Tenants are suing the software company and the landlords for artificially inflating prices

Tenants are suing Texas-based software company RealPage and some of the nation’s largest property management firms for allegedly creating what they call a “cartel” to artificially inflate apartment prices above competitive levels.

Five tenants are suing RealPage and seven property management firms, days after ProPublica published investigation on Landlords Using RealPage’s Proprietary YieldStar Algorithm to Promote U.S. Apartment Rentals to Tenants

“RealPage vehemently denies the allegations and will vigorously defend itself against the lawsuit,” said RealPage spokeswoman Natalie Dent. “Furthermore, we do not comment on pending litigation.”

Earlier this week, in response to a ProPublica story, RealPage told The Dallas Morning News, “Revenue management software can’t control the market because it doesn’t take into account or see the affordability of the market. Additionally, the article finds that vacancy and resident turnover have increased due to income management, the exact opposite of what has happened as both have steadily declined over the past decade, even as the use of income management software has increased.”

The class-action lawsuit was filed in the U.S. District Court for the Southern District of California on behalf of all tenants of multifamily rental properties owned by landlords who used RealPage’s software to price or renew their leases.

“Today’s lawsuit credibly alleges that rental landlords coordinated to drive rents to unprecedented levels, exacerbating the nation’s affordable housing crisis,” said Gary Smith Jr., a Hausfeld attorney representing the tenants. “We look forward to defending our clients’ rights in this important federal antitrust litigation.”

The suit alleges that the landlords independently set rental prices based on their own assessments of how best to compete with other landlords until around 2016, when they agreed to use a shared third party, RealPage, which collected real-time prices and supply levels and used this data to make pricing and supply recommendations. Landlords are following RealPage’s offer with the hope that others will do the same, the lawsuit says.

The lawsuit targets some of the nation’s largest apartment complex managers, including Greystar Real Estate Partners LLC, headquartered in Charleston, South Carolina; Dallas-based Lincoln Property Co.; FPI Management Inc., based near Sacramento; Mid-America Apartment Communities Inc., based in the Memphis area; Chicago-based Equity Residential; San Francisco Bay Area-headquartered Essex Property Trust; and three Seattle companies: Avenue5 Residential LLC, Thrive Communities Management LLC and Security Properties Inc.

Neither firm immediately responded to requests for comment.

The lawsuit alleges that RealPage collected confidential and non-public data from participating landlords and used it to recommend prices for other operators.

“RealPage advertises that it sets the prices [landlords’] “properties as if we ourselves own them” – i.e [landlords’] The cartel replicates the market outcomes that would be observed if they were a rental housing monopoly, which is the goal of any cartel,” the lawsuit states.

RealPage said landlords must accept recommended prices at least 80% of the time in order to maximize rent increases, the lawsuit said. RealPage’s chief architect, Jeffrey Roeper, was quoted in the ProPublica article and the lawsuit as saying, “When you have idiots who underestimate, it costs the whole system.”

The lawsuit cited a RealPage employee as saying that landlords accept 80% to 90% of prices without any variances.

“As one [landlord] explains that while “technically we are all competitors,” RealPage helps us work together, “to work with the community on pricing strategies, rather than working individually,” the lawsuit says.

The lawsuit also alleges that the landlords used RealPage’s services to coordinate their listing levels to avoid price competition. It says RealPage provides landlords with information that helps them collectively create an oversupply in the market and keep prices high by “staggering” lease extensions, keeping vacant units unoccupied for a certain amount of time.

The North Texas-based property management technology giant has 22 million apartments worldwide. RealPage became the nation’s dominant provider of rent-setting software for landlords after a controversial merger with rival Lease Rent Options in 2017, according to a ProPublica investigation.

The firm sells software and operating systems and provides analytics to the rental industry. It grew through a series of acquisitions before San Francisco-based private equity firm Thoma Bravo, one of the world’s largest private equity firms, bought the company in 2021 in a $10.2 billion deal that took RealPage private.