As you may know by now, the Department of Justice filed an antitrust lawsuit against RealPage, a real estate software company, blaming it for enabling landlords to collude to raise rents. But precisely how much this software contributed to rent inflation is something Matt Stoller, director of research at the American Economic Liberties Project, took it upon himself to calculate.
“About a quarter of rental inflation is potentially due to this price fixing conspiracy orchestrated by RealPage and some of the big corporate landlords,” he told Fortune, while acknowledging he isn’t necessarily an expert on rental data. “It could be more, it could be less. We don’t totally know.”
In June, prior to the DOJ’s antitrust suit, RealPage rebutted an investigation by ProPublica twoyears earlier and denied any wrongdoing. “These factual inaccuracies threaten to undermine the essential benefits RealPage’s solutions provide to both renters and housing providers. In fact, RealPage’s revenue management software contributes to a healthier and more efficient rental housing ecosystem,” the company said in a press release.
Dana Jones, RealPage’s chief executive and president, at the time, said: “Housing affordability should be the real focus.” RealPage did not immediately respond to Fortune’s request for comment.
But everyone can agree that rents rose considerably during the pandemic. Estimates vary by how much exactly, as Stoller pointed out in his newsletter last month, but it could be as much as 33%. RealPage, per its marketing, boasts a 3% to 7% revenue increase for landlords using its service, and there are about 14 million multifamily apartments in the rental world. Corporate landlords using RealPage control about 3 million to 5 million units, depending on the estimate.
But whether it is more or less, it all matters. There are 44 million households that rent in America and even if the price-fixing only affected a few million renters, it indirectly affected millions of others, Stoller said. Not to mention, there are certain cities where RealPage’s presence is especially significant.
“The idea here is, if you were to get rid of this price-fixing conspiracy, you would see prices drop pretty substantially,” he said.
Of three possible pricing scenarios in his blog, the more aggressive one is the one Stoller tends to think most accurately depicts our current situation: a 7% rent increase, 4.8 million apartments controlled by landlords using RealPage, a 2% spillover across all other apartments, and his estimate that in a RealPage-affected city, you should be paying $1579 instead of $2070 every month. Put it all together and you get 24% of rental inflation due to the supposed conspiracy.
And given that soaring rents have accounted for a substantial share of inflation in recent years, the Federal Reserve’s interest rate hikes may have been swayed in part by the alleged price fixing.
“This has significant impacts on the economy writ large, inflation would be lower, on a macro-level, not just with rent,” Stoller said. “If you took a quarter of the inflation in rent away, you would start to see some impacts on the consumer price index, and that’s something that is really anathema, I think, to economists and to people at the Federal Reserve. They don’t want to think that pricing can be affected by these kinds of conspiracy.”
To be clear, inflation has cooled sharply since reaching a 40-year high in 2022, when the Fed began ramping up its interest rates. It wasn’t until last month that the central bank delivered its first rate cut. But its entire model could be challenged with these findings. The conventional view is that prices usually go up because people have too much money, requiring rates to rise to make it more expensive to borrow. Stoller questioned if inflation was instead stoked by another source.
“What if inflation is caused on the supply side by corporations withholding supplies so they can increase prices,” he asked, later adding, “it actually is a more fundamental problem where it breaks their whole philosophy of how they do policy.”
And this isn’t to say the country doesn’t have a shortfall of homes. It does. But part of it may be due to corporate landlords colluding with one another, according to Stoller. “They don’t necessarily want to see more supply,” he said. And sometimes, big builders are building homes to sell to Wall Street, to corporate landlords, who rent them out. “It’s just the home has been turned into a financial asset by and to be wholly manipulated by these larger players,” he said.
For what it’s worth, Stoller thinks the days of RealPage setting prices are sort of over. But for rents to really come down, addressing consolidation in the rental and housing world, while increasing financing and supply, is key, he said. “It’s not a mystery of how to do it? It’s just a question: do you want to attack the profits of these guys?”
Consider the National Association of Realtors, not the same situation per se, but one of antitrust in the housing industry; the realtor group along with other brokerages were accused of colluding and conspiring to inflate commissions. It turned into a $418 million settlement for the National Association of Realtors, which happens to be the country’s biggest lobbyist.
“When you don’t enforce laws against collusion for 40 years, what you find is that there’s a lot of collusion,” Stoller said.
