UPPER WEST SIDE, NY — Imagine software that analyzed millions of rental transactions across the country, collected nonpublic data from competing landlords, and then used that data to recommend rental prices for properties — while making sure the competition did the same. This would effectively allow landlords to raise rents uniformly and maximize their profits without fear of undercutting the market in which they operate.
That’s exactly what RealPage is doing for landlords, according to a complaint filed by the Justice Department in August.
“Classic price fixing”
The landlords are apparently aware that this product is a “classic price-fixing agreement,” the lawsuit states. It describes a collegial environment in which competing landlords do not act as opponents, but as collaborators within the framework of a common pricing strategy.
The problem? This is illegal and violates the Sherman Act, a law that prohibits collusion and monopolistic behavior.
In this case, the complaint alleges, such coordination “has restricted rather than promoted competition,” which “has resulted in, or may result in, harm to tenants and prospective tenants.”
The company defended its practices, saying that “the software does not result in higher prices than would be the case in a competitive market,” according to USA Today.
The local perspective
State Senator Brad Hoylman-Sigal, who represents the 47th Senate District – which includes much of Manhattan’s West Side – has introduced a bill that would prohibit the use of “an algorithmic device that uses, incorporates, or is trained on non-public competitor data.”
Anyone who violates the law faces a civil penalty of up to $5,000 per violation.
“Whether it’s done the old-fashioned way or through the use of new technologies, rent-fixing is rent-fixing and it’s wrong,” Hoylman-Sigal said in a statement.
“I am glad that the Department of Justice is taking urgently needed action to protect tenants, and I am confident that the courts will find what we already know: algorithms should not be used to set rent prices.”
“I introduced a bill (S.9434) in May to ban this practice in New York State, regardless of the outcome of this federal case, and I will seek to pass this bill when the legislative session resumes in January.”
Holyman-Sigal is not linked to any specific cases in New York. She first became aware of RealPage through a ProPublica exposé, a spokesperson told Patch.
“Use of insider information”
Rodneyse Bichotte Hermelyn, a member of the Brooklyn Assembly and representative of the 42nd district – which includes Flatbush, Ditmas Park and Midwood – was the first to address the issue, introducing a bill to ban algorithmic collusion as early as March 2024.
Their actions were also of a preventive nature, said a spokesman.
“New York is facing a deepening housing crisis, exacerbated by unscrupulous real estate agents and landlords who use algorithms to manipulate the market and artificially inflate rents,” Bichotte Hermelyn said in a statement.
“By exploiting insider information, bad actors are using algorithms to create a monopoly and unfairly line the pockets of New Yorkers struggling to pay their next month’s rent. I am proud to support this bill (A9473) to ensure a fair housing market for consumers by banning exploitative algorithms.”
“The Justice Department’s recent antitrust complaint against RealPage shows just how big the problem is – millions of renters have fallen victim to price gouging and price fixing. I am optimistic that the Justice Department’s findings will enact this bill in the next legislative session for the benefit of all New Yorkers.”
This year’s legislative session ended in June. The next session begins in January 2025.
Do you have an opinion on price gouging in the New York rental market? Email [email protected].
