RealPage has hit another rough stretch and this time it’s taking Dallas-based rental giant Lincoln Property Company along for the bumpy ride.
On Oct. 15, ProPublica published the results of an investigation into RealPage’s YieldStar software, airing contentions that it’s effectively engineered collusion by landlords to drive up their tenants’ rent.
Now, the Dallas Morning News reports that RealPage and seven property management firms are facing a class-action lawsuit for allegedly forming a “cartel” to inflate apartment prices above competitive levels.
“Today’s lawsuit plausibly alleges that lessors of rental units have coordinated to drive rents up to unprecedented levels, exacerbating the nation’s affordable housing crisis,” said Gary Smith Jr., a San Francisco-based attorney at Hausfeld, which is representing the renters. “We look forward to vindicating our clients’ rights in this important federal antitrust litigation.”
One quote from Jeffrey Roper— the main architect of RealPage’s software— from ProPublica’s investigation will now be a part of the lawsuit against the company. Roper reportedly said “if you have idiots undervaluing, it costs the whole system,” regarding landlords’ setting rents below what the market would bear.
The lawsuit also claims landlords used RealPage services to coordinate supply levels to avoid price competition. It further alleges that RealPage provides landlords with information to help them collectively keep prices high by “staggering” lease renewals, holding vacant units unoccupied for periods of time.
“RealPage touts that it sets pricing for [landlords’] ‘properties as though we own them ourselves’ — i.e., the participating [landlords’] cartel replicates the market outcomes one would observe if they were a monopolist of residential leases, which is the goal of any cartel,” the lawsuit said.
One RealPage employee is cited in the lawsuit saying landlords adopt 80 percent to 90 percent of price recommendations.
“As one [landlord] explains, while ‘we are all technically competitors,’ RealPage‘ helps us work together,’ ‘to work with a community in pricing strategies, not to work separately,’” the lawsuit said.
While RealPage is a Richardson-based proptech company, the class-action suit — levied on behalf of all renters of multifamily real estate leases from landlords who have used RealPage’s pricing or lease renewal-staggering software— is being pursued in the Southern District of California.
On the receiving end of this lawsuit, aside from RealPage, are seven of the biggest apartment managers in the nation. One is Dallas-based Lincoln Property Company, which has its headquarters a short drive south of RealPage. The other six include Sam Zelle’s Equity Residential and its Californian firms, FPI Management and Essex Property Trust; Greystar Real Estate Partners and Mid-America Apartment Communities down in the Sun Belt; as well as three Seattle-based firms— Avenue5 Residential, Thrive Communities Management and Security Properties.
None of the firms immediately responded to DMN’s requests for comment. However, RealPage spokesperson Natalie Dent said the tech firm “strongly denies the allegations and will vigorously defend against the lawsuit. Beyond that, we do not comment on pending litigation.”
— Maddy Sperling