A Texas-based actual property tech firm is going through a brand new barrage of questions on whether or not its software program helps landlords coordinate rental pricing in violation of antitrust legal guidelines.
Seventeen Democratic members of the U.S. Home of Representatives despatched a letter Monday to the Division of Justice and the Federal Commerce Fee asking the companies to research RealPage’s rent-setting software program. In an Oct. 15 story, ProPublica detailed how RealPage’s pricing algorithm makes use of competitor information to recommend new costs day by day for obtainable flats.
Within the letter, Reps. Jesús “Chuy” García and Jan Schakowsky, each from Illinois, and different Democratic leaders stated that if massive property managers and RealPage fashioned a cartel to artificially inflate rents and reduce the availability of flats, they may face “potential prison prosecution.”
The representatives famous that RealPage grew to become dominant within the business after it bought its largest competitor in 2017. The Justice Division reviewed the merger however allowed it to proceed.
“Our constituents can not afford to have anticompetitive — and probably per se unlawful — practices drive up costs for important items and companies at a time when a full-time, minimum-wage wage doesn’t present a employee sufficient cash to lease a two-bedroom condo in any metropolis throughout this nation,” they stated.
A serious driver of inflation, median U.S. asking rents grew year-over-year by as a lot as 18% this spring, earlier than the expansion fee slowed this fall, based on a examine by actual property agency Redfin. This got here, the representatives famous, after the ten largest publicly traded condo corporations noticed income rise by greater than 50% final yr, to virtually $5 billion.
The Justice Division and Federal Commerce Fee didn’t reply to requests for remark.
The Home letter provides to rising authorized and regulatory stress on RealPage. U.S. Sen. Sherrod Brown just lately despatched the same request to the FTC calling for a evaluation of the corporate’s practices. Final month, renters filed a lawsuit in San Diego alleging the corporate facilitated collusion amongst 9 of the nation’s largest property managers. Two extra lawsuits have been filed since then. All of them search class motion standing.
One swimsuit filed Friday on behalf of two Seattle renters alleges a broad sample of collusive habits by RealPage and a bunch of 10 giant property managers.
It says that along with utilizing RealPage software program to inflate rents in downtown Seattle, property managers had staff name opponents frequently searching for detailed nonpublic info on what they had been charging — which the workers would change their costs to match. The lawsuit quoted what it stated was a former worker of Greystar, the nation’s largest property administration agency.
“You’d name up the competitors within the space,” the previous worker stated, based on the lawsuit. “Generally there’d be a listing of 10 individuals to name. Generally only one. You’d ask what they’re charging for his or her flats. You then’d actually change the costs proper there on RealPage. Manually bump it up.
“It was price-fixing,” the worker continued, based on the lawsuit. “What else are you able to name it if you’re actually calling your competitors and altering your fee based mostly on what they are saying?”
The lawsuit quoted one other former Greystar worker who described making comparable calls in Seattle. The employee stated somebody from one other property supervisor would name searching for pricing info two or 3 times a day, and added, “If any person referred to as me searching for numbers, I’d inform them after which flip round and say, ‘now it’s your flip. What are your numbers?’”
The lawsuit stated that publicly obtainable information confirmed that marketed charges for the properties supplied by the defendants within the swimsuit within the Seattle space had been “constantly larger” than these of nondefendants.
Greystar and 9 different companies named within the lawsuit didn’t instantly reply to requests for remark.
ProPublica discovered RealPage’s pricing software program to be broadly utilized in downtown Seattle, the place rents have climbed steeply lately. In a single neighborhood, ProPublica discovered, 70% of flats had been overseen by simply 10 property managers, each single one in every of which used RealPage’s pricing software program.
One other lawsuit, filed by the identical group of attorneys earlier this month in U.S. District Court docket in Seattle, accused RealPage of serving to landlords have interaction in anti-competitive habits within the scholar housing market.
That lawsuit alleges {that a} College of Washington scholar paid larger lease costs due to collusion between landlords utilizing RealPage’s software program.
The lawsuit names as defendants a few of the largest actual property companies on the earth, together with Greystar and Cushman & Wakefield. It accuses them of artificially inflating lease in such school cities as Seattle; Eugene, Oregon; Tucson, Arizona; Salt Lake Metropolis, Utah; Ann Arbor, Michigan; Columbus, Ohio; and Gainesville, Florida.
A spokesperson for Cushman & Wakefield, which additionally owns one other agency named within the lawsuit, declined to remark.
