RealPage sues California city officials over rental algorithm ban

Real estate software company RealPage filed a federal lawsuit Wednesday against Berkeley, California — the latest city to try to block landlords from using algorithms when deciding rents. Officials in many cities claim the practice is anti-competitive and is driving up the price of housing.

Texas-based RealPage said Berkeley's ordinance, which goes into effect this month violates the company's free speech rights and is the result of an “intentional campaign of misinformation and often-repeated false claims” about its products.

“Berkeley is trying to enact an ordinance that prohibits speech — speech in the form of advice and recommendations from RealPage to its customers,” RealPage attorney Stephen Weissman told reporters on a conference call.

The Department of Justice sued Realpage in August under former President Joe Biden, saying its algorithm combines confidential information from each real estate management company in ways that enable landlords to align prices and avoid competition that would otherwise push down rents. That amounts to cartel-like illegal price collusion, prosecutors said. RealPage's clients include huge landlords who collectively oversee millions of units across the U.S.

In the lawsuit, the DOJ pointed to RealPage executives’ own words about how their product maximizes prices for landlords. One executive said, “There is greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down.”

San Francisco, Philadelphia and Minneapolis have since passed ordinances restricting landlords from using rental algorithms. The DOJ case remains ongoing, as do lawsuits against RealPage brought by tenants and the attorneys general of Arizona and Washington, D.C.

Berkeley's ordinance, which fines violators up to $1,000 per infraction, says algorithmic rental software has contributed to “double-digit rent increases ... higher vacancy rates and higher rates of eviction.”

RealPage said all these claims are false, and that the real driver of high rents is a lack of housing supply.

The company also denies providing “price fixing software” or a “coordinated pricing algorithm,” saying its pricing recommendations — higher, lower or no change — align with whatever property-specific objectives the housing providers want to achieve using the software.

And since landlords already are incentivized to maximize revenue, RealPage argues that real estate management software can show them how best to maintain high occupancy, and this in turn reduces constraints on the supply of homes.

The lawsuit accuses American Economic Liberties Project, an advocacy group that opposes monopolistic practices, of spreading falsehoods that have caused local officials to pursue misguided policies.

“AELP’s false narrative has taken root in certain municipalities that are particularly eager to find a scapegoat for their own hand in impeding the housing supply,” the lawsuit said.

Weissman said RealPage officials were never given an opportunity to present their arguments to the Berkeley City Council before the ordinance was passed and said the company is considering legal action against other cities that have passed similar policies, including San Francisco.

A spokesperson for Berkeley City Council did not comment on the lawsuit and said officials had not been formally served with the complaint. A spokesperson for the AELP did not immediately reply to a request for comment.