US senator seeks antitrust review of apartment price-setting software

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The chair of a U.S. Senate committee asked the Federal Trade Commission to look into the legality of a Texas-based property tech company's rent-setting software.

An investigation by ProPublica found that RealPage suggested new rents daily to landlords for all available units in a building. Big landlords may be using the software to push rents above competitive levels, according to critics.

According to a recent report by ProPublica, RealPage's YieldStar is being used by a growing number of property managers and landlords, potentially impacting pricing and the supply of homes in the rental market Tenants should have the power to negotiate fair prices for housing.

A huge amount of data collected by the company from landlords who are its clients is applied to a set of mathematical rules. Private data of competitors is included in that data.

According to the letter, the data could give insight into how competitors within a half mile are pricing their units.

The data fed into RealPage's pricing tool is not public. The company uses aggregated market data from a variety of sources.

The company said it was willing to engage with policy stakeholders to ensure they have the facts about the competitive dynamics of the housing market and the value and benefits that RealPage creates for renters and housing providers.

The use of private data is one of the reasons the software is subject to scrutiny. RealPage claims it has the ability to balance supply and demand. The company organizes forums for competitors to talk about aspects of its software. An antitrust red flag could be raised by such collaborations, according to one legal expert.

In one neighborhood in Seattle, 70% of apartments were overseen by just 10 property managers, all of which used pricing software from RealPage.

The recent reporting on RealPage raises serious concerns about colluding in the rental market. It said that the FTC should review whether rent setting algorithms that analyze rent prices through the use of competitors' private data violates antitrust laws.

RealPage said in the past that its revenue management software prioritized internal supply and demand over other factors. The company said that the software helps eliminate the risk of colluding with manual pricing.

The agency doesn't comment on letters or requests from congress.

Concerns were raised that the pricing software could restrict the supply of apartments. The national rental vacancies rate was 5.6% at the end of the year. There are reports that RealPage encourages property owners to keep units vacant or push tenants out to make more money.

The letter cited a ProPublica story that quoted from a RealPage earnings call. He explained how a property company was able to increase profits by increasing rents.

Requests for comment have not been answered by Winn.

The letter saidIntentionally holding units vacant, when there are so few homes available, decreases a consumer's negotiating power.

The influence of RealPage over apartment pricing has grown since it acquired LRO from The Rainmaker Group. The purchase made it possible to double the number of units. The Department of Justice allowed the merger to go ahead despite taking a close look at it.

RealPage had increased its number of clients to 31,700 by the year 2020. RealPage was bought by a private equity firm for over $10 billion. The pricing software is now called revenue management.

A group of tenants filed a lawsuit against RealPage and nine other landlords, accusing them of colluding to artificially inflate rents.

The company will defend against the lawsuit. The company doesn't comment on pending litigation, she said.