Renters are suing the Texas-based software company RealPage and some of the largest property management firms in the nation for allegedly forming what they call a “cartel” to artificially inflate apartment prices above competitive levels.
Five renters are challenging RealPage and seven property management firms — including Dallas-based Lincoln Property Co. — days after ProPublica published an investigation on landlords’ use of RealPage’s proprietary YieldStar algorithm to push the highest possible rent prices on tenants for apartments across the U.S.
“RealPage strongly denies the allegations and will vigorously defend against the lawsuit,” said RealPage spokeswoman Natalie Dent. “Beyond that, we do not comment on pending litigation.”
Earlier this week in response to the ProPublica story, RealPage told The Dallas Morning News: “Revenue management software cannot control the market because it does not consider or have visibility into market availability. Additionally, the article implies vacancy and resident turnover have increased due to revenue management, which is exactly opposite of what has occurred, as both have steadily declined over the last decade even as revenue management software usage increased.”
The class-action suit was filed in U.S. District Court in the Southern District of California on behalf of all renters of multifamily real estate leases from landlords who have used RealPage’s pricing or lease renewal-staggering software.
“Today’s lawsuit plausibly alleges that lessors of rental units have coordinated to drive rents up to unprecedented levels, exacerbating the nation’s affordable housing crisis,” said Gary Smith Jr., an attorney at Hausfeld representing the renters. “We look forward to vindicating our clients’ rights in this important federal antitrust litigation.”
The suit claims landlords independently priced their leases based on their own assessments of how to best compete against other landlords until about 2016, when they agreed to use a common third party, RealPage, which collected real-time prices and supply levels and used that data to make pricing and supply recommendations. The landlords would follow RealPage’s suggestion with the expectation that others would do the same, the suit said.
The lawsuit is targeted at some of the largest managers of apartment complexes in the nation, including Greystar Real Estate Partners LLC, headquartered in Charleston, S.C.; Dallas-based Lincoln Property Co.; FPI Management Inc., based near Sacramento; Mid-America Apartment Communities Inc., based in the Memphis area; Chicago-based Equity Residential; Essex Property Trust, headquartered in the San Francisco Bay Area.; and three Seattle-based firms: Avenue5 Residential LLC, Thrive Communities Management LLC and Security Properties Inc.
None of the firms immediately responded to requests for comment.
The listed plaintiffs are Sherry Bason, Lois Winn, Georges Emmanuel Njong Diboki and Julia Sims, current and former residents of properties in California and Washington managed by Greystar, and Sophia Woodland, a resident at a property in Everett, Wash., run by Security Properties.
The lawsuit claims RealPage collected sensitive and nonpublic data from participating landlords and used that to recommend prices for other operators.
“RealPage touts that it sets pricing for [landlords’] ‘properties as though we own them ourselves’ — i.e., the participating [landlords’] cartel replicates the market outcomes one would observe if they were a monopolist of residential leases, which is the goal of any cartel,” the lawsuit said.
RealPage has said landlords must accept the recommended pricing at least 80% of the time to be most effective in increasing rents, according to the lawsuit. RealPage’s main architect, Jeffrey Roper, was quoted in the ProPublica article and in the suit saying, “if you have idiots undervaluing, it costs the whole system.”
The suit cited a RealPage employee who said landlords adopt 80% to 90% of prices without any deviation.
“As one [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 landlords used RealPage services to coordinate supply levels to avoid price competition. It said RealPage provides landlords with information to help them collectively oversupply the market and keep prices high by “staggering” lease renewals, holding vacant units unoccupied for periods of time.
The North Texas property management-tech giant has a presence across 22 million apartment units around the world. RealPage became the nation’s dominant provider of rent-setting software for landlords after a controversial merger with competitor Lease Rent Options in 2017, according to ProPublica’s investigation.
The firm 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 a $10.2 billion deal that took RealPage private.
