Five renters – three in California and two in Washington state – filed a class action lawsuit last week in the U.S. District Court for the Southern District of California against RealPage and some of the largest property management firms in the country, alleging antitrust violations under the Sherman Act.
Among other things, they accuse property managers of sharing “competitively sensitive information with one another” by using RealPage as a conduit.
The property managers named in the suit filed Oct. 18 include seven firms in the National Multifamily Housing Council (NMHC) Top 50. They are:
- Greystar Real Estate Partners (No. 1).
- Lincoln Property Co. (No. 2).
- FPI Management (No. 5).
- MAA (No. 10).
- Avenue 5 Residential (No. 12).
- Equity Residential (No. 16).
- Essex Property Trust (No. 24).
Thrive Communities Management and Security Properties, both based in Seattle, were also named in the suit, which comes in the wake of a ProPublica report questioning whether RealPage’s algorithm has allowed the nation’s largest apartment owners to indirectly coordinate rent prices, possibly in violation of the law. Many of the article’s points were echoed in the class-action suit.
In a company statement provided to Multifamily Dive, RealPage said that the ProPublica article contains inaccuracies, is misleading and it disagrees with many of its conclusions.
“Rent prices are determined by various factors, including supply and demand as well as each property owner’s unique circumstances,” RealPage said in an email to Multifamily Dive. “There is a housing supply shortage and that alone drives prices higher. Occupancy has been at an all-time high.”
RealPage noted that revenue management is used across many industries and that it isn’t the only option for property operators in the U.S.
“RealPage’s revenue management software is purposely built to be legally compliant,” the company said in the statement. “It focuses on the internal supply and demand dynamics at a particular property and does not consider or have any visibility into availability [supply] at competing properties.”
A class action suit
The plaintiffs allege that the apartment managers named in the suit used “unit-specific pricing and supply recommendations” from RealPage. In the process, they coordinated “both pricing and supply,” according to the suit.
The suit also claims that RealPage asked for “discipline” among apartment managers, referred to as lessors. “To encourage adherence to its common scheme, RealPage explains that for its services to be most effective in increasing rents, lessors must accept the pricing at least 80% of the time,” according to the suit.
In its response to the ProPublica article, RealPage said that many housing providers prefer bottom-line pricing, and revenue management software, because it keeps them in compliance with fair housing compliance. “Negotiating rent opens up the possibility of providing different renters with different pricing for the same housing unit, which can put housing providers squarely in violation of federal Fair Housing laws,” it said in the statement to Multifamily Dive.
RealPage is also accused of allowing apartment operators to coordinate supply levels, inflating prices.
“To avoid the consequences of lawful competition, RealPage provides lessors with information sufficient to ‘stagger’ lease renewals to avoid oversupply,” according to the suit. “Lessors thus held vacant rental units unoccupied for periods of time to ensure that, collectively, there is not one period in which the market faces an oversupply of residential real estate properties for lease, keeping prices higher.”
RealPage denied the allegations in the lawsuit and vowed to vigorously defend itself against the lawsuit. “Beyond that, we do not comment on pending litigation,” it told Multifamily Dive.
Industry reaction
Multifamily Dive reached out to each of the management firms mentioned in the suit and the law firms representing the plaintiffs.
Lincoln responded to Multifamily Dive with a statement saying the allegations are without merit, and that it denies that the company or any of its employees have engaged in conduct in violation of U.S. antitrust laws. “Lincoln looks forward to the opportunity to bring the facts to the attention of the court,” it said in the statement.
In a statement provided to Multifamily Dive, Bob Pinnegar, president and CEO of the National Apartment Association, commented that embracing technology like algorithms and artificial intelligence to provide insights into supply and demand is part of any business.
“It’s important to note that while they can increase rent, the reverse is also true: if the market cannot support rent levels, asking rents will drop,” Pinnegar said in the statement.
Pinnegar says the larger issue is that a critical lack of all types of housing at all price points has led to “an unprecedented housing affordability crisis.”
A representative from the National Multifamily Housing Council said the organization was aware of the suit but had no comment.
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