In response to the San Diego lawsuit alleging collusion, a RealPage consultant stated the corporate “strongly denies the allegations and can vigorously defend in opposition to the lawsuit.” RealPage has stated that the corporate “makes use of aggregated market information from quite a lot of sources in a legally compliant method.” RealPage didn’t instantly reply to a request for touch upon the brand new lawsuits and congressional letter.
RealPage stated beforehand that its income administration software program prioritizes a property’s personal inner provide and demand dynamics over such exterior elements as opponents’ rents. In an earlier assertion, the corporate stated its software program helps get rid of the danger of collusion that would happen with handbook pricing involving cellphone surveys of competitor costs.
RealPage’s software program makes use of an algorithm to churn via a trove of information to recommend lease costs. The software program makes use of not solely details about the condo being priced and the property the place it’s situated, but additionally personal information on what close by opponents are charging in rents. The software program considers precise rents paid to these rivals, not simply what they’re promoting, the corporate advised ProPublica.
ProPublica’s investigation discovered that the software program’s design and attain have raised questions amongst specialists about whether or not it’s serving to the nation’s largest landlords not directly coordinate pricing — probably in violation of federal regulation.
Six different companies named within the scholar housing lawsuit didn’t instantly reply to requests for remark. One couldn’t be reached.
The lawsuit alleges that earlier than property managers started utilizing RealPage’s software program in round 2009, the scholar housing market within the U.S. was aggressive, with landlords providing concessions and giveaways as incentives. It says that RealPage referred to as such maneuvers leaving “cash on the desk.”
With the software program, landlords within the extremely concentrated marketplace for scholar housing discovered they may set a “high tier worth,” the lawsuit says. It provides that the corporate claims to have a complete information set that features key efficiency indicators for almost 1,000 universities. YieldStar Pupil, pricing software program tailor-made for scholar housing, served greater than 50 purchasers as of 2019, the corporate claimed, based on the swimsuit.
Shoppers submit detailed inner information on the lease they’re charging for every unit to RealPage, the lawsuit says, citing the corporate. The corporate’s software program recommends a worth for every unit, it says, giving landlords “the braveness to cost an inflated worth by the implicit assurance that each one of their opponents had been doing the identical.”
ProPublica reported beforehand that RealPage stated its software program helped its purchasers outperform the market by 3 to 7%.
The lawsuit stated the collusion amongst property managers utilizing the software program eradicated the necessity for reductions or decrease lease costs even at the beginning of the college yr — historically a time when competitors for scholar renters is the fiercest.
“Even when some beds remained empty, the monopoly rents RealPage helped extract from the rented models justified the unrented models,” the lawsuit says.
As soon as RealPage was broadly adopted by scholar housing purveyors, the lawsuit says, landlords shifted “from the earlier aggressive ‘market share over worth’ technique to a brand new collusive ‘worth over quantity’ technique.”
Pushing worth over quantity “is attribute of a cartelized market,” the lawsuit says.
The brand new technique elevated costs no matter market situations and requested landlords to tolerate some unrented models, the lawsuit says — an method that will fail in a aggressive market.
“Out there RealPage and Lessors created, every Lessor had mutual assurances that different Lessors would additionally maintain costs excessive, leaving college students with no selection however to pay what Lessors demanded,” the lawsuit says.
One examine of 2017-2018 information by RealPage and defendant Campus Benefit discovered one 576-bed advanced outperformed its market by 14.1%, regardless of a “detrimental” occupancy change yr over yr, the lawsuit says. It provides: “RealPage suggested property house owners and potential purchasers, ‘If you wish to outperform the market time period after time period, focus much less on occupancy and extra on strategic lease pricing.’”
In an announcement emailed to ProPublica, Campus Benefit stated it “strongly disagrees with the unsubstantiated allegations within the lawsuit and intends to vigorously defend in opposition to the claims. Campus Benefit is pleased with its monitor document creating profitable communities.”
The lawsuit says the defendants had a chance to conspire via RealPage’s Person Group Discussion board, which consists of purchasers who need to work collectively to assist the corporate enhance its merchandise, in addition to at different RealPage capabilities and business commerce affiliation gatherings.
RealPage advisors would even be in common contact with landlords “to maintain them updated on their opponents,” the lawsuit alleges.
RealPage’s actions weren’t broadly recognized, the lawsuit says. “Solely after the current publication in October 2022 of an article in ProPublica was there a complete presentation of the complete scope of the confidential companies that RealPage supplies to its purchasers in the true property business,” it says.
ProPublica is a Pulitzer Prize-winning investigative newsroom. Join The Large Story e-newsletter to obtain tales like this one in your inbox.
