DC’s Attorney General Sues Landlords for Price Fixing Rents

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DC ATTORNEY GENERAL SUES LANDLORDS FOR PRICE FIXING RENTS

IS YOUR LANDLORD OR MANAGEMENT COMPANY ON THE AG’S LIST OF PRICE FIXING LANDLORDS?

SEE THE LIST AND ARTICLE BELOW

WE URGE THE AG IN ANY SUIT TO INCLUDE REDRESS AND REMEDIES SUCH AS RENT ROLLBACKS

AND REFUNDS FOR RENTERS WHOSE RENTS

ARE PRICE-FIXED

In a bold move, DC’s Attorney General (OAG), Brian Schwalb, has filed suit against landlords for collusion in price fixing rents. Kudos to the AG and his staff working diligently on this issues.

TENAC has long contended that landlords, who work, meet, and strategize together, also price fix together. By maintaining rents artificially high, they are no different than other monopolies under which consumers suffer, paying artificially high prices. Big Pharma’s outrageous prices for prescription drugs is a noticeable example that comes to mind. Price fixing is illegal for rents, too.

Landlords have always claimed that they are charging market rate, according to the economic laws of supply and demand. Well, we see them habitually break that economic law (and the price fixing laws), while claiming it’s all the “free market” determining rents and prices.

As keen observers of DC housing and renters, we fully expect more landlords and companies to make the “hit parade” list of price fixers. Freedom of Information Act (FOIA) requests across the board should show that their phone, email and other communications reveal collusion in efforts to price-fix across the board! We are deeply grateful to OAG for their efforts! See the Prince of Petworth e-newspaper for details, below. (Note: The Comments by readers just below the article are particularly informative.)

ATTORNEY GENERAL

“Lawsuit Alleges that 14 of DC’s Largest Landlords Coordinated Through RealPage’s Centralized Price-Setting Algorithm to Artificially Inflate Rent Prices”

From Prince Of Petworth November 1, 2023 at 11:35am

From the The Office of the DC Attorney General:

“Attorney General Brian L. Schwalb today announced a lawsuit against RealPage, Inc. (RealPage) and 14 of the largest residential landlords in the District for colluding to illegally raise rents for tens of thousands of DC residents by collectively delegating price-setting authority to RealPage, which used a centralized pricing algorithm to inflate prices, costing renters millions of dollars.

The defendant landlords are some of the largest providers of multifamily housing in the District, and the Office of the Attorney General’s (OAG) investigation revealed that RealPage’s technology was used to set rents for more than 50,000 apartments across DC, in violation of the District’s Antitrust Act.

“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,” said AG Schwalb.

“Defendants’ coordinated and anticompetitive conduct amounts to a District-wide housing cartel. At a time when affordable housing in DC is increasingly scarce, our office will continue to use the law to fight for fair market conditions and ensure that District residents and law-abiding businesses are protected.”

The 14 landlords named in the lawsuit are:

Avenue5 Residential, LLC

AvalonBay Communities, Inc.

Bell Partners, Inc.

Bozzuto Management Company

Camden Summit Partnership L.P.

Equity Residential Management, LLC

Gables Residential Services, Inc.

GREP Atlantic, LLC

Highmark Residential, LLC

JBG Smith Properties, LP

Mid-America Apartments, LP

Paradigm Management II, LP

UDR, Inc.

William C. Smith & Co., Inc.

Background on RealPage [the tech company in question]:

RealPage offers a variety of technology-based services to real estate owners and property managers including revenue management products that employ statistical models that use data—including non-public, competitively sensitive data—to estimate supply and demand for multifamily housing that is specific to particular geographic areas and unit types, and then generate a “price” to charge for renting those units that maximizes the landlord’s revenue.

In the District, well over 30% of apartments in multifamily buildings (i.e., buildings with five or more units), and approximately 60% of units in large multifamily buildings (with 50+ units), are priced using RealPage’s software.

In the Washington-Arlington-Alexandria Metropolitan Area, that number is even higher: over 90% of units in large buildings are priced using RealPage’s software.

This leaves many District residents with no choice but to pay RealPage’s inflated rents.

OAG’s Lawsuit:

Specifically, OAG’s lawsuit alleges that:

RealPage and the defendant District landlords colluded to use RealPage’s “Revenue Management” technology, making it market-dominant. RealPage contracts with property managers and owners to provide its software and services. The company’s unparalleled access to proprietary data and significant market share have positioned it as the “Big Tech” company of rental housing.

The defendant landlords illegally coordinated to forgo competition and share sensitive company data and delegate rent-setting authority to RealPage in order to raise rents.

RealPage and the defendant landlords transformed a competitive marketplace into one in which competing landlords work together for their collective benefit at the expense of renters. Their anticompetitive agreement is reflected in documents, has been publicly acknowledged by cartel members, and is closely policed by RealPage to ensure compliance.

Participating landlords worked to recruit additional landlords into the illegal scheme, providing written and oral testimonials touting the benefits of using RealPage’s technology to inflate rent prices and increase revenues.

