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The US Department of Justice (DOJ) is going after property management software provider RealPage, accusing it of being responsible for rental inflation beyond market forces.
The major antitrust suit, which was joined by the US states of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee and Washington, hangs on the question of whether the algorithm of RealPage’s YieldStar software allows landlords to coordinate to hike prices, which would constitute an illegal pricing scheme.
YeildStar is a subscription-based property management service that collects information from paying landlords such as occupancy rates and rents that would otherwise be kept private. The software uses that information to help inform the suggestions it provides to landlords on how much rent to charge for their properties. The DOJ alleges that these prices are often higher than they would be in a competitive market.
The basis of the argument is that the software essentially allows landlords to align their prices and avoid competition that would keep rents down. The complaint made by the DOJ includes quotes from RealPage executives and the company’s marketing language to suggest this is intentional. But beyond examining statements from RealPage – such as claims that YieldStar will help landlords earn 3 per cent to 7 per cent more than they would without the service – the DOJ has said it will be going straight to the source, and has hired data scientists to analyse the code that determines the rental suggestions.
While experts agree that the case may be hard to build, the DOJ is using the effort to signal its intention of holding technology companies accountable for the economic impact of their algorithms.
“After all, humans create them,” said US deputy attorney general Lisa Monaco at a press conference announcing the suit. “Our laws will always apply to the people behind the machines and the companies behind the algorithms.”
For Dr Dana Mckay, associate dean of interaction, technology and information at Melbourne’s RMIT, the suit brings up a number of issues that she believes might give Australian property technology companies and their professionals pause for thought.
“I’m looking at this and wondering, do I need to be teaching my students about antitrust and how to avoid [antitrust violations]?” she commented.
McKay noted that it’s something programmers may want to think about when an executive asks for certain functions to be programed into a product. The coder, after all, is often best placed to understand the implications of algorithmic changes.
“It potentially puts programmers in a situation where it’s more in their best interest to push back against potentially unethical or illegal activities on the part of an employer,” McKay commented.
Beyond the legal question of whether such a suit could be brought according to Australian law, McKay noted the court of public opinion is certainly prepared to adjudicate on matters of ethics in tech – as well as ethics in real estate, particularly with rental stress dominating headlines.
“We all know that every company and every industry has some level of expectation of corporate social responsibility. And I think if it were to become obvious in the news that essentially, some companies are driving rents up for everyone, it would make them quite unpopular,” she said.
With governments around the globe showing an intention to hold big tech responsible for being good corporate citizens, McKay said that it is an important time for all stakeholders in society to consider how big data interacts with social priorities.
In the case of RealPage, she pointed out that the service offered through the software is not much different to what has always been offered through a property manager, but that elements of converting a human service into a digital one can have consequences – intentional and not.
“Real estate professionals who advise landlords on what to charge for their properties have a large group of properties in a single area, and have always had access to data about the properties they have on the books – that’s part of why you pay them a commission. So it’s not like this is a new problem,” she said.
“The data that these systems offer is what gives landlords and real estate agents the reach, and now something that used to require extensive effort can be done with the click of a button. It’s no longer difficult or an investment of your time to decide to charge more. It becomes very easy, and indeed, you might even be pushed to do so by an algorithm,” she noted.
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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