Thoma Bravo’s RealPage sued by DOJ in rental collusion case

Pete Kiehart/Photographer: Pete Kiehart/Bloom

The U.S. sued Thoma Bravo LLC’s RealPage Inc. for allegedly violating antitrust legislation by serving to property managers collude to drive up rental costs on thousands and thousands of models throughout the nation. 

In a criticism filed by the Justice Division on Friday, antitrust enforcers stated RealPage’s software program, which helps landlords set rental unit pricing, has successfully raised costs on renters illegally. RealPage is a prime software program supplier to the multifamily rental trade.

“RealPage has constructed a enterprise out of irritating the pure forces of competitors,” in response to the lawsuit, which cites allegedly anticompetitive remarks by firm executives. “A rising tide raises all ships” is greater than a advertising mantra, the federal government stated. 

In line with the U.S., RealPage’s vp of income administration advisory companies stated the mantra meant “there may be larger good in everyone succeeding versus basically attempting to compete in opposition to each other in a means that really retains the complete trade down.” 

Election Difficulty

The lawsuit, filed in federal court docket in North Carolina, represents the Justice Division’s first massive algorithmic collusion case as alleged schemes turn out to be extra subtle by means of using know-how, division officers say.

“Individuals mustn’t need to pay extra in lease just because an organization has discovered a brand new option to scheme with landlords to interrupt the legislation,” Legal professional Basic Merrick Garland stated at a press convention after the swimsuit was filed. Deputy Legal professional Basic Lisa Monaco added, “Coaching a machine to interrupt the legislation remains to be breaking the legislation.”

The criticism comes as house costs and rents within the US have surged for the reason that early days of the Covid-19 pandemic, fueling an affordability disaster that has turn out to be a central challenge within the presidential marketing campaign. Democratic nominee Kamala Harris has referred to as for a lease cap on company landlords and down fee help for first-time homebuyers, lots of whom have been caught on the sidelines of the housing market as increased rates of interest pushed possession out of attain. 

The typical U.S. lease has skyrocketed by 33% for the reason that starting of the pandemic, in accordance a Zillow index.

RealPage stated it’s following the legislation and has labored with the Justice Division to stay in compliance.

“RealPage’s income administration software program is purposely constructed to be legally compliant, and we’ve got a historical past of working constructively with the DOJ to indicate that,” the corporate stated in a press release, referring to the Justice Division. 

Blessed by DOJ

“In reality, in 2017 when the DOJ granted antitrust clearance for our acquisition of LRO, the DOJ additionally analyzed intensive details about our income administration merchandise with out objecting to them in any means,” RealPage added, referring to its largest competitor, Lease Lease Choices, which it acquired in 2017. 

RealPage, based mostly in Richardson, Texas, helps residential landlords market vacant flats, display potential tenants and set rents, amongst different capabilities. It serves greater than 24 million models all over the world, in response to the corporate’s web site, making it one of many largest software program suppliers to the multifamily trade.

The corporate, which personal fairness agency Thoma Bravo acquired in 2021, stated its income administration merchandise function principally as they did on the time of the DOJ evaluate. Following that transaction, the YieldStar software program grew to become the dominant mannequin utilized by giant landlords in lots of cities. 

RealPage has cornered 80% of the marketplace for industrial income administration software program for typical multifamily housing leases within the US, in response to the lawsuit, wherein the US was joined by North Carolina, California and Minnesota, amongst a number of different states.

‘Algorithmic Middleman’

The personal information that landlords share with RealPage embody a unit’s efficient lease, lease reductions, lease phrases, lease standing and unit traits reminiscent of structure and facilities, in response to the criticism. The landlords additionally share “the variety of potential future renters who’ve visited a property or submitted a rental software.”

“RealPage is an algorithmic middleman that collects, combines and exploits landlords’ competitively delicate info,” in response to the U.S. “And in so doing, it enriches itself and compliant landlords on the expense of renters who pay inflated costs and sincere companies that will in any other case compete.”

In a June assertion, RealPage stated its software program makes use of nameless information in an aggregated trend, and landlords haven’t got perception into rivals’ pricing. The corporate stated the software program solely suggests rental costs and its clients settle for these suggestions lower than 50% of the time.