Real estate software company RealPage filed a federal lawsuit Wednesday against New York Attorney General Letitia James to block a new law targeting landlords and companies that use algorithms to set rental prices.
The Texas-based company is seeking a preliminary injunction in federal court in Manhattan to prevent the law, which bans any software that “recommends rental prices, lease renewal terms, ideal occupancy levels or other lease terms” from taking effect on Dec. 15.
The case has significant implications for Long Island renters.
Property management firms that operate several thousand apartments on Long Island were named in federal lawsuits, alleging they used RealPage to collude to raise rents, according to a Newsday analysis published in January.
The country’s largest landlord Greystar, which owns or manages 13 apartment communities on Long Island, and 25 other property management companies agreed to pay $141 million in a class-action settlement in October related to their use of RealPage.
The company’s lawsuit alleges the new law infringes on its First Amendment rights by restricting the “sale, disclosure and use of information”, according to its complaint. The lawsuit comes just days after RealPage settled a federal antitrust suit with the U.S. Department of Justice that had alleged its software helped landlords around the U.S. collude to raise rents.
RealPage cited that settlement in its case against New York, noting the Justice Department allowed the company to continue selling its product to customers under a proposed settlement pending approval in federal court in North Carolina. The company is owned by Chicago-based private equity firm Thoma Bravo.
The Justice Department’s proposed settlement bars RealPage from using competitors’ nonpublic, competitively sensitive information in its recommendations.
The governor’s office said it intends to fight the lawsuit.
“Governor Hochul took action and championed legislation to stop landlords from illegally jacking up rents and to protect tenants across New York State,” Kristin Devoe, a spokesperson for Gov. Kathy Hochul, told Newsday in an email. “Now, the company that makes its profits by helping landlords collude and break the law is suing to keep those illegal rent hikes going. We’re not backing down.”
New York’s law aims to improve housing affordability by prohibiting coordination among two or more landlords using “software, [a] data analytics service, algorithmic device” that can help property owners or managers coordinate rent prices
RealPage argues the law infringes on the company’s rights and casts such a wide net that it may be illegal for a mom-and-pop landlord to use ChatGPT to help them set rents, according to the lawsuit.
“The multifamily industry deserves tools that support responsible operations, informed decisions, and better outcomes for residents,” Dirk Wakeham, RealPage President and CEO, said in a statement on Wednesday. “This law denies housing providers access to lawful analysis and information that helps them meet the needs of their communities.”
Ian Wilder, executive director at fair housing agency Long Island Housing Services in Bohemia, disagreed with that argument.
“The last thing Long Island needs is someone making recommendations to raise the cost of rent even higher,” Wilder said. “There’s a difference between somebody renting one apartment, making decisions for themselves, and a central body taking all the data from the market and making recommendations to large landlords who control a chunk of the market.”
Jonathan LaMantia covers residential real estate and other business news on Long Island. He previously covered the business of health care for Crain’s New York Business.