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Justice Department Sues Major Landlords for Alleged Rent-Inflation Scheme

By  |  January 8, 2025
DOJ

The U.S. Justice Department has filed a lawsuit against six large landlords, alleging they conspired to artificially inflate rents across the country by sharing sensitive pricing information and relying on an algorithm to set rental rates. According to the department, this coordinated effort deprived renters of fair market prices, worsening an already dire housing crisis.

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    The lawsuit comes at a time when millions of Americans are grappling with soaring rental costs. Per recent data, half of U.S. renters spent more than 30% of their income on rent and utilities in 2022—a record high. This growing financial strain forces many families to make difficult choices between essential expenses like food, medicine, and housing. Research from Princeton University’s Eviction Lab shows that this instability results in about 1.5 million evictions annually, with children being disproportionately affected.

    While the housing affordability crisis stems from several factors, including a long-term decline in housing construction, the Justice Department contends that major landlords are contributing to the problem through coordinated practices designed to maximize profits.

    Read more: Compliance Now! Actionable Antitrust Advice for the Residential Real Estate Industry

    The lawsuit, filed in partnership with 10 states including North Carolina, California, Tennessee, and Colorado, claims that these landlords—who collectively own and manage more than 1.3 million rental units across 43 states and Washington, D.C.—shared confidential information about rental rates, occupancy levels, and pricing strategies. The department alleges that landlords communicated via phone, email, and meetings to exchange details on renewal rates, use of rental concessions, and pricing plans for upcoming quarters.

    A key focus of the lawsuit is the role of rent-setting algorithms used by the landlords. These tools are designed to recommend rental prices based on market data, but the Justice Department alleges that companies used these algorithms in coordination with competitors to keep prices elevated. The lawsuit claims that landlords often discussed how closely they adhered to the algorithm’s recommendations and how they adjusted rates based on shared data.

    One of the six landlords named in the lawsuit has agreed to cooperate with the government. According to a statement from the Justice Department, the proposed settlement would impose limits on how this company uses competitor data and rent-setting algorithms in the future. Prosecutors hope this settlement will set a precedent for curbing anti-competitive behavior in the housing industry.

    Source: Fortune