RealPage sues Berkeley over impending ban on rent-pricing algorithms

Weeks after Berkeley joined several other U.S. cities in banning landlords from using popular algorithmic rent-pricing software, arguing it amounts to collusion that drives up housing costs, the company targeted by the ban has filed a lawsuit seeking to stop it.  

The ordinance, which the Berkeley City Council voted to approve on March 11, prohibits the sale or use of algorithms that help landlords coordinate to set rents or manage vacancies. It goes into effect April 24, unless stopped by the court.

related

Such algorithms recommend pricing to landlords by evaluating customers’ properties as well as publicly available rent data from other properties. 

“These recommendations allow landlords to manipulate the market and the practice amounts to illegal price-fixing,” asserts a memo submitted to the City Council in March by the Housing Advisory Commission, which brought the ordinance to the council for approval.

The lawsuit, filed Wednesday by Texas-based real estate software company RealPage, calls the ordinance a “sweeping and unconstitutional ban on lawful speech,” arguing that Berkeley’s law “violates the First Amendment’s prohibition on content-based speech restrictions” and is “based on misinformation.”

Stephen Weissman, a Washington, D.C.-based attorney for law firm Gibson Dunn, who is representing RealPage, said the company is not engaging in price-fixing. Cities banning the software are scapegoating it, he said. 

Weissman noted that the company is preparing to file a temporary restraining order this week against Berkeley to keep its ban from being implemented until the lawsuit moves through the court. 

Neither Berkeley’s city attorney nor other city spokespeople responded to requests for comment as of publication time.

RealPage is facing numerous antitrust lawsuits from tenants. Last year, under President Joe Biden’s administration, the Department of Justice joined with the attorneys general of California and seven other states to file a civil antitrust lawsuit against the company. The lawsuit accused the company of scheming to decrease competition among landlords, arguing that the software generates recommendations based on their rivals’ pricing information, whereas in a “free” market, those owners would have to compete independently to attract renters based on pricing, lease terms or other factors.

“Americans should not have to pay more in rent because a company has found a new way to scheme with landlords to break the law,” said then-Attorney General Merrick B. Garland. “We allege that RealPage’s pricing algorithm enables landlords to share confidential, competitively sensitive information and align their rents.” 

In January, the DOJ amended its complaint to add six of the country’s largest landlords as co-defendants, and two other state attorneys general – from Massachusetts and Illinois – joined the suit. That – and other lawsuits from tenants – are still pending.

RealPage leaders have repeatedly denied they are “price-fixing.” Weissman said it bases its recommendations on information about the customer’s property itself — such as impending vacancies, number of applications or interest and rents in its other units — and if there is vacancy in the market, uses aggregated, anonymized publicly available rent data. 

The company says landlord customers always have complete discretion to accept or reject the price recommendations from its software and accept recommendations less than 50% of the time. Company leaders have said, too, that its software generates price recommendations that align with their customers’ “unique asset strategy,” based on many customizable parameters.  

““We encourage California’s public leaders to focus on the real issue – the lack of housing supply,” said Dana Jones, RealPage CEO and President, in a written statement Wednesday. “Until then, we must take legal action to defend the critical role technology plays in supporting a healthier housing ecosystem.”

San Francisco and Philadelphia have adopted similar bans to Berkeley’s, but Berkeley is the first to face a lawsuit from RealPage. 

Weissman said that’s because Berkeley’s ban is imminent, and the company hopes to stop it before it’s in place. But it has not ruled out suing other cities over the bans.

It’s unclear how widespread the use of RealPage’s software is in Berkeley, but a report from the Housing Advisory Commission found that six major real estate firms named in lawsuits over the software own over 1,300 apartments in the city.

The City Council voted 8-1 on its ordinance to ban the software. Councilmember Mark Humbert, the sole opponent in the vote, argued enforcement would be difficult and said Berkeley should prioritize building more housing instead of focusing on the ban.

RealPage’s leaders have argued the same. Its lawsuit notes that some cities have been “particularly eager to find a scapegoat for their own hand in impeding the housing supply.”

RealPage’s suit against Berkeley takes a free speech-oriented tack, insisting that Berkeley’s ordinance violates the First Amendment because it “prohibits speech based on its content — namely, whether the speech provides recommendations or advice on rents or occupancy levels.” 

It’s unclear how that argument will fare in federal court, since courts have not always protected price-setting agreements under the First Amendment. 

“Using software as the sharing mechanism does not immunize this scheme from Sherman Act liability,” former U.S. Attorney General Garland said in a statement when the DOJ filed its suit against RealPage in 2024. 

But Weissman said he’s confident in the approach.

“The speech here is not commercial speech, because it’s not related to a transaction, but even if it were, there’s a heightened level of scrutiny,” he said. “It seems particularly now, in this climate, that courts are going to be more vigilant about enforcing the First Amendment, instead of allowing government entities – whether it be the President of the United States or local legislators – to chill that speech.”