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A wave of class-action lawsuits is sweeping through the U.S. rental market as tenants accuse corporate landlords of engaging in a price-fixing conspiracy using real estate software. Allegations point to software provider RealPage and 34 co-defendant landlords, with the U.S. Department of Justice expressing interest in the case, asserting Sherman Antitrust Act violations.
Key Points from the Lawsuits:
1. Inflated Rent Hikes:
– U.S. renters claim that landlords are utilizing software, specifically RealPage, to deliver inflated rent hikes.
– Tenants allege that management, including Equity Residential, started implementing substantial price increases after offering concessions during the Covid-19 pandemic.
2. Class-Action Lawsuits:
– Tenants at Portside Towers, a 527-unit building in Jersey City, are involved in a sprawling class-action lawsuit against RealPage and 34 co-defendant landlords.
– The U.S. Department of Justice filed a statement of interest, supporting the tenants and arguing Sherman Antitrust Act violations.
3. Attorney General Complaint:
– In November 2023, the attorney general of Washington, D.C., filed a complaint against RealPage and 14 landlords managing over 50,000 apartment units in the District.
– The complaint alleges RealPage facilitates a housing cartel, claiming landlords share competitively sensitive data through the software, leading to artificially high rents.
4. Antitrust Grounds:
– The Attorney General of the District of Columbia, Brian Schwalb, accuses RealPage of facilitating a housing cartel and asserts that landlords are compelled to charge rents dictated by RealPage, violating antitrust laws.
5. RealPage’s Defense:
– RealPage defends its revenue management products, stating they use anonymized, aggregated data to deliver pricing recommendations on approximately 4.5 million U.S. housing units.
– The company claims its tools can increase landlord revenues between 2% and 7% and emphasizes that landlord customers are not obligated to follow price suggestions.
6. YieldStar Software:
-One of RealPage’s key revenue management tools, YieldStar, balances prices, occupancy, and lease lengths to help property managers optimize their portfolio’s yield.
– Former RealPage employee Jeffrey Roper emphasizes the efficiency of the software, claiming it outperforms manual analysis.
7. Tenant Awareness:
– Renters became aware of the use of revenue management software in real estate through a 2022 ProPublica investigation.
– Equity Residential investor materials indicate experimentation with Lease Rent Options, with RealPage acquiring the product in 2017.
8. Ongoing Litigation:
– Equity Residential and other defendant landlords involved in the lawsuits declined to comment on ongoing litigation against RealPage.
– Thoma Bravo, the private equity firm that acquired RealPage for $10.2 billion in 2021, claims it is not liable for alleged acts outlined by plaintiffs.
9. Rent Market Dynamics:
– Redfin reports a decline in U.S. asking rents to $1,964 a month in December 2023.
– Analysts note that while prices are decreasing in certain markets, well-located landlords on the U.S. East Coast may have increased pricing power due to low rates of homebuilding.
10. Equity Residential CEO’s Perspective:
– Equity Residential CEO Mark Parrell suggests that landlords with strategically located apartments remain in a favorable position despite market fluctuations.