RealPage, Operators Accused of Fixing Student Housing Rents

RealPage has been hit with a second federal class action lawsuit that accuses the proptech firm and a bevy of student housing operators of conspiring to “artificially inflate” the price of student housing in the US.

Gabriel Navarro, a University of Washington student, filed the lawsuit this month in the US District Court for the Western District of Washington in Seattle.

As in a class action antitrust suit filed in California in October by a group of renters, the Washington lawsuit accuses RealPage and several prominent rental property operators of illegally sharing competitive data on rents through RealPage’s YieldStar revenue management platform and of colluding to raise rents.

“RealPage provided pricing information for student housing providers that allowed them to closely analyze their pricing in comparison to their competitors at a bedroom-by-bedroom level,” Navarro’s lawsuit said.

The lawsuit specifically alleges collusion on student housing rents in Seattle, Ann Arbor, MI and Gainesville, FL.

As in the California class action lawsuit, Navarro’s suit names nine prominent housing operators as defendants, in this case managers of student housing portfolios including the company that is the landlord of the apartment campus where Navarro lives and an NYC-based brokerage.

However, the lawsuit doesn’t provide evidence that the operators did anything more than accept pricing recommendations from YieldStar as Yieldstar clients; it does allege that RealPage’s platform is illegally sharing competitive rental data with its clients.

RealPage issued a terse statement declaring that it “strongly denies” the allegations in the Washington lawsuit and will vigorously defend against the lawsuit. “Beyond that, we do not comment on pending litigation,” the company said.

Last month, after the first class action lawsuit against RealPage was filed in California, the company provided GlobeSt. with a statement specifically denying the allegation that the firm is illegally providing competitive rental data through its YieldStar platform.

“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.”

According to the Texas-based proptech firm’s