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DC’s attorney general has sued 14 of the city’s largest landlord firms, claiming they entered into agreements with a property management software firm to keep rent prices high in a city with a housing affordability crisis.
The complaint, filed earlier today by Attorney General Brian Schwalb, focuses on the multifamily landlords’ use of software from Texas-based firm RealPage, which suggests rental prices based on a pricing algorithm. Key to those models, according to the suit, is the data fed in from the landlords and the pressure RealPage puts on them to stick to the code-derived rental rates.
“RealPage and the defendant landlords illegally colluded to artificially raise rents by participating in a centralized, anticompetitive scheme, causing District residents to pay millions of dollars above fair market prices,” Schwalb said in a release tied to the complaint.
The collaboration “amounts to a District-wide housing cartel,” Schwalb said, noting that “well over” 30 percent of buildings with five or more units use RealPage’s software, along with 60 percent of 50-unit-plus buildings. Across a wider Washington-Arlington-Alexandria area, more than 90 percent of units in large buildings are subject to RealPage pricing, according to Schwalb’s office.
RealPage’s rent management service, YieldStar, has come under increasing scrutiny in recent years. RealPage and the property management firms utilizing their software were the subject of a class-action suit filed in the Southern District of California in October 2022, alleging the “cartel” of artificially inflating prices. The Department of Justice’s Antitrust Division opened an investigation in November 2022 into RealPage’s role in potential landlord collusion.
ProPublica’s investigation in October 2022, which seemingly incited legal action, noted that YieldStar discourages direct bargaining with renters and can recommend landlords accept lower occupancy rates rather than take lower rents. A developer who worked on YieldStar’s algorithm told ProPublica that rental leasing agents had “too much empathy” compared to the software’s pricing systems. Its creation of “work groups” of would-be rival landlords could also invite antitrust scrutiny, a former federal prosecutor told ProPublica.
Ars contacted RealPage and defendant Greystar Management Services for comment and will update the post with any new information.
In response to ProPublica’s reporting, a RealPage representative said the firm used “aggregated market data from a variety of sources in a legally compliant manner.” The representative also suggested that without RealPage, landlords typically conduct phone checks of competitors’ prices, whereas RealPage can “prioritize a property’s own internal supply/demand dynamics over external factors such as competitors’ rents.”
Schwalb’s DC lawsuit cites a former “high-ranking manager” at Greystar Management Services, one of the RealPage customers named in the suit, as confirming that landlords used rent management software to collude and raise prices. “He responded that of course they did—it’s the entire reason landlords used the software,” according to the complaint.
The complaint also cites internal and public statements by defendant landlords regarding their strong alignment with RealPage pricing. A slide from an internal Greystar presentation cited in the complaint suggested that “at least 95 percent” of RealPage prices should be used, as “Discipline of using revenue management increased more consistent outcomes.” Former Greystar employees allegedly told the Attorney General’s office that negotiating rents outside RealPage guidance was “unacceptable.”
