Get All Access for $5/mo

The DOJ Sued an AI Software Company It Says Artificially Inflated Rents for Millions of Americans The lawsuit comes after a two-year investigation that included an unannounced FBI raid.

By Sherin Shibu Edited by Jessica Thomas

Key Takeaways

  • On Friday, the U.S. Department of Justice sued RealPage, a real estate software company.
  • The DOJ alleged that RealPage fixed rent prices with its AI-powered pricing algorithm.
  • In a statement, RealPage said the DOJ's claims were "devoid of merit" and "will do nothing to make housing more affordable."

The U.S. Department of Justice (DOJ) sued RealPage on Friday after a two-year investigation that included an unannounced FBI raid of a national corporate landlord. The DOJ alleged that Richardson, Texas-based RealPage, which sells real estate software, decreased competition among landlords and artificially inflated rents for millions of tenants across the country.

"We allege that RealPage's pricing algorithm enables landlords to share confidential, competitively sensitive information and align their rents," attorney general Merrick B. Garland stated in a press release.

The DOJ filed the 115-page complaint in the U.S. District Court for the Middle District of North Carolina on Friday. The antitrust lawsuit details how RealPage signed contracts with landlords who would otherwise be competitors and collected sensitive, detailed information about rent prices, lease terms, amenities and occupancy rates.

RealPage then allegedly fed the information to its AI-driven algorithm, which gave landlords recommendations on how to price rentals and set terms for rental agreements. The DOJ also accused the company of ensuring landlords accepted its recommendations by sending out pricing advisors to meet with them for "accountability conversations" and adding an "auto accept" feature so landlords would automatically approve price increases.

In 2020, RealPage said its software collected data on 16 million rental units of the 22 million investment-grade apartment units in the U.S., indicating its broad reach.

U.S. Attorney General Merrick Garland (C), U.S. Deputy Attorney General Lisa Monaco (L) and U.S. Acting Associate Attorney General Benjamin Mizer (R). Photo Credit: Anna Moneymaker/Getty Images

"As Americans struggle to afford housing, RealPage is making it easier for landlords to coordinate to increase rents," assistant attorney general Jonathan Kanter of the Justice Department's Antitrust Division stated, adding that "competition – not RealPage – should determine what Americans pay to rent their homes."

The DOJ filed the lawsuit with the attorneys general of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee and Washington. State attorneys general for Arizona and Washington, D.C., have already taken legal action against RealPage this year.

Related: State Attorneys General Sue RealPage, Landlords Over 'Astronomical' Rent Hikes: 'This Was Not A Fair Market At Work'

In a statement, RealPage said the DOJ's claims were "devoid of merit" and "will do nothing to make housing more affordable." The lawsuit "seeks to scapegoat pro-competitive technology," the company claimed.

The non-partisan nonprofit American Economic Liberties Project (AELP) took a different stance. In an emailed statement to Entrepreneur, AELP senior legal counsel Lee Hepner pointed to RealPage's own marketing, highlighted by the DOJ, which stated that the company took "every possible opportunity" to raise prices.

"Working people have enough problems affording daily necessities without RealPage bragging that it seizes 'every possible opportunity' to increase rents," Hepner stated.

Related: This Simple Money Formula Helped Me Escape My 9-5 and Find Financial Freedom

Sherin Shibu

Entrepreneur Staff

News Reporter

Sherin Shibu is a business news reporter at Entrepreneur.com. She previously worked for PCMag, Business Insider, The Messenger, and ZDNET as a reporter and copyeditor. Her areas of coverage encompass tech, business, strategy, finance, and even space. She is a Columbia University graduate.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Science & Technology

5 Rule-Bending AI Hacks to Make Your Mornings More Productive and Profitable

By 2025, AI will transform productivity by streamlining workflows and cutting costs. Major companies like Microsoft, Google, and OpenAI are leading the way, advancing AI into "Phase 3," where tools act as digital assistants. Discover 5 AI hacks to boost efficiency and redefine your daily routine.

Side Hustle

'Hustling Every Day': These Friends Started a Side Hustle With $2,500 Each — It 'Snowballed' to Over $500,000 and Became a Multimillion-Dollar Brand

Paris Emily Nicholson and Saskia Teje Jenkins had a 2020 brainstorm session that led to a lucrative business.

Marketing

5 Critical Mistakes to Avoid When Giving a Presentation

Are you tired of enduring dull presentations? Over the years, I have compiled a list of common presentation mistakes and how to avoid them. Here are my top five tips.

Science & Technology

5 Automation Strategies Every Small Business Should Follow

It's time we make IT automation work for us: streamline processes, boost efficiency and drive growth with the right tools and strategy.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.