(Bloomberg) -- A group of Democratic senators is urging the US Justice Department to scrutinize whether Thoma Bravo LLC’s rental software company RealPage Inc. is fomenting rising rents across the US through its rental pricing software.
Senators Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont pressed the Justice Department in a letter Thursday to examine the impact of RealPage’s YieldStar rental pricing software on consumers and on inflation amid persistent concerns about the overheating of the US economy.
YieldStar software is used by the largest property management companies to set prices on more than 20 million rental units – about 8% of all homes rented in the US. The No. 1 property manager GreyStar Real Estate Partners LLC, as well as Camden Property Trust and Mid-America Apartments LP, are among companies that use the software.
“Given YieldStar’s market share, even the widespread use of its anonymized and aggregated proprietary rental data by the country’s largest landlords could result in de-facto price-setting by those companies, driving up prices and hurting renters,” the senators wrote to Assistant Attorney General for Antitrust Jonathan Kanter.
Warren and Sanders have been investigating the impact of algorithmic rent-setting software on the economy and last year sought information from RealPage as part of their own probe into rising US rents. They wrote that YieldStar’s software has access to “transactional apartment data from the rent rolls of 13+ million units.”
In responses to the senators, RealPage said its software recommends pricing for rentals based in part on aggregated data on rents charged by other buildings.
“RealPage appreciates the opportunity to work with the senators’ offices and, more generally, we are always willing to engage policy stakeholders to ensure an informed and comprehensive understanding of the benefits we contribute to the rental ecosystem,” said Teresa Wolke, a RealPage spokesperson.
The Justice Department declined to comment.
Rents represent about one third of the Consumer Price Index — a key indicator of US inflation — which rose 6.4% in January versus the year before. The median asking rent in the US increased to $1,322 in December, a 26.9% increase since the beginning of the pandemic in March 2020.
It’s “essential that the department use all of its tools to ensure that renters do not fall victim to corporate landlords and anti-competitive forces,” the senators wrote.
The senators’ letter comes as President Joe Biden’s administration has stepped up antitrust enforcement and increased scrutiny of the role technology firms can play in squelching competition and harming consumers in certain markets.
Biden tasked the Justice Department in January specifically with addressing anti-competitive information sharing practices in the housing market.
RealPage acquired its largest competitor, Lease Rent Options or LRO, in 2017. Following the transaction, its YieldStar software became the dominant model used by corporate landlords in many cities. The Justice Department’s antitrust division had reviewed the deal, but ultimately let it move forward. Thoma Bravo acquired RealPage in 2021.
The Justice Department has already expressed concerns about the use of information exchanges on the economy. In July, the agency fined poultry producers Cargill Inc., Sanderson Farms Inc. and Wayne Farms LLC $84.8 million for colluding on wages and benefits for their employees via data firm Webber, Meng, Sahl and Company. The data firm and its president were banned from the industry.
Last month, the Justice Department withdrew a trio of policy statements related to information exchanges. Doha Mekki, Kanter’s top deputy, said in a speech Feb. 2 that the use of automated pricing algorithms has rendered the guidance outdated.
“High-speed, complex algorithms can ingest massive quantities of ‘stale,’ ‘aggregated’ data from buyers and sellers to glean insights about the strategies of a competitor,” Mekki said. “Where competitors adopt the same pricing algorithms, our concern is only heightened.”
(Updates with company comment in seventh paragraph)
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