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Berkeley Faces Lawsuit from RealPage over Prohibition of Algorithmic Rental Pricing Regulation

The entity contends that the ban infringes upon its freedom of speech, as protected by the First Amendment.

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Berkeley Faces Lawsuit from RealPage over Prohibition of Algorithmic Rental Pricing Regulation

The city of Berkeley, California is currently embroiled in a legal tussle with RealPage, a controversial company known for its revenue-maximizing apartment rental price algorithm. The lawsuit, filed by RealPage, argues that Berkeley's ordinance, enacted in March, constitutes a "constitution-shattering ban on lawful speech," and a blatant violation of the First Amendment's restrictions on content-based censorship.

RealPage's algorithm assesses a landlord's properties, along with rental data from neighboring properties, to offer proposed pricing. Critics argue this practice borders on illegal price-fixing. Last year, the Department of Justice under the Biden administration filed a civil antitrust suit against RealPage, accusing it of dampening competition among landlords by generating price recommendations based on rivals' pricing data, effectively stifling independent market competition. Prosecutors claim RealPage dominates 80% of the market for commercial revenue management software.

Data collated by the Department of Justice reveals that in certain areas with high RealPage software utilization, rental increases have outpaced the national average, although it's challenging to pinpoint RealPage's exact contribution to these rises. In their lawsuit, the Justice Department cites RealPage executives admitting that their product optimizes revenue: "It's better for everyone to succeed rather than engaging in cutthroat competition that suppresses the industry as a whole."

YIMBY advocates champion deregulation of the housing market to lower rental costs. Establishing new properties in states like California is a laborious, drawn-out procedure, with new apartment buildings often facing opposition from NIMBY activists who manipulate environmental laws to hinder development.

RealPage argues that its software simply offers advice and recommendations on rental prices, while landlords have the final say on accepting or rejecting these suggestions. The company denies participating in illegal collusion and attributes Berkeley's ban to scapegoating. It contends that the real problem is a severe housing supply shortage.

In one specific example cited by the Justice Department, RealPage suggested a landlord could increase rent by 7% by reducing their occupancy rate from 97% to 95%. Nevertheless, RealPage asserts that in high-vacancy markets, landlords would still be subject to market forces, compelling them to lower rent to hit their occupancy targets.

In the particular case of Berkeley, a report from the Housing Advisory Commission found that six major real estate firms, named in lawsuits related to RealPage's software, collectively own over 1,300 apartments within the city. The ban on RealPage is scheduled to commence on April 24th, but RealPage is seeking a temporary restraining order to delay it.

Although RealPage relies heavily on First Amendment defense, free speech itself does not render regulating it unlawful. Colluding to fix prices may involve free speech, but that does not make it legally protected. As this dispute unfolds, landlords must bear in mind that their esteem remains relatively low within the United States, and software like RealPage's potential benefits may not outweigh the potential drawbacks.

  1. In the midst of a legal battle with Berkeley, California, tech company RealPage defends its future technology that assesses rental prices, arguing it merely provides recommendations, with landlords holding the final decision.
  2. Critics, however, claim RealPage's technology could potentially contribute to decreasing renters' affordability by borderline price-fixing, given its reliance on data from neighboring properties.
  3. Last year, lawmakers filed a civil antitrust suit against RealPage, asserting that its dominance in the commercial revenue management software market stifles independent market competition.
  4. As the future of RealPage's role in the rental market remains uncertain amidst the ongoing legal battle and scrutiny from lawmakers, YIMBY advocates call for deregulation of the housing market as a solution to lower rental costs.

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