(Bloomberg) — Senators Elizabeth Warren and Bernie Sanders are demanding information from a software company owned by private equity firm Thoma Bravo LLC over concerns its algorithm is driving up rents across the country.
(Bloomberg) — Senators Elizabeth Warren and Bernie Sanders are demanding information from a software company owned by private equity firm Thoma Bravo LLC over concerns its algorithm is driving up rents across the country.
The senators are scrutinizing pricing software sold by RealPage Inc. that’s used by the largest property management companies to set prices on more than 20 million rental units in the US.
In a letter to RealPage’s chief executive officer, Dana Jones, dated Tuesday, the senators sought details on the company’s practices, citing concerns its Yieldstar software fosters collusion between property owners and leads to rent increases.
“As housing becomes increasingly concentrated within the hands of a few, we are concerned that your software is facilitating a never-ending race to setting the highest possible rents,” wrote Warren, a Massachusetts Democrat, and Sanders, an independent from Vermont.
The senators pointed out that RealPage has created a forum — RealPage User Group — which encourages landlords to work together, creating a virtual “cartel” among property owners. YieldStar clients include GreyStar Real Estate Partners LLC, the largest US property manager, as well as Camden Property Trust and Mid-America Apartments LP, among others.
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, a ProPublica investigation found last month. The Justice Department’s antitrust division had reviewed the deal, but ultimately let it move forward.
Thoma Bravo acquired RealPage last year.
The letter, which was also signed by Senators Ed Markey of Massachusetts and Tina Smith of Minnesota, both Democrats, asks that RealPage provide information on the metropolitan areas where it has the highest market share and the average rent increases imposed by its clients for the past five years.
“While the underlying cause of the housing crisis is a supply shortage of nearly seven million affordable homes, private equity firms and other institutional investors have taken advantage of these conditions and fueled the fire under American renters,” the senators wrote.
Other senators also have asked the Justice Department to look into RealPage’s YieldStar algorithm.
Inflation rose 7.7% in October from a year earlier with rent — which comprises about one third of the Consumer Price Index — as a partial driver. The median asking rent in the United States has increased 28% since the first quarter of 2020, according to US Census Bureau data compiled by Bloomberg.
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