Justice Department sues large US owners for alleged price fixing – ProPublica

The Justice Department on Tuesday sued six of the country’s largest landlords, accusing them of using a pricing algorithm to inappropriately work together to raise rents across the country.

The lawsuit expands on an antitrust complaint by the department. presented in August which accused property management software maker RealPage of engaging in illegal price fixing to reduce competition among landlords so prices (and profits) would skyrocket. Officials conducted a two-year investigation into the plan after a 2022 ProPublica story That showed how RealPage was helping landlords set rents across the country in a way that legal experts said could result in cartel-like behavior.

Together, the six owners manage more than 1.3 million apartments in 43 states and the District of Columbia. Prosecutors have already negotiated a deal with one of them.

“As Americans across the country struggled to afford housing, the landlords named in today’s lawsuit shared confidential information about rental prices and used algorithms to coordinate to keep the price high,” said Acting Deputy Attorney General Doha Mekki. of the Antitrust Division of the Department of Justice. . The lawsuit seeks to end “their practice of putting profits before people” and make housing more affordable.

The legal action is the latest development to follow ProPublica’s initial investigation. Since 2022, senators have introduced legislation seeking to ban the use of rental algorithms similar to RealPage’s, and tenants have filed dozens of ongoing federal lawsuits. Cities across the country, including San Francisco, Philadelphia and Minneapolis, have also taken steps to ban landlords from using similar algorithms to set rents.

RealPage’s popular software collected non-public pricing information from multiple property managers and fed it through a common algorithm, which then recommended an optimal rental level to those who used it, in violation of rules prohibiting such coordination, they alleged. federal prosecutors. They also accused the owners of inappropriately and directly communicating about their prices through calls, emails, and participation in “user group” forums hosted by RealPage.

The company pressures landlords to use an “auto-accept” feature in its software, officials said, and makes it onerous for property managers to reject their suggestions.

RealPage Senior Vice President Jennifer Bowcock called the federal case “flawed” and said the company is “committed to vigorously defending ourselves and our clients against the Department of Justice’s allegations.” RealPage already changed its software to remove non-public data, despite its view that its technology was legal and “pro-competitive,” he said.

“It is time to stop scapegoating RealPage, and now our customers, for housing affordability issues when the root cause of high housing costs is a lack of housing supply, as we have been saying from the beginning,” he said.

Three of the landlords sued in this week’s action appeared in ProPublica’s 2022 story, including the country’s largest landlord, Greystar, and Camden Property Trust.

Camden CEO Ric Campo told the news organization at the time that the apartment market in Houston, where the company is based, was so large and diverse that “it would be difficult to argue that there was any type of price fixing.” prices.”

But when Camden adopted the nascent rent-setting technology in 2006, the company found its profits growing even as more tenants were moving out.

“The net effect of boosting revenue and pushing people out was $10 million in revenue,” Campo told a trade publication at the time. (He later said that quote doesn’t reflect how he or Camden view renters today.)

Neither Campo nor Camden responded to a request for comment.

Greystar, the largest rental manager and owner in the United States, said in a statement that it was “disappointed” that the Justice Department included the company in the lawsuit.

“At no time did Greystar engage in anti-competitive practices,” the South Carolina-based company’s statement said. “We will vigorously defend ourselves in this lawsuit.”

ProPublica’s 2022 data analysis also found that Willow Bridge Property Company (formerly Lincoln Residential) managed dozens of buildings in markets that had experienced rapid rental growth. The company did not immediately respond to a request for comment on the Justice Department lawsuit.

One property owner and manager, Cortland, has already agreed to stop using competitors’ non-public data to train or run pricing models under a deal with federal prosecutors. The proposed settlement has been submitted to the court for consideration.

Atlanta-based Cortland manages more than 80,000 rentals in 13 states. A related federal criminal investigation that led to a search of its headquarters in May 2024 was closed, a spokesperson said.

The spokesperson said the company is “pleased” to announce the deal.

“We believe we were only able to achieve this result because Cortland has invested years and significant internal resources in developing a proprietary revenue management software tool that does not rely on data from external, non-public sources,” the spokesperson said.

Income management software can help landlords manage rentals “efficiently” and avoid discrimination, said a spokesperson for defendant Cushman & Wakefield, which also owns defendant Pinnacle. The spokesperson said that as a manager only, the company does not “set occupancy strategies, pricing or goals,” decide what software to use or whether to accept recommendations from any software.

The lawsuit also names Blackstone’s LivCor as a defendant. Blackstone did not immediately respond to requests for comment.

In addition to naming the owners as defendants in the lawsuit, it also added the attorneys general of Illinois and Massachusetts as co-plaintiffs, bringing the total number of participating states to 10. The states include the most populous in the country: California, which has 17 million inhabitants. tenants.

RealPage said that “less than 10% of all rental housing units in the U.S. use RealPage software to suggest rental prices, and our software recommendations are accepted less than half of the time.”

But a white house report in December he said that number could be higher. He said RealPage and census data suggest that as many as 1 in 4 rentals nationwide use a RealPage pricing algorithm. And the company’s penetration is greater in some markets, he said.

Using models of what competitive markets would look like, researchers found that algorithmic pricing costs tenants in units where they are used $70 more a month, or 4% of rent, on average. In six major metropolitan areas, the cost exceeds $100 a month, according to the report.

The report estimated that the total added cost to renters from using such algorithms in 2023 will be approximately $3.8 billion.

RealPage said the analysis is “riddled with erroneous assumptions” and that the White House never contacted the company about the report.

The fate of the Justice Department lawsuit under the incoming administration is unclear. President-elect Donald Trump nominated Gail Slater, a veteran antitrust attorney and economic adviser to JD Vance, to lead the department’s antitrust division.