DENVER (AP) - The U.S. Justice Department has filed a lawsuit against several major landlords, alleging that they have conspired to keep rental prices high by utilizing an algorithm to regulate rent and by exchanging sensitive information with competitors to maximize profits. This legal action comes at a time when U.S. renters are facing intense challenges in a harsh housing market, with wages not keeping pace with rapid rent increases.
According to recent statistics, over half of American renters allocated more than 30% of their income to rent and utilities in 2022, marking a historic peak. This situation has led to difficult daily choices regarding essentials like medication, groceries, school supplies, and rent. The consequences are severe, culminating in eviction notices and lengthy court proceedings, affecting an estimated 1.5 million individuals annually, particularly children, as reported by Princeton University's Eviction Lab.
While various factors contribute to the ongoing housing crisis, including a decade-long decline in home construction, the Justice Department's lawsuit underscores the role of major landlords in exacerbating the issue. The lawsuit identifies six landlords operating a collective total of over 1.3 million rental units across 43 states and the District of Columbia. Alongside the Justice Department, ten states—North Carolina, Tennessee, Colorado, and California among them—are participating in the action against these landlords.
One of the defendants, Greystar Real Estate Partners LLC, has refrained from commenting directly on the lawsuit but issued a statement on their website asserting their commitment to ethical business practices and denying any involvement in anti-competitive behavior. They indicated plans to vigorously defend themselves in court.
The lawsuit accuses the landlords of exchanging confidential data related to rents and occupancy levels through various channels like emails, phone conversations, and group discussions. The types of shared information reportedly encompass renewal rates, the frequency with which they adopt algorithmic price suggestions, the use of promotional concessions, and pricing strategies for upcoming quarters.
As a response to the investigation, one landlord among the accused entities has chosen to cooperate with federal prosecutors. A proposed settlement is expected to limit how this landlord can access and utilize their competitors' data and algorithms for rent setting.
Doha Mekki, the acting Assistant Attorney General for the Antitrust Division, stated that the actions are aimed at prioritizing human welfare over corporate profit, with an emphasis on making housing more accessible for millions across the nation. This lawsuit marks an expansion of an ongoing case against RealPage, a firm that operates an algorithm designed to recommend rental prices. Prosecutors claim that this algorithm incorporates sensitive competitive data, enabling landlords to synchronize their rental rates and sidestep the competitive forces that could lower prices.
In reaction to the accusations, Jennifer Bowcock, Senior Vice President for Communications at RealPage, defended the company's software, clarifying that it is utilized in less than 10% of U.S. rental units and that price recommendations from the algorithm are followed less than half of the time. Bowcock emphasized the need to stop blaming RealPage and its clients for housing affordability issues that she asserts stem from a significant under-supply of housing in the market.
These developments underscore the complexities of the housing crisis in the United States and spotlight the potential regulatory actions that may arise as the government seeks to ensure fair competition in the rental market.
