Colorado Attorney General Phil Weiser has joined attorneys general from seven other states in suing software company RealPafe for an alleged illegal price-fixing scheme that has pushed rent prices up across the country.
RealPage sells software to landlords, who in turn share sensitive data such as rent invoices, lease terms and vacancies. Then RealPage puts the data into an algorithm that delivers price recommendations to those same landlords. But instead of competing against each other to provide the best services or best price, landlords work together through RealPage to set rents as high as they can, according to the lawsuit.
“A significant number of landlords then effectively agree to outsource their pricing function to RealPage with auto acceptance or other settings such that RealPage as a middleman, and not the free market, determines the price that a renter will pay,” the lawsuit contends.
The lawsuit, filed August 23 in U.S. District Court for the Middle District of North Carolina, asks the court to end anticompetitive agreements between RealPage and landlords who purchase its services, and to end RealPage’s monopoly on revenue management software for landlords.
“The rent is too damn high, and this is one of the reasons why,” U.S. Attorney General Merrick Garland told reporters during a press conference announcing the lawsuit.
The text of the lawsuit argues that because of RealPage’s influence, rent does not respond to economic trends. Instead, it has continued to go up even during economic downturns.
“In its own words, RealPage ‘helps curb instincts to respond to down-market conditions by either dramatically lowering price or by holding price when they are losing velocity and/or occupancy. ... Our tool ensures that [landlords] are driving every possible opportunity to increase price even in the most downward trending or unexpected conditions,’” the lawsuit says.
According to Weiser, half of the renters in Colorado spend over 30 percent of their income on housing, and Denver is on pace for record evictions in 2024.
“RealPage’s software and market dominance have enabled collusion between landlords to fix rents, set the number of apartments available in the market, and harm renters by forcing them to pay rents above competitive levels,” Weiser says in his lawsuit announcement. “This anticompetitive conduct is driving rent increases.”
This year, Weiser’s office took its first action against a property manager in Colorado, reaching a $1 million settlement with Four Star Realty over illegal manipulation of security deposits. At the time, he promised to do more for renters in the state.
In June, the FBI raided the offices of Cortland, an apartment management company, in connection with the RealPage price-fixing investigation. Cortland owns fourteen buildings in Colorado and manages several others; tenants in local Cortland properties believe their rents have been raised unjustifiably using RealPage technology.
In addition to allegedly fixing the price of rent, the lawsuit argues that RealPage has succeeded in ending other renter-friendly concessions, like a free month’s rent at the beginning of a lease term.
“In a hot market, AIRM and YieldStar will recommend price increases to test what the market will bear, while in a down market AIRM and YieldStar will, to the extent possible, still increase or hold prices and minimize price decreases to reach the target occupancy rate,” the lawsuit notes, naming two specific software tools landlords can purchase from RealPage. “AIRM and YieldStar are designed to help landlords press pricing beyond what they could otherwise achieve while reducing the risk that other landlords would undercut them.”
According to the lawsuit, around 80 percent of the commercial rental market uses RealPage’s data to set prices; RealPage’s technology also makes it a breeze to accept price recommendations, but requires property managers to jump through difficult hoops in order to reject them.
When a manager decides to reject a price recommendation from RealPage, they much provide a justification that is based on something RealPage’s algorithm can’t account for, like local construction or renovations; it cannot be a “mere preference.” Each rejection is then sent to a RealPage pricing advisor who can escalate the justification to a regional manager or someone higher in the property manager’s company if they disagree with the property manager, according to the lawsuit.
Therefore, the lawsuit argues, RealPage isn’t just helping landlords make choices, it’s making choices for them. Choices that are squeezing renters.
“I have repeatedly heard from Coloradans that high rents and the cost of housing is a top concern,” Weiser said. “Landlords need to operate fairly, which means not using abusive practices like deceptive or non-disclosed ‘junk fees’ and not using RealPage’s software to collude with rivals.”
RealPage did not respond to a request for comment.