RealPage Denies Price Fixing Alleged in Federal Lawsuit

RealPage has forcefully denied that its revenue management proptech platform has enabled some of the largest property management firms to illegally share data and act as a “cartel” artificially inflating rents in violation of federal law.

The bombshell accusation—based on an investigation published last month by non-profit ProPublica—is the central charge of a class action antitrust lawsuit filed in the US District Court in San Diego on Oct. 18.

The federal class action, filed on behalf of renters in California and Washington state, names nine property management firms and accuses them of using RealPage’s platform to illegally share “competitively sensitive information” with one another.

The nine real estate players—Greystar Real Estate Partners, Lincoln Property, FPI Management, Mid-America Apartment Communities, Avenue 5 Residential, Equity Residential, Essex Residential, Essex Property Trust, Thrive Communities Management and Security Properties—did not respond to requests for comment.

“The ProPublica article contains inaccuracies and is misleading. RealPage completely disagrees with its conclusions,” RealPage said, in a statement provided to GlobeSt.

“We strongly deny the allegations and will vigorously defend against the lawsuit,” the proptech firm said.

According to the company’s website, Texas-based RealPage’s YieldStar software combines lease transaction data from more than 13.5M units and uses AI-driven algorithms to “unlock hundreds of basis points of hidden yield through price optimization.”

The company claims its algorithms enable new users to achieve “up to 400% in year-one ROI” for owners, operators and investors.

ProPublica’s article quotes RealPage execs boasting at a CRE conference last year that the company’s data analytic tool, used to suggest daily prices for open apartment units, has been driving double-digit rent increases across the country.

ProPublica said RealPage’s 2017 acquisition of The Rainmaker Group’s Lease Rent Option business had effectively given the Texas firm a monopoly on predictive analytics used to set rent prices, expanding RealPage’s client base to 31,700 customers.

In one neighborhood in Seattle, ProPublica found that 70% of apartments were operated by 10 property managers, all of which used RealPage’s pricing software. Property managers can reject pricing recommended by the software, but rarely do, ProPublica reported.

According to the non-profit, RealPage discourages bargaining with renters because leasing agents have “too much empathy” compared to computer-generated pricing. ProPublica said RealPage has encouraged landlords to accept lower occupancy rates in order to raise rents.

“Rent prices are determined by various factors, including supply and demand as well as each property owner’s unique circumstances.

There is a housing supply shortage and that alone drives prices higher. Occupancy has been at an all-time high,” RealPage responded.

“The ProPublica article repeatedly takes information out of context and ignores key facts to craft a distorted picture of how revenue management software works,” RealPage told GlobeSt.

“The article prominently states that ‘RealPage discourages bargaining with renters’ while ignoring the big reason why many housing providers prefer bottom-line pricing,” RealPage said.

“Negotiating rent opens up the possibility of providing different renters with different pricing for the same housing unit, which can put housing providers squarely in violation of federal Fair Housing laws. Fair housing compliance is one of the reasons why revenue management software exists,” the proptech firm said.

“RealPage’s revenue management software is purposely built to be legally compliant,” the company’s statement said. “It focuses on the internal supply and demand dynamics at a particular property and does not consider or have any visibility into availability (supply) at competing properties.”

RealPage’s statement noted that “revenue management is commonly used across many industries, and innovations in this area have been to the mutual benefit of both consumers and vendors.”

“RealPage’s software is but one of a number of such tools available in the marketplace to property operators across the US,” the company said.