Landlords Pay $141M to Settle Claims of Rent-Gouging Algorithm Abuse

Landlords Settle Claim of Rent-Gouging Algorithm Abuse for $141 Million In a significant victory for consumers, real estate giants Greystar and 25 other property management companies have agreed to pay over $141 million to settle a class action lawsuit accusing them of using rent-setting algorithms to drive up housing costs nationwide. The proposed settlement, filed Wednesday in a Tennessee federal court, marks a major shift in the multifamily housing industry. According to the lawsuit, the companies used RealPage's rent algorithm, which relies on nonpublic information shared by landlords, to enable price coordination and push up rents. Under the proposed agreement, Greystar, the nation's largest landlord, would pay $50 million, while the other 25 companies would collectively contribute the remaining amount. "This settlement represents a fundamental shift in the multifamily housing industry," said R.J. Rico, an attorney representing the plaintiffs. "It will help reverse the type of anticompetitive coordination alleged in the complaint." The lawsuit, filed in 2020, accused RealPage and its clients of engaging in price-fixing and monopolistic practices, which led to increased rents for millions of Americans. The companies denied any wrongdoing but agreed to settle to avoid further litigation. RealPage's rent algorithm uses machine learning to analyze data from various sources, including property management software, to determine optimal rental prices. Critics argue that this approach enables landlords to collude and drive up costs, exacerbating the affordable housing crisis. "This settlement is a significant step towards holding companies accountable for their use of AI-powered algorithms," said Rachel Weber, an urban planning expert at the University of Illinois at Chicago. "It highlights the need for greater transparency and regulation in the use of these technologies." The proposed settlement still requires a judge's approval, which could take several months to obtain. If approved, it would be one of the largest settlements related to anticompetitive practices in the real estate industry. As the use of AI-powered algorithms continues to grow in various industries, this case serves as a warning about the potential risks and consequences of unchecked technological advancements. It also underscores the importance of regulatory oversight and consumer protection in ensuring that these technologies are used responsibly. Background: The lawsuit was filed in 2020 by a group of tenants who claimed that RealPage's rent algorithm enabled landlords to collude and drive up rents. The plaintiffs alleged that the companies engaged in anticompetitive practices, including price-fixing and monopolistic behavior, which led to increased costs for millions of Americans. Additional Perspectives: "This settlement is a victory for consumers who have been harmed by the predatory practices of these companies," said Senator Elizabeth Warren (D-MA), who has long advocated for greater regulation of the real estate industry. "We welcome this development and look forward to working with policymakers to ensure that AI-powered algorithms are used in a way that benefits consumers, not just corporate interests," said Rachel Weber. Current Status: The proposed settlement is pending approval from a Tennessee federal court. If approved, it would be one of the largest settlements related to anticompetitive practices in the real estate industry. The case serves as a warning about the potential risks and consequences of unchecked technological advancements and highlights the need for greater transparency and regulation in the use of AI-powered algorithms. *Reporting by Fortune.*