Feds Allege Landlord Collusion, Local Reps Take Action

UPPER WEST SIDE, NY – Imagine a software that analyzes millions of rental transactions across the country, collects nonpublic data from competing landlords, and then uses that data to recommend rental prices for properties – all while ensuring competitors are doing the same, effectively enabling landlords to raise rents in unison and maximize profits without worrying about undercutting the market where they operate.

That's exactly what the company RealPage does for landlords, according to a complaint filed in August by the Justice Department.

‘Classic Price Fixing’

Landlords are apparently aware that the product offers “classic price fixing,” according to the complaint, which describes a collegial environment where competitor landlords act not as adversaries, but as collaborators in a shared pricing strategy.

The problem? That's illegal, running afoul of the Sherman Act, a law that forbids collusion and monopolistic behavior.

In this case, according to the complaint, such coordination has “restrained, rather than promoted, competition,” which has “resulted, or is likely to result, in harm to renters and prospective renters."

The company has defended its practices, and said that “the software is not driving higher rates than what would happen in a competitive market,” according to USA Today.

The Local Angle

State Senator Brad Hoylman-Sigal, who represents Senate District 47 – which covers much of Manhattan’s West Side – has introduced legislation that would prohibit the use of “an algorithmic device that uses, incorporates, or was trained with nonpublic competitor data.”

Those who flout the law could face 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 collusion is rent collusion, and it's wrong,” said Hoylman-Sigal, in a statement.

“I'm glad the Justice Department is taking much needed action to protect tenants, and I believe that the courts will find what we already know to be true, 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 look to pass that bill when the legislative session resumes in January.”

No specific cases in New York are motivating Holyman-Sigal, who first became aware of RealPage following a ProPublica expose, a spokesperson told Patch.

‘Exploiting Insider Information’

Brooklyn Assemblymember Rodneyse Bichotte Hermelyn, who represents District 42 – which covers Flatbush, Ditmas Park, and Midwood – was first on the issue, introducing legislation to prohibit algorithmic collusion back in March 2024.

Her action was also preventative, according to a spokesperson.

“New York is facing a worsening housing crisis, which is compounded by unscrupulous real estate agents and landlords using algorithms to manipulate the market and artificially raise rental rates,” Bichotte Hermelyn said, in a statement.

“By exploiting insider information, bad actors are using algorithms to create a monopoly and line their pockets at the unfair expense of everyday New Yorkers struggling to make next month’s rent. I’m proud to sponsor this bill (A9473) to ensure a fair housing market for consumers by banning exploitative algorithms.”

“The DOJ’s recent antitrust complaint against RealPage shows just how large of a problem this is – with millions of renters being victimized by price gouging and fixing. I’m optimistic that the DOJ’s findings will push this bill into law next session for the benefit of all New Yorkers.”

This year’s legislative session concluded in June. The next session begins in January 2025.

Do you have thoughts about price fixing in the New York City rental market? Email michael.mcdowell@patch.com.