Home News RealPage Accused of Colluding With Landlords to Increase Rents — ProPublica

RealPage Accused of Colluding With Landlords to Increase Rents — ProPublica

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The Texas-based real estate tech company faces a new barrage of questions about whether its software is helping landlords adjust rental prices in violation of antitrust laws.

Seventeen Democrats in the US House of Representatives wrote Monday to the Justice Department and the Federal Trade Commission asking the agency to investigate RealPage’s rent-setting software. ProPublica detailed how to do it in his Oct. 15 article. RealPage’s pricing algorithm uses competitor data We propose new prices for available apartments daily.

in the letterIllinois Rep. Jesús “Chuy” Garcia and Jan Schakowski, along with other Democratic leaders, say large property management companies and realpages have formed a cartel to artificially raise rents. , said reducing the supply of apartments “could face potential criminal prosecution.” “

The representative noted that RealPage became dominant in the industry after acquiring its biggest competitor in 2017. The Department of Justice considered a merger but allowed it to proceed.

“Our voters are against anti-competitive and potentially illegal practices when a full-time minimum wage salary does not provide workers with enough money to rent a two-bedroom. We can’t afford to do that in an apartment in any city in the country,” they said.

Median asking rents in the US, a key driver of inflation, rose 18% year-over-year this spring before slowing growth this fall. According to a survey by real estate firm RedfinHere are the 10 largest apartment companies publicly listed More than 50% increase in profit Last year, it was almost $5 billion.

The Justice Department and Federal Trade Commission did not respond to requests for comment.

The House letter furthers increased legal and regulatory pressure on RealPage. U.S. Senator Sherrod Brown recently A similar request to the FTC I would like to request a review of the company’s practices. last month, the tenant filed a lawsuit In San Diego, the company alleged it fostered collusion among nine of the country’s largest property managers. They are all seeking class action status.

A Lawsuit Filed Friday on Behalf of Two Seattle Tenants Widespread patterns of collusion By RealPage and a large group of 10 property managers.

In addition to using RealPage software to drive up rent in downtown Seattle, a property manager had employees routinely call competitors asking for detailed, non-public information about their bills, and employees The price has been changed accordingly. The suit said he was a former employee of Greystar, the country’s largest property management company.

According to the lawsuit, the former employee said he would “call for competition in the area.” “Sometimes I call a list of ten people. Sometimes just one. You’ll ask what they’re charging for their apartment. Then you literally change the price on RealPage.” Bump up manually.

“It was price fixing,” the employee continued, according to the lawsuit. “When you’re literally calling your competitors and changing your rates based on what they say, what else can you call them?”

The lawsuit cited another former Greyster employee who described having made similar calls in Seattle. “If someone calls me to get my number, I’ll tell them, then turn around and say, ‘Now it’s your turn,'” he added. What is your number? “

According to the complaint, publicly available data showed that real estate advertising rates offered by defendants in Seattle-area lawsuits were “consistently higher” than those of non-defendants.

Greystar and nine other companies named in the lawsuit did not immediately respond to requests for comment.

ProPublica has found RealPage’s pricing software in widespread use in downtown Seattle, where rents have skyrocketed in recent years. A ProPublica study found that in one district, 70% of apartments were managed by just 10 property managers, all of whom used his RealPage pricing software.

A separate lawsuit filed earlier this month by the same group of attorneys in US District Court in Seattle accused RealPage of helping landlords get involved. Anti-competitive behavior in the student housing market.

The lawsuit alleges that a University of Washington student paid higher rent due to collusion among landlords to use RealPage’s software.

The lawsuit names the world’s largest real estate companies as defendants, including Greystar and Cushman & Wakefield. They accuse college cities like Seattle of artificially inflating rents. Eugene, Oregon. Tucson, Arizona. Salt Lake City, Utah. Ann Arbor, Michigan. Columbus, Ohio. and Gainesville, Florida.

A spokeswoman for Cushman & Wakefield, which also owns another company named in the lawsuit, declined to comment.

