Inflation brought Donald Trump back to the White House, or at least aided his reelection chances. In the United States, consumer price inflation was, in part, rent inflation. Smart rent control laws could have kept growth in housing costs in check and curbed overall inflation.
Corporate power is an important contributor to exploding rents. In Atlanta and many other cities across the country, software firm RealPage operates as a cartel manager for property managers and owners. Landlords agree to share unit data — such as historical rents, maintenance costs, area and number of bedrooms — with the company. Using this information, RealPage produces rent recommendations for each client’s apartments, which favor higher rents over maximum occupancy. A landlord that previously aimed for 99% occupancy can make more money through higher rents and occupancy of 95% — provided a critical mass of rivals increase rents in tandem with each other. Collusion that used to be done in smoke-filled rooms is now done by rivals using a common algorithm.
Credit: Handout
Credit: Handout
Credit: Handout
Credit: Handout
RealPage allegedly enforces its recommendations. First, it makes overrides of recommended rents difficult. Property managers must seek approval of their supervisor and offer a written justification to RealPage. Second, RealPage threatens to cut off landlords who reject more than a small fraction of proposed rents. Third, RealPage employees conduct “secret shops” to ensure property managers are offering units at the recommended rents to prospective tenants.
The cartel’s effects on rents are significant, according to a national class action lawsuit filed by tenants. The use of RealPage by landlords coincided with an especially significant run-up of rents in Atlanta. Rents in the city rose by 80% between 2016, when RealPage was widely adopted by landlords, and 2023. The overall consumer price index in the metropolitan area increased by only 37% during the same time.
RealPage is now in serious legal trouble. In August, the Department of Justice, joined by eight states, filed a civil antitrust complaint against the company. Earlier, the attorneys general of Washington, D.C., and Arizona filed their own lawsuits. These suits are necessary and worthwhile, both to hold RealPage accountable and to remind corporations that collusion, if proved, will not be tolerated.
Antitrust lawsuits have serious limits, however. The cases against RealPage will take years to resolve and entail significant expenses by the government and law firms representing tenants. The federal government reportedly began investigating RealPage in 2022, but it filed suit only a few months ago. Even these seemingly slam-dunk antitrust cases are not certain to succeed. In the meantime, tenants will continue to overpay for housing, showing that remedying bad conduct after the fact is never easy. However, one winner is already clear: RealPage’s lawyers, who will bill at least tens of thousands of hours defending their client.
The RealPage cartel shows the public value of rent control laws. Consider a hypothetical rent control measure tied to the consumer price index: If the local CPI increased 5% in 2024, a landlord generally could not raise rents more than 5%. These laws strike a balance between protecting tenants and allowing landlords to recover their costs and make a reasonable profit.
A national rent control law along these lines would have made RealPage’s scheme a nonstarter. If the CPI increased 2% in a 12-month period, landlords in general could not raise rents by more than 2%. A RealPage recommendation to raise rent 5% would be illegal under this law, unless a landlord could show a regulator that its costs rose by 5%. The incentive to collude on rents would largely vanish, and rents would follow overall inflation, instead of leading it.
Importantly, smart rent control does more than stop collusion in its tracks. Well-designed rent control laws protect tenants against the pricing power of landlords, no matter the source, be it a small property owner seeking to take advantage of an elderly couple who cannot relocate easily, or a nationwide cartel of landlords using sophisticated software to boost their collective revenues and profits. The RealPage scandal underscores the need for strong rental market protections and illustrates that, at a macro and micro level, an ounce of prevention is worth a pound of cure.
Brian Callaci is chief economist and Sandeep Vaheesan is legal director at the Open Markets Institute, an antimonopoly research and advocacy organization based in Washington, D.C.
