The Arguments Against RealPage Aren’t Real: Part Three

Part One of this series explored concerns about the effect of RealPage’s revenue-management (RM) software on rental costs and the question of anticompetitive intent. Part Two considered the matter of anticompetitive outcomes. This third and final part will examine the real reasons behind rising rental costs.

Why Rental Costs Are Really Rising

Even if RealPage were playing a role in the recent and often dramatic rental cost increases—a dubious proposition at best—its effects are dwarfed by other, far more powerful influences. Much of the explanation for these rapidly rising rents comes down to the most basic tenets of economics: supply and demand. Specifically:

Housing supply is down. New-home starts decreased from a seasonally adjusted annual rate of 1.286 million units in December 2020 to 857,000 units in July 2024—a decline of more than one-third. Looked at another way, the new-home start rate declined in 28 of those 44 months.

Home prices have risen sharply. According to the S&P CoreLogic Case-Shiller U.S. National Home Price Index, home prices averaged $236,600 in December 2020 and soared to an all-time high of $321,600 in July 2024—an increase of 35.9 percent. Compounding the home-price problem, mortgage interest rates also climbed from 2.67 percent in December 2020 to 7.79 percent in October 2023. Although these rates declined thereafter, they had dipped to only 6.35 percent by August 2024.

Renting has become the only option for tens of millions of families. Since 2021, 28.4 million U.S. households and 8.7 million renter households have been priced out of the market. These millions of renters, many of whom would otherwise be purchasing a home, have been forced to find or remain in rental housing, creating tremendous upward pressure on rents. As a recent report from ProPublica points out, with more people forced to rent, there simply aren’t enough rental units to go around. This increasing competition drives rental prices much higher than they would be otherwise.

Private-equity ownership has overtaken rental markets. Besides these basic supply and demand conditions (over which RealPage and other RM software providers have no control), the composition of rental-housing ownership in recent years has also pushed rents higher. The ProPublica report noted that “[s]ince 2011, there’s been a steady increase in the number of rental units owned by private equity-backed firms … These property management firms aim to increase short-term profits by increasing rents, cutting costs, or both.” By 2021, the report goes on, “more than half of the top 35 [U.S.] apartment building owners were backed by private equity, likely contributing to higher rents around the country.”

If there is a monopolistic power in the rental market, it is the aforementioned factors—not RealPage.

One more data point confirms the exogenous determinants of rent increases throughout the United States. RealPage was founded in 1998 and acquired LRO, a competing RM solution, in 2017—granting RealPage 80 percent of the RM software market. If RealPage had the anticompetitive influence in the rental market that the U.S. Department of Justice (DOJ) and other detractors claim it does, rental prices should have risen disproportionately faster than owner-occupied home prices as RealPage’s market share expanded.

However, when we compare year-over-year price increases for owner-occupied homes to the equivalent price increases for rental properties (as shown in the table below), the four-year change in the ratio of rental price increases to owner-occupied home price increases rose from 1 percent in 2001-2004 to 114 percent in 2009-2012. Subsequently, during the time in which RealPage most significantly expanded its RM software market share, the ratio of rental price increases to owner-occupied home price increases actually declined—by 38 percent in 2013-2016, by 10 percent in 2017-2020, and by 23 percent in 2021-2024. In other words, there has actually been a negative correlation between RealPage’s growing market share and the relative change in the cost of rental housing versus owner-occupied housing over the past 12 years.

Conclusion

RM software developer RealPage has been at the center of a legal and political firestorm in recent months, having taken blame for the rapid run-up in rental prices over the past three years. But RealPage isn’t alone as an object of attack—one report indicated that nearly half of the S&P 500, by market cap, is currently under government investigation for possible antitrust violations.

Many of these antitrust allegations are no doubt economically dubious, and that is certainly the case with respect to RealPage’s link to rising rental prices. In fact, the charges against RealPage are economically unreasonable. The U.S. rental-housing market is highly atomized, and contrary to traditional antitrust tenets, characterized by neither anticompetitive intent nor anticompetitive outcomes. As noted, even proponents of a malign RealPage role admit there are many significant explanations for sharply increasing rental prices—and both logic and data clearly show that the company’s RM software is not among them.

The arguments against RealPage, in short, are simply not real.