Home Rental industry Tenants sue software company and landlords for artificially inflating prices

Tenants sue software company and landlords for artificially inflating prices


Tenants are suing Texas-based software company RealPage and some of the nation’s largest property management firms for allegedly forming what they call a “cartel” to artificially inflate apartment prices above competitive levels.

Five tenants challenge RealPage and seven property management companies days after ProPublica released an investigation into landlords’ use of RealPage’s proprietary YieldStar algorithm to push the highest possible rental prices for apartment tenants across the United States.

“RealPage strongly denies the allegations and will vigorously defend itself against the lawsuit,” RealPage spokeswoman Natalie Dent said. “Beyond that, we do not comment on ongoing litigation.”

Earlier this week, in response to the ProPublica story, RealPage told the Dallas Morning News, “Revenue management software can’t control the market because it doesn’t account for or have visibility into the market availability. Additionally, the article implies that vacancy and resident turnover have increased due to revenue management, which is the exact opposite of what has happened, as both have steadily declined over the course of the year. decade, although the use of revenue management software has increased.

The class action lawsuit was filed in the U.S. District Court for the Southern District of California on behalf of all tenants of multifamily real estate leases from landlords who used RealPage’s pricing or lease renewal software.

“Today’s lawsuit plausibly alleges that rental housing landlords coordinated to drive up rents to unprecedented levels, exacerbating the national affordable housing crisis,” said Gary Smith Jr., attorney at Hausfeld representing tenants. “We look forward to asserting our clients’ rights in this important federal antitrust litigation.”

The lawsuit says the landlords independently priced their leases based on their own assessments of how best to compete with other landlords until around 2016, when they agreed to use a common third party, RealPage. , which collected prices and supply levels in real time and used this data. make price and supply recommendations. The owners would follow RealPage’s suggestion in the hope that others would do the same, the suit said.

The lawsuit targets some of the nation’s largest apartment complex managers, including Greystar Real Estate Partners LLC, headquartered in Charleston, SC; Dallas-based Lincoln Property Co.; FPI Management Inc., based near Sacramento; Mid-America Apartment Communities Inc., based in the Memphis area; Equity Residential in Chicago; Essex Property Trust, headquartered in the San Francisco Bay Area.; and three Seattle-based companies: Avenue5 Residential LLC, Thrive Communities Management LLC and Security Properties Inc.

None of the companies immediately responded to requests for comment.

The lawsuit claims that RealPage collected sensitive, non-public data from participating owners and used it to recommend prices to other operators.

“RealPage claims that it fixes the prices for [landlords’] ‘properties as if we owned them ourselves’ — i.e. [landlords’] cartel replicates the market outcomes that would be observed if they were a residential lease monopoly, which is the goal of any cartel,” the lawsuit said.

RealPage said landlords must accept recommended prices at least 80% of the time to be more effective at raising rents, according to the lawsuit. RealPage lead architect Jeffrey Roper was quoted in the ProPublica article and in the lawsuit as saying, “If you have idiots dumping, it costs the whole system.

The lawsuit quoted a RealPage employee as saying that the owners adopted 80% to 90% of the prices without any discrepancies.

“Like a [landlord] explains, while “we are all technically competitors,” RealPage “helps us work together,” “to work with a community in pricing strategies, not to work separately,” the lawsuit said.

The lawsuit also claims the owners used RealPage services to coordinate supply levels to avoid price competition. He said RealPage provides landlords with information to help them collectively oversupply the market and keep prices high by “staggering” lease renewals, keeping vacant units unoccupied for periods of time.

The North Texas-based property management tech giant has a presence in 22 million apartments around the world. RealPage became the nation’s leading provider of rent-setting software for landlords after a controversial merger with competitor Lease Rent Options in 2017, according to the ProPublica survey.

The company sells software and operating systems and provides analytics to the rental industry. It grew through a series of acquisitions before San Francisco-based private equity firm Thoma Bravo, one of the world’s largest private equity firms, bought the company in 2021 in part of a $10.2 billion deal that took RealPage out.