The US Justice Department and attorneys general in eight states are suing a popular AI-enabled property management software system over alleged anti-trust violations.
The Justice Department — and the states of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee, and Washington — accuse RealPage Inc. of violating the Sherman Act and harming “millions of Americans” by decreasing competition among landlords in apartment pricing. RealPage is using the data to “maintain a monopoly in the market for commercial revenue management software,” the complaint, filed in North Carolina, reads.
“RealPage’s egregious, anticompetitive conduct allows landlords to undermine fair pricing and limit housing options while stifling necessary competition,” Acting Associate Attorney General Benjamin C. Mizer said in an Aug. 23 news release announcing the action. “The Department remains committed to rooting out illegal schemes and practices aimed at empowering corporate interests at the expense of consumers.”
More than 30 cases against RealPage alleging antitrust violations have been consolidated in federal court, Bisnow has reported.
A ProPublica investigation found that rents in buildings that use RealPage’s AIRM software (formerly YieldStar) rose dramatically in some markets across the nation. At issue is the Lease Rent Option feature that collects sensitive rental data from landlords, analyzes it, and uses it to suggest new rents to other clients. The ProPublica story, published back in October 2022, quoted Boston renter Kaylee Hutchinson, who faced a 6.5 percent increase in her rent during the COVID-19 pandemic, a time of urban exodus when units in her building sat vacant.
Citing housing experts, National Public Radio reported on Aug. 23 that “in some markets across the country, half or more of landlords use RealPage’s pricing algorithm.”
RealPage posted a six-page response to the allegations on its website, arguing that its management software offers prospective residents and housing providers more options and flexibility in lease terms, aids compliance with Fair Housing Laws … does not use any personal or demographic data to generate rent price recommendations, and helps ensure that prospective residents have access to the best pricing available to everyone.” It argues that the landlords set their own prices and that the acceptance rates of those recommendations “have been greatly exaggerated.”
A RealPage spokesperson declined to provide a list of the company’s Massachusetts customers but said in an email: “In Boston, AIRM/YieldStar’s market penetration is only 8.0%, and LRO’s [the Lease Rent Option’s] market penetration is only 5.1%. AIRM/YieldStar customer acceptance rates are less than 50%.”
Tenants and prospective tenants in Massachusetts have no way to know whether their landlords use the software and the lease rent option feature. Some tenants have filed their own lawsuits against RealPage.
Those suits name some Massachusetts RealPage customers.
WinnResidential Manager Corp. — which has 18 apartment properties in Massachusetts, according to a map on its webpage — is named in a suit.
“WinnCompanies does not use this software for revenue management anywhere in the country and hasn’t for nearly a year,” a spokesman for the developer wrote. “The company denies the claims made in this lawsuit and is presently arguing that it should be removed from the litigation. It is important to remember that, unlike the other defendants named in this suit, 90 percent of the apartments that WinnResidential manages are income-restricted or rent-restricted, meaning that rents are set based on household income and thresholds established annually by the government.”
Equity Residential, which has 25 rental properties in Massachusetts, also is named but did not respond to a Globe request for comment.
Bell Partners Inc. and Lincoln Property Co. all have properties in Massachusetts and are named in the suits. Neither of them responded to requests for comment.
Avalon Bay, which has 35 properties in Massachusetts, uses the software but not the Lease Rent Option. It said in a second quarter earnings call that it had been removed from the consolidated suits, Bisnow reported on Aug. 10.
All of the entities named in the lawsuits have disputed the allegations.
Doug Quattrochi, executive director of the trade organization Mass Landlords, said his organization doesn’t “talk about what our rents are. We don’t ask people to report their finances to us, although that would be hugely interesting.”
Tenants in the current market are already at a disadvantage because the market favors landlords. Real estate attorney Richard D. Vetstein of the Vetstein Law Group in Framingham said there isn’t much tenants can do when a landlord jacks up the rent.
“You hardly ever see it, but every now and then a tenant will negotiate a cap on how high the renewal increases can go in the lease before they sign it,” Vetstein said. “But that’s very, very rare because landlords don’t want to be boxed into what is essentially rent control, especially in this market.”
Beyond that, he said, there’s only one other option for a tenant facing a large increase.
“Don’t renew and move somewhere else,” he said.
Jim Morrison can be reached at JamesAndrewMorrison@gmail.com. Follow him on X @jimmorrison617. Follow Address on X @GlobeHomes, and subscribe to the Address newsletter at Boston.com/address-newsletter.
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Publish date : 2024-09-03 22:30:00
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