The downtown section of Tucson, one of the cities where rents have sharply increased because of RealPage pricing – Bill Morrow, CC 2.0. BY-SAAs part of a criminal investigation, the FBI raided the offices of Cortland, a property management company operating in Arizona to find out if it was involved in an illegal price-fixing scheme centered around AI-driven rent control software.
In February, the Arizona Attorney General announced a lawsuit against nine major rental companies for alleged price fixing. All nine as well as Cortland rely on RealPage, a pricing algorithm that takes market data and determines how high rents can be in order to maximize revenue.
A feature piece by investigative outlet ProPublica in 2022 reports that following the acquisition of a rival, by 2017 RealPage was pricing 2 million units nationwide. Many rental companies found that they could increase their net operating income between 3 and 7% without minimizing vacancies—in other words, they could make more money even though they had fewer tenants.
As early as 2018, ProPublica reports, the FTC was aware of RealPage's activities, and the consideration that the firm's breadth of clientele combined with its encouragement to share private pricing information and market data between RealPage users to increase the accuracy of the algorithm was reminiscent of the particulars in previous antitrust cases in the 20th century.
Since that ProPublica story, rents in Arizona have gone up 30% on average, with even higher increases seen in parts of Phoenix and Tucson.
The Copper Courier, an Arizona outlet, reports that the 9 rental management companies named in the Arizona AG suit not only controlled over 100,000 rental units in the metropolitan areas where rents were rising the fastest, but that they all used RealPage software in at least some cases to set unit prices.
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“The conspiracy allegedly engaged in by RealPage and these landlords has harmed Arizonans and directly contributed to Arizona’s affordable housing crisis,” said AG Kris Mayes. “This conspiracy stifled fair competition and essentially established a rental monopoly in our state’s two largest metro areas.”
The Courier reports that the FBI is investigating RealPage's influence in allegations of price-fixing and monopolistic behavior in 8 states and Washington D.C.
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RealPage denies and rejects the charges, saying the algorithm includes publically available data, among other objections.
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