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 gives landlords pricing recommendations in 4.5 million housing units across the U.S.
Mayes alleged that 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 — causing households to see 30% to 76% rent increases within six years in the process.
For context, the average monthly rent for a 2-bedroom apartment was $1,013 overall in the U.S. in January 2017, according to Statista estimates. By November 2023, that average had grown to $1,317, about a 30% increase. A 76% rent increase nationwide would have made the average rent $1,782.88.
According to the Arizona Attorney’s Office, RealPage “used its revenue management algorithm to illegally set prices” for the network of landlords who used its services.
Related: Renters on a Budget Should Look in These 27 Cities Where Apartment Prices Are Plunging
Arizona Attorney General Kris Mayes. Photo by Mario Tama/Getty Images
“They were not competing at all,” Mayes stated. “They were colluding with one another. Using this sensitive data RealPage directed the 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.”
Related: What Landlords Need to Know About Automated Rent Payments
Mayes isn’t the first to voice concerns against RealPage or to take legal action against the company.
Earlier this month, D.C. Attorney General Brian Schwalb also brought a lawsuit against RealPage for over 50,000 D.C. apartments using the company’s software that allegedly charged inflated rents for years.
“Landlords are compelled, under the terms of their agreement with RealPage, to charge what RealPage tells them,” Schwalb told CNBC at the time.
Even though RealPage told the outlet that its customers aren’t required to use the rent increases its algorithm recommends, a 2022 investigation by ProPublica revealed that landlords accepted up to 90% of the algorithm’s suggestions.
Renters in San Diego, California first filed a federal lawsuit against RealPage in 2022. RealPage’s lawyers and other defendants stated in response at the time that users weren’t 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, over 20 lawsuits on the issue from defendants in different cities, including Seattle, Boston, and New York, were merged into a complaint in a Nashville federal court last year. The latest filings from Arizona and D.C. join the wave of antitrust complaints RealPage faces across the country.
The rulings on these cases could send ripple effects throughout the U.S. by affecting how landlords set rents. Multifamily investment consultant Tony Konstant wrote that a judgment could set a precedent for what kind of software is allowed and what isn’t, and prevent the future misuse of technology that could potentially be anticompetitive.
This story originally appeared on Entrepreneur
