RealPage Claims Berkeley Ban on Algorithmic Rent-Setting Violated Its Free Speech
Megha Nagaram
Property management software company RealPage recently challenged a city ordinance in Berkeley, California, that banned the use of algorithmic rent-setting tools, claiming the ban violated its right to free speech. RealPage’s suit against Berkeley appears to have succeeded in discouraging other local and state governments from enacting similar laws that ban the use of its products.
The suit, filed April 2, is the first time RealPage has invoked the First Amendment in its defense, marking a shift in the corporation’s response to a series of lawsuits by the Justice Department and individual states charging the firm with violating antitrust law. The new strategy reflects a broader trend in which large businesses ground their legal defenses on a 2010 Supreme Court decision — Citizens United v. FEC — that extended First Amendment protections to corporations.
The DOJ’s case against RealPage dates to August 2024 and alleges that RealPage was operating an unlawful information-sharing scheme in violation of antitrust laws. Eight states — including California and Colorado — joined the DOJ in the suit. That lawsuit followed earlier cases by the District of Columbia and Arizona. In addition, over 30 cases brought by individual plaintiffs have been consolidated into another antitrust suit against RealPage.
The suits by DC and Arizona offer particularly rich detail on RealPage’s actions. According to those complaints, RealPage’s property management software requires landlords to share sensitive data such as “occupancy rates, rents charged for each unit and each floorplan, lease terms, amenities, move-in dates, and move-out dates.” RealPage then inputs this data into an algorithm that sets prices for each lease for each user. According to the suits, RealPage helps landlords set rents for as many as 16 million rental units nationwide.
The two suits also provide a clear view of the harms. According to analysis done by the Biden White House Council of Economic Advisers, RealPage’s system resulted in renters across the U.S. paying an extra $3.8 billion in rent just in 2023. The Arizona complaint found that renters were overpaying by 12%-13% of their rent.
RealPage contends in its complaint against the Berkeley that its recommendations are simply “rental advice” and that a prohibition of such advice is an unconstitutional suppression of speech. The Arizona lawsuit, however, estimates that landlords follow RealPage’s recommendations over 90% of the time due to multiple forms of pressure.
According to the Arizona lawsuit, landlords that deviate too often from RealPage’s recommended rents face the threat of being terminated from the RealPage system. In addition, RealPage encourages landlords to automatically accept their prices and also employs “pricing advisors” to ensure compliance. Thus, RealPage not only sets the rental prices but works to ensure landlord compliance with the prices.
RealPage takes great care in its complaint against Berkeley to distinguish its recommendations from “commercial speech,” which is afforded a lesser degree of protection under the First Amendment. And while RealPage does acknowledge that “preventing collusion among competitors and constraining the rate of rent increases are sufficiently compelling government interests,” they argue that the Berkeley city ordinance is overbroad because it is designed to address more than merely collusion and rising rents.
Berkeley’s existing set of rental market policies appears to have helped ensure the city’s economic and racial diversity, in part by preventing the sort of price spikes experienced in other parts of California. At present, 57% of the city’s population are renters. Of these, 60% are low-income and half already pay at least 30% of their income on rent. Meanwhile, about half of Berkeley’s population is non-white, and roughly three-quarters of this population rent rather than own their own homes. Rents in the East Bay have gone up 19% in the past nine years.
RealPage’s new legal offensive already appears to be having a chilling effect on other local and state governments. Two weeks after RealPage filed its suit against Berkeley, the city council in Portland, Oregon, decided against passing a similar ordinance to ban the use of rent-setting algorithms, citing the Berkeley suit as a reason to send the ordinance back to committee. At a hearing for the ordinance, Open Markets Institute’s chief economist Brian Callaci testified that rent-setting algorithms drive rents higher, while a lobbyist representing RealPage testified that a ban would result in expensive litigation.
Following Portland’s retreat, Colorado governor Jared Polis vetoed a bill that would have established the first statewide ban on the use of rent-setting algorithms. Citing the ongoing litigation, Polis said he would like to see how the case plays out.