Senator seeks antitrust review of apartment-pricing software – ProPublica

Senator seeks antitrust review of apartment-pricing software – ProPublica

The chair of a US Senate committee requested the Federal Commerce Fee on Tuesday to evaluate whether or not the Texas-based actual property expertise firm’s rent-fixing program violated antitrust legal guidelines.

This transfer comes after ProPublica Publish an investigation October 15 in RealPage’s pricing program, which suggests every day new rents to landlords for all models obtainable within the constructing. Critics say this system could assist massive landlords act as a cartel to push rents above aggressive ranges in some markets.

“Alarmingly, latest studies from ProPublica have highlighted that RealPage’s algorithm-based worth optimization program, YieldStar, is being utilized by an rising variety of property managers and landlords, probably impacting costs and residential provide within the rental market.” The letter is signed by US Senator Sherrod Brown, Democrat of Ohio who chairs the Senate Committee on Banking, Housing, and City Affairs. “Tenants ought to have the power to barter housing that’s reasonably priced, free from unfair collusion and misleading pricing strategies.”

RealPage applies a posh set of mathematical guidelines to a wealth of information that an organization collects from actual property house owners from its prospects. This information consists of the non-public information of close by rivals.

“Alarmingly, ProPublica reported {that a} former RealPage government said that the info might give perception into how rivals inside a half a mile or a mile vary are pricing their models,” mentioned the letter, which was addressed to FTC Chair Lina Khan.

RealPage mentioned the info entered into its pricing instrument is anonymized and aggregated. It mentioned the corporate “makes use of market information aggregated from a wide range of sources in a legally compliant method.”

In an announcement Tuesday, the corporate mentioned it had not seen the letter, “however we’re all the time prepared to interact with coverage stakeholders to make sure they’ve the information in regards to the aggressive dynamics of the housing market and the worth and advantages that RealPage creates for tenants and housing suppliers.”

Critics say using non-public information is one motive this system requires scrutiny by antitrust enforcement companies such because the Federal Commerce Fee. RealPage additionally claims that its analytics “stability provide and demand to maximise income progress.” The corporate organizes boards for rivals to fulfill and talk about features of its software program, together with its pricing algorithms. One authorized knowledgeable advised ProPublica that such cooperation “might fly the antitrust flag.”

In a neighborhood in Seattle, ProPublica discovered that 70% of residences have been beneath the supervision of solely 10 property managers, all of whom used RealPage-sold pricing software program in at the very least a few of their buildings.

The Senate letter mentioned latest studies on RealPage “increase critical considerations about collusion within the rental market.” “The FTC ought to evaluate whether or not rental setup algorithms that analyze rental costs through the use of rivals’ non-public information, corresponding to YieldStar, violate antitrust legal guidelines,” she mentioned.

RealPage beforehand mentioned that its income administration software program prioritizes the property’s inner provide and demand dynamics over exterior components corresponding to competitor rents. The corporate mentioned the software program helps eradicate the chance of collusion that may happen with handbook pricing, which frequently depends on telephone surveys of competitor costs.

An FTC spokesperson mentioned the company doesn’t touch upon messages or requests from Congress.

The letter additionally raised considerations that the pricing program is prone to limit the provision of residences. She mentioned the nationwide rental emptiness charge was simply 5.6% on the finish of 2021, the bottom stage since 1984. Nevertheless, she mentioned there are studies that the RealPage algorithm generally encourages landlords to maintain models vacant or pay them off. Tenants are out to extend earnings.

The letter cited a ProPublica story, which was quoted from a 2017 earnings name with then-RealPage CEO Steve Wynn. He defined how a big actual property firm discovered that it might enhance its earnings by rising rents and leaving extra residences vacant.

Winn didn’t reply to requests for remark.

“Intentionally occupying vacant models, when there are only a few houses obtainable, reduces the bargaining energy of customers and exacerbates the housing scarcity,” the letter learn.

RealPage’s affect on condominium costs has grown exponentially in recent times, after its 2017 acquisition of its largest worth competitor, a program known as Lease RentOptions, or LRO, from Rainmaker Group. RealPage was pricing 1.5 million models on the time, and the acquisition allowed it to double that quantity. The Justice Division’s Antitrust Division took a more in-depth take a look at the merger, however allowed it to maneuver ahead..

By 2020, RealPage has expanded its buyer depend to 31,700 throughout all of its merchandise, which additionally embody accounting, rental administration, and different software program. Non-public fairness agency Thoma Bravo purchased RealPage final 12 months for $10.2 billion. It’s now known as AI Income Administration pricing software program.

After ProPublica printed its investigation, a gaggle of tenants File a lawsuit against RealPage and 9 of the most important landlords within the nation, alleging that they have been complicit in artificially inflating rents.

A RealPage spokesperson denied the allegations and mentioned the corporate would “vigorously defend the lawsuit”. It declined to remark additional, saying the corporate doesn’t touch upon pending lawsuits.

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