The defendants’ illegal agreement to share information and collectively set rents led to artificially inflated rental prices and caused District tenants to pay millions of dollars above market rates. RealPage widely touts the impact of its products, publicly advertising revenue increases of 2-7%. Where RealPage’s market penetration increases, price effects tend to extend beyond just the users of the price-setting software itself, potentially impacting all market participants, illustrating the significant, widespread effects of the adoption of RealPage’s algorithmic pricing.

With this lawsuit, OAG is seeking to:

Stop RealPage and the defendant landlords from engaging in anticompetitive behaviors that artificially inflate rent prices for District tenants.

Appoint a corporate monitor to ensure that RealPage and the defendant landlords do not engage in further anticompetitive misconduct.

Secure financial compensation for the District and residents whose rents were unlawfully raised.

The full complaint is available here.

This matter is being handled by Assistant Attorney General Amanda Hamilton and Section Chief Adam Gitlin of the Antitrust and Nonprofit Enforcement Section.”

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Comments by Article’s Readers:

SoArlImmigrant 2 days ago edited

Looks like this is just DC OAG piling on (good) (EDIT: not the first to investigate, but perhaps the first actual suit filed):

“In October 2022, ProPublica reported that landlords use RealPage’s asset optimization algorithm called YieldStar (later rebranded as AI Revenue Management) to increase rents throughout the United States, naming its users an illegal cartel that encouraged participants to withhold rental units from the market. Overwhelmingly, approximately 90% of property managers/landlords approve price change suggestions by the software. RealPage’s software strongly discourages landlord users from negotiating asking rent prices with tenants.

In November 2022, the United States Department of Justice’s Antitrust Division opened an investigation into RealPage, which is accused of contributing to higher rent prices throughout the United States. The company’s YieldStar software is alleged to use an algorithm to “help landlords push the highest possible rents on tenants.”

This is all from their Wikipedia page. Looks like they are also gobbling up utility payment companies so they’re really working on a scheme to screw over renters in every way possible. Lovely!

ETtheLibrarian 2 days ago

Time will tell on this case, but after helping someone trying (unsuccessfully) to track down ownership of a building and of a management company and going in circles and hitting dead ends, I am more convince that real estate on this scale is a shady business.

Craig Mack 2 days ago

I’m not surprised to see Equity Residential on that list. Total slumlords. Scum of the earth. Avoid their buildings at all costs.

penumultimate 2 days ago

Open to being convinced otherwise but… this seems like an incredibly difficult case to prove. Or at least ambitious — asserting that an algorithm can be held liable for antitrust. Is market-making collusion?

TheNotoriousOneNDone penumultimate 2 days ago edited

I don’t think this is about an algorithm per se. OAG is accusing these companies of coordinating with each other in an illegal manner for their mutual benefit at the expense of renters. That they happened to use an algorithm to do so is secondary if even that.

Punster TheNotoriousOneNDone a day ago

kind of like how Ivy League colleges share applicant data and set tuition

DistrictPerson penumultimate 2 days ago

Seems like a perfect example of a hub-and-spoke conspiracy to me. The 14 landlords (the spokes) are coordinating with RealPage (the hub) by allegedly sharing sensitive data and collectively delegating rent-setting authority to RealPage. I don’t think the existence of an algorithm matters – Garbage/crime in, garbage/crime out.

Batman DistrictPerson a day ago

Exactly. The algorithm isn’t the issue here.

Greg123 penumultimate 2 days ago

A lawyer can weigh in on the legal specifics. But it’s a big national issue that has been going on for over a year – not just a DC case. It’s not the algorithm itself as much as the algorithm has access to the data of a huge percentage of the open listings and prices across independent landlords so it encourages collusion by using that information to “suggest” (set) prices.

But yes, market making of this sort could be considered collusion if too much of the market is involved in the same process.

FridayGirl penumultimate 2 days ago

FWIW, DOJ’s Antitrust Division is looking into it, as well — and I feel like they only look into things when they think they’ve really got something.

Dan penumultimate 2 days ago

Presumably, it depends on how much non-public info from a specific landlord is used to determine pricing for *other* landlords… if all non-public data is being sandboxed, maybe not? But if non-public data is shared (or used in the modeling across the board), this case seems like it might have legs.

MotoDoper Dan 2 days ago

https://www.propublica.org/…

This article says the data is coming from executed leases, which isn’t public information.

penumultimate penumultimate 2 days ago

Thank you all for the replies! Very illuminating

CBrains 32 minutes ago

WC Smith–pay up!!! Not only in on these scams, but taking advantage of renters in other ways too (main office: unresponsive to anything except collecting your cash, property maintenance issues accomplished with cheap labor and cheap materials that don’t hold up).

Batman a day ago

They’re definitely missing a few companies.

dc_chica a day ago

Good. Vice has a good article about the class action lawsuit against RealPage which goes into more detail, like for example how RealPage requires management companies using their product to accept at least 80% of their rent recommendations, and RealPage encourages them to leave some units vacant in order to restrict supply and support higher prices. Very shady, and yet another example of how big companies are figuring out how to extract inflated profits from housing in the rental market: https://www.vice.com/en/art…

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For DCist article on the AG’s suit against price fixing by landlords, click:

dcist.com/story/23/11/01/dc-attorney-general-lawsuit-landlords-realpage/