In response to the San Diego lawsuit alleging collusion, a RealPage representative said the company “strongly denies the allegations and will vigorously defend itself against the lawsuit.” RealPage says it “uses market data collected from a variety of sources in a legally compliant manner.” RealPage did not immediately respond to a request for comment on the new lawsuit and congressional letter.

RealPage has previously said its revenue management software prioritizes supply and demand dynamics within properties over external factors such as competitors’ rents. In a previous statement, the company said its software helps eliminate the risk of collusion that can occur with manual pricing, including phone surveys of competitor prices.

RealPage’s software uses algorithms to churn through large amounts of data to suggest rent. The software uses not only information about the apartments priced and their locations, but also personal data about the rents of neighboring competitors. The software takes into account actual rents paid to rivals, not just what they advertise, the company told ProPublica.

A ProPublica study found that the software’s design and reach have led experts to question whether it is indirectly helping the nation’s largest landlords, who may be in violation of federal law, to adjust their pricing. I know you’re questioning it.

Six other companies named in the student housing lawsuit did not immediately respond to requests for comment.

The lawsuit alleges that before property managers began using RealPage’s software around 2009, the U.S. student housing market was highly competitive, with landlords offering concessions and giveaways as incentives. RealPage calls such a ruse, stating that it “leaves the money on the table.”

By using the software, landlords in the highly concentrated student housing market have found they can set “best prices,” the lawsuit says. The company adds that it claims to have a comprehensive dataset containing key performance indicators for about 1,000 universities. According to the lawsuit, YieldStar Student was pricing software for student housing that served more than 50 clients as of 2019.

Clients provide RealPage with detailed internal data about the rent they charge for each unit, the lawsuit says, citing the company. The company’s software recommends prices for each unit, giving landlords “the courage to charge inflated prices by the implied assurance that all competitors are doing the same.”

ProPublica previously reported that RealPage said its software helped its customers outperform their markets by 3-7%.

The lawsuit says collusion among property managers using the software eliminated the need for discounts and rent reductions, even at the start of a new school year.

“Even though some beds remained empty, the exclusive rent that RealPage helped extract from the rented units justified the non-rented units,” the lawsuit states.

As RealPage was widely adopted by student housing providers, landlords moved from “the previous competitive ‘market share over price’ strategy to a new collusive ‘price over quantity’ strategy,” the lawsuit said. said.

It is “the hallmark of a cartelized market,” the lawsuit says, pushing prices over quantity.

The new strategy called for higher prices regardless of market conditions and for landlords to tolerate some unrented properties, the lawsuit says, but an approach that would fail in a highly competitive market.

“In a marketplace created by RealPage and lenders, each lender mutually guaranteed that other lenders would also keep prices high, so students had no choice but to pay what the lenders demanded,” the lawsuit states. I’m here.

In one study of 2017-2018 data by RealPage and defendant Campus Advantage, one 576-bed complex outperformed its market by 14.1%, despite a “negative” occupancy change from year to year. The lawsuit states that it was found that “RealPage advises property owners and potential clients, ‘If you want to outperform each market period, focus on strategic lease pricing rather than occupancy rates.'” did.”

In a statement emailed to ProPublica, Campus Advantage said, “We strongly disagree with the baseless allegations in the lawsuit and intend to vigorously defend ourselves against the allegations. I am proud of what we have achieved.”

According to the complaint, defendants had an opportunity to collude through RealPage’s user group forums. RealPage’s User Group Forums are made up of clients who want to work together to improve the company’s products, as well as other RealPage features and trade association meetings.

The lawsuit also alleges that RealPage’s advisors are in regular contact with landlords to “keep up-to-date with their competitors.”

RealPage’s actions were not widely publicized, the lawsuit states. “For the first time since an article was recently published in his ProPublica in October 2022, we have been able to provide a comprehensive look at the full range of confidential services that RealPage offers its clients in the real estate industry,” the company said. I’m here.

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