Inside the 'housing cartel' accused of pushing up the cost of YOUR rent: Legal battle breaks out over niche tech firm that helps landlords fix prices

A Texan software company is alleged to have been at the center of a 'rental cartel' that enabled landlords across the US to artificially drive up prices.

Software sold by RealPage is used by many of the largest property management firms in the US and suggests prices landlords should charge based on availability and demand in their area.

But plaintiffs in several states have brought lawsuits against the firm, claiming landlords share private and commercially sensitive data with the platform which is then weaponized against renters to keep costs as high as possible.

In some markets, the majority of property managers in an area are said to use the software for pricing guidance and instruction.

Now legal pressures are mounting against RealPage which is run by Dana Jones, a University of Michigan graduate who labels herself a 'growth minded CEO' on LinkedIn.

RealPage is facing mounting legal pressure over its 'AI Revenue Management' tool which uses data to calculate how much. Pictured: RealPage CEO Dana Jones

Software sold by RealPage is used by many of the largest property management firms in the US and suggests prices landlords should charge based on availability and demand in their area 

The mother-of-two took the top position in 2021, succeeding billionaire founder Steve Winn, who sold the company that year for $10.2 billion to private equity firm Thoma Bravo.

Since then, state and district attorneys have brought civil action against RealPage and the Department of Justice has opened a criminal investigation into its software and customers.

RealPage, founded in 1998 and headquartered in Richardson, analyzes data supplied by landlords on apartment pricing and leasing to recommend rental unit prices in a specific area.

It can instruct them when they should raise rent and by how much. It can also estimate the optimum prices for new properties entering the rental market.

RealPage founder and long-time CEO Steve Winn sold the company in 2021 for $10.2 billion

The Biden administration in recent years has sought to target price gouging in various pockets of the US economy - bringing antitrust suits against big firms like Google and Amazon.

Some of its investigations have also targeted markets like concert tickets through LiveNation and payment processors with an investigation into Visa. 

On its website, RealPage notes that 'AI Revenue Management delivers data-driven AI machine learning insights for balancing supply and demand at your property and provides recommendations that optimize performance.'

In a twist of fate, plaintiffs have cited in court documents RealPage's own marketing materials to make the case that it has been used to drive up prices.

On its website, the firm notes that its pricing methodology allows landlords to 'outpace the market in good times and bad.'

Kris Mayes, Arizona's attorney general, suggested in a complaint that '"outpace" is code for charging higher prices than what would be charged in a market untainted by collusion.' 

'This is price fixing, and it is illegal,' read the complaint.

RealPage also boasts that the use of its tools can yield returns that 'exceed the market by 2 percent to 5 percent.'

It is not the first a company has wound up in controversy for the use of algorithmic, or dynamic, pricing, which typically uses data to gain an edge on the consumer and maximize profit margins.

Last month, Wendy's was thrust into the limelight after its executives announced plans to roll out dynamic pricing which would change the cost of food items based on demand.

RealPage is headquartered in Richardson, Texas, and was founded in 1998

RealPage's pricing software is used by property managers for guidance as to how much they should charge tenants. It can instruct them when they should raise rent and by how much

Last month, North Carolina Attorney General Josh Stein announced the state was launching its own probe into the software.

'Housing is already too expensive for so many North Carolinians,' he said.

'Companies cannot collude to illegally raise rents on tenants. My investigation into RealPage will shed light on whether this company's operations violate the law and raise rental costs for residents,' he added.

In response to the lawsuits, the tech firm has denied any wrongdoing, claiming instead that the use of revenue management tools and software is well-established in various industries, by airlines, hotels and car rental companies. 

The company first came under significant scrutiny in 2022 after ProPublica published a series of stories about the tech firm's use of a 'mysterious algorithm to help landlords push the highest possible rents on tenants.'

It found that the use of RealPage's pricing software was far-reaching in some markets.

In one downtown Seattle ZIP code, 70 percent of more than 9,000 apartments were controlled by 10 property managers, each of which used RealPage's software in at least some of its buildings.

And in the Senate, Senator Ron Wyden of Oregon introduced the Preventing the Algorithmic Facilitation of Rental Housing Cartels Act in January.

'Setting prices with an algorithm is no different from doing it over cigars and whiskey in a private club,' Wyden said at the time. 

'Although it's my view that these cartels are already violating existing antitrust laws, I want the law to be painfully clear that algorithmic price fixing of rents is a crime.'