Housing cartel? No, not in a lawless drug country, but in major American cities where corporate landlords have He is accused Conspiracy with Texas real estate software company RealPage raise rent.
Most recently, Atlanta-based Cortland Management, one of the largest landlords in the United States used to be A warrant has been issued for the FBI’s arrest. about a Ongoing antitrust investigation Multifamily house price manipulation by the Department of Justice (DOJ). According to Cortland Management’s website, the company is valued at $218 billion and manages 85,000 units in 13 states.
RealPage mounted a vigorous defense and much of its content website Works to debunk accusations of price manipulation. It claims that in many cases it recommends lowering house prices rather than raising them.
RealPage coverage
RealPage states that the scope of its services is 24 million units worldwide From North America, Europe and Asia (including 4.5 million Apartments for rent in the United States)use Algorithmic pricing to measure the rent of each property they serve Incorporate recommendations from the following agencies their management company clients. That’s this aspect of their business The FBI’s main concern is.
private equity firm Thoma Bravo acquires RealPage The company lost nearly $10 billion in 2021, and soon after, complaints against the company began to surface. Renters from Seattle to New Jersey bring Two dozen class action lawsuits Shortly after the company was acquired.
Tenants claim that RealPage’s alleged monopoly on the U.S. real estate market puts them in a situation where “the house always wins,” with rents rising regardless of how they change. If they choose to renew their lease, their rent will increase based on RealPage’s new figures. If they move, their rent will go up because other property management companies use RealPage to raise rents significantly.
Initial tenant complaint merged A case before the Federal District Court in Nashville. The case attracted the attention of the Justice Department Launch the current antitrust investigation.
Potential seismic impact
Cortland Management manages properties in several states, including Arizona. State Attorney General Chris Meyers recent speeches Regarding the case, he said: “RealPage and these landlords allegedly participated in a conspiracy that harmed the people of Arizona and directly contributed to Arizona’s affordable housing crisis. This conspiracy stifled fair competition. Essentially Rental monopolies have been established in our state’s two largest metropolitan areas.
ProPublica.org, a website that aims to expose “abuses of power and betrayals of public trust by governments, corporations and other institutions,” recently launched it is my own investigation Enter RealPage, and the conclusion is that the software giant does indeed use its algorithms to aggressively and artificially increase rents. If the Justice Department agrees, the result could be a shock case against some of the largest multifamily landlords in the United States. Since many rental units are bundled together REIT and trading on Wall Street, where the resulting lawsuits could soar into the billions of dollars.
political perspective
As housing and the cost of living become hot topics in the next election, the Biden administration has made rent metering and price increases a central theme of its affordable housing policy. “We are cracking down on big landlords who violate antitrust laws by manipulating prices and raising rents,” the president said in his recent State of the Union address.
exist United States SenateSenators Peter Welch (D-Vt.) and Ron Wyden (D-Ore.) introduced Preventing Algorithms from Promoting Rental Housing Cartels Act exist January.
“Using algorithmic pricing is no different than drinking cigars and whiskey in a private club,” Wyden said in a note. Press release. “While I believe these cartels have violated existing antitrust laws, I hope the law will make it clear that algorithmic pricing of rents is a criminal offense.”
RealPage is not alone
The real page is not to be singled out for potential punishment. it is software competitors, Yardi Systems, Also a target of DOJ for similar accusations.
It is widely believed that fighting the Justice Department is futile given the government’s unlimited resources, so most companies ultimately settle. has happened In some early RealPage cases filed in Nashville. Denver-based Apartment Income REIT, commonly known as AIR, and Dallas-based Pinnacle Property Management Services, owned by real estate services firm Cushman & Wakefield, admitted in Select end They suit up early.
“AIR’s pricing decisions were and are made by AIR team members based on internal information and public market data,” AIR said in a statement. “While the allegations are baseless, AIR is pleased to exit the litigation in a favorable and early manner.”
History of Justice Department Involvement
The U.S. Department of Justice’s quest to increase competition in the real estate market is nothing new. it has a a long history Such cases date back decades. The agency has been on a winning streak recently, playing a key role in an antitrust class-action lawsuit filed against the country’s largest brokerage, National Association of Realtors (NAR).
“We’ve been in the National Association of Realtors’ crosshairs since I joined them,” NAR President Kevin Sears, a licensed real estate agent for more than 20 years, told hundreds of industry insiders at a conference. said. Meeting In February.
Although the Justice Department is not a party to the lawsuit, according to the news and analysis firm AxiosGovernment agencies have been investigating the real estate industry for years. In 2021, under the new administration, the agency stop A previous settlement would have prevented it from going after NAR. In February, the department Raise objections A different settlement was reached in a Massachusetts commission case that mirrored a larger case against NAR that resulted in $418 million settlement.
final thoughts
The U.S. government rarely loses lawsuits, and most defendants settle the cases long before they go to court, as was the case in an early lawsuit against a RealPage affiliate. Many of their existing clients are bracing for the consequences. RealPage guarantees that its software complies with federal law, but that’s unlikely to dissuade developers from doing business with them.
“We certainly recommend that customers be prepared “For a world without RealPage-style revenue management,” said Parker Miller, an antitrust attorney at Alston & Bird who represents corporate clients. Tell wall street journal.
Broadening the horizon, when a company sells for $10 billion, as RealPage did, the company has a huge responsibility to grow revenue to justify the investment. Whether this pressure led RealPage to cross legal lines and collude with landlords to harm tenants, as the Justice Department alleges, has not yet been fully determined. What no At issue were bad publicity, legal fees from multiple court cases and a Justice Department investigation.
many landlord A case against a software company used across the country could catch them off guard. The investigation focuses on a nationwide housing shortage, rising homelessness and people living paycheck to paycheck. The need for affordable housing cannot be underestimated. Landlords who can fill this gap—whether working with government agencies or independently—are likely to be in demand in the coming years.
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