Despite having all the intelligence at their disposal, human beings have shown that they cannot avoid making a mistake every now and then. This dynamic has already been reinforced quite a few times throughout our history, with each testimony practically forcing us to look for a defensive cover. We will, however, solve our conundrum in the most fitting way possible and we’ll do so by bringing dedicated regulatory bodies into the fold. Having a well-defined authority across every area was a game-changer, as it instantly concealed our many shortcomings. Now, the kind of utopia you would generally expect from such a development did arrive, but at the same time, it failed to stick around for long. Talk about what led to the stated setback, the answer will touch upon technology before it covers anything else. You see, the moment technology got its layered nature to take over the scene, it allowed every individual an unprecedented chance to exploit others for their own benefit. In case this didn’t sound bad enough, the whole runner soon began to materialize on such a massive scale that it expectantly overwhelmed our governing forces and sent them back to square one. After a lengthy spell of waiting around in the wilderness, though, it seems like the regulatory contingent is finally ready to make a comeback. The same has only turned more and more evident in recent times, and truth be told, a newly-launched investigation does a lot to keep that trend alive and kicking.
The Department of Justice’s Antitrust Division has formally launched an investigation into RealPage, the real estate technology company accused of contributing to higher-than-normal rent prices. The move provides an interesting follow-up to a report from ProPublica that came out last month and made a sensational claim about RealPage’s YieldStar software using an algorithm to “help landlords push the highest possible rents on tenants.” But how does the whole thing works? Well, going by the stated report, YieldStar’s algorithm uses the non-public rental rates gathered from the landlords and property managers. Once it has all the relevant information, the system then moves on to bundle it together so to create rental rate recommendations for its users. However, the catch here is that, by doing so, the platform also ends up giving landlords an idea regarding their competitor’s pricing, thus setting the perfect stage for a myriad of unfair practices.
In ProPublica’s words, the software’s design has actually “raised questions among real estate and legal experts about whether RealPage has birthed a new kind of cartel that allows the nation’s largest landlords to indirectly coordinate pricing, potentially in violation of federal law.”
These concerns are well-supported by a different report from the New York Times, which digs into how the rent prices in US have gone up by 20 percent since early 2020. Now, considering it minimizes the direct communication between landlords and their potential tenants, RealPage’s software, along with other similar avenues, is only expected to make that uptick worse in the near future.
Interestingly enough, this isn’t the first time RealPage has found itself pitted against a regulatory force. Back in 2017, the company faced some serious inquiry from the Justice Department after it agreed a $300 million deal to acquire Rainmaker Group, a competing real estate software company that created the rent-setting software, Lease Rent Options (LRO).
Apart from the ProPublica report, though, the investigation in focus was also encouraged by a total of 17 state representatives, who wrote a letter to FTC to initiate the same.
“Our constituents cannot afford to have anticompetitive — and potentially per se illegal — practices drive up prices for essential goods and services at a time when a full-time, minimum-wage salary does not provide a worker enough money to rent a two-bedroom apartment in any city across this country,” the lawmakers wrote.
With so many entities trying to expose its dubious practices, it will be intriguing to see if and how RealPage is able to navigate through the whole mess.