. The landlords do not have to follow the suggestions, but critics argue that because the software has access to a vast trove of confidential data, it helps RealPage’s clients charge the highest possible rent.

“RealPage was replacing competition with coordination, and renters paid the price,” said DOJ antitrust chief Gail Slater, who emphasized that the settlement avoided a costly, time-consuming trial.

Under the terms of the proposed settlement, RealPage can no longer use that real-time data to determine price recommendations. Instead, the only nonpublic data that can be used to train the software’s algorithm must be at least one year old.

“What does this mean for you and your family?” Slater said in a video statement. “It means more real competition in local housing markets. It means rents set by the market, not by a secret algorithm.”

RealPage attorney Stephen Weissman said the company is pleased the DOJ worked with them to settle the matter.

“There has been a great deal of misinformation about how RealPage’s software works and the value it provides for both housing providers and renters,” Weissman said in a statement. “We believe that RealPage’s historical use of aggregated and anonymized nonpublic data, which include rents that are typically lower than advertised rents, has led to lower rents, less vacancies, and more procompetitive effects.”

Over the past few months, more than two dozen property management companies have reached various settlements over their use of RealPage, including Greystar, the nation’s largest landlord, which agreed to pay $50 million to settle a class action lawsuit, and $7 million to settle a separate lawsuit filed by nine states.

The governors of California and New York signed laws last month to crack down on rent-setting software, and a growing list of cities, including Philadelphia and Seattle, have passed ordinances against the practice.

Ten states — California, Colorado, Connecticut, Illinois, Massachusetts, Minnesota, North Carolina, Oregon, Tennessee and Washington — had joined the DOJ’s antitrust lawsuit. Those states were not part of Monday’s settlement.