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 businesses to analyze RealPage’s rent-setting software program. In an Oct. 15 story, ProPublica detailed how RealPage’s pricing algorithm makes use of competitor knowledge to counsel new costs every day for out there residences.
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 provision of residences, they may face “potential legal 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’t 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 hire a two-bedroom condominium 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 charge slowed this fall, in line with a research by actual property agency Redfin. This got here, the representatives famous, after the ten largest publicly traded condominium firms noticed income rise by greater than 50% final 12 months, 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 strain on RealPage. U.S. Sen. Sherrod Brown just lately despatched an identical request to the FTC calling for a overview 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 workers name opponents commonly searching for detailed nonpublic data 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, in line with the lawsuit. “Typically there’d be a listing of 10 folks to name. Typically only one. You’d ask what they’re charging for his or her residences. Then you definitely’d actually change the costs proper there on RealPage. Manually bump it up.
“It was price-fixing,” the worker continued, in line with the lawsuit. “What else are you able to name it whenever you’re actually calling your competitors and altering your charge 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 data two or thrice a day, and added, “If anyone known 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 out there knowledge confirmed that marketed charges for the properties supplied by the defendants within the swimsuit within the Seattle space had been “persistently increased” 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 in recent times. In a single neighborhood, ProPublica discovered, 70% of residences 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 legal professionals earlier this month in U.S. District Courtroom in Seattle, accused RealPage of serving to landlords have interaction in anti-competitive habits within the pupil housing market.
That lawsuit alleges {that a} College of Washington pupil paid increased hire 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 hire in such faculty 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 towards the lawsuit.” RealPage has stated that the corporate “makes use of aggregated market knowledge from a wide range 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 inside 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 chance of collusion that might happen with handbook pricing involving telephone surveys of competitor costs.
RealPage’s software program makes use of an algorithm to churn by a trove of information to counsel hire costs. The software program makes use of not solely details about the condominium being priced and the property the place it’s situated, but in addition non-public knowledge 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 informed ProPublica.
ProPublica’s investigation discovered that the software program’s design and attain have raised questions amongst consultants about whether or not it’s serving to the nation’s largest landlords not directly coordinate pricing — probably in violation of federal legislation.
Six different companies named within the pupil 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 coed housing market within the U.S. was aggressive, with landlords providing concessions and giveaways as incentives. It says that RealPage known as such maneuvers leaving “cash on the desk.”
With the software program, landlords within the extremely concentrated marketplace for pupil housing discovered they may set a “high tier value,” the lawsuit says. It provides that the corporate claims to have a complete knowledge set that features key efficiency indicators for practically 1,000 universities. YieldStar Pupil, pricing software program tailor-made for pupil housing, served greater than 50 shoppers as of 2019, the corporate claimed, in line with the swimsuit.
Shoppers submit detailed inside knowledge on the hire they’re charging for every unit to RealPage, the lawsuit says, citing the corporate. The corporate’s software program recommends a value for every unit, it says, giving landlords “the braveness to cost an inflated value by the implicit assurance that every one of their opponents had been doing the identical.”
ProPublica reported beforehand that RealPage stated its software program helped its shoppers 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 hire costs even firstly of the varsity 12 months — historically a time when competitors for pupil 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 pupil housing purveyors, the lawsuit says, landlords shifted “from the earlier aggressive ‘market share over value’ technique to a brand new collusive ‘value over quantity’ technique.”
Pushing value over quantity “is attribute of a cartelized market,” the lawsuit says.
The brand new technique elevated costs no matter market circumstances and requested landlords to tolerate some unrented models, the lawsuit says — an method that might 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 alternative however to pay what Lessors demanded,” the lawsuit says.
One research of 2017-2018 knowledge by RealPage and defendant Campus Benefit discovered one 576-bed advanced outperformed its market by 14.1%, regardless of a “damaging” occupancy change 12 months over 12 months, the lawsuit says. It provides: “RealPage suggested property house owners and potential shoppers, ‘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 towards the claims. Campus Benefit is happy with its observe report creating profitable communities.”
The lawsuit says the defendants had a chance to conspire by RealPage’s Consumer Group Discussion board, which consists of shoppers 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 gives to its shoppers in the true property business,” it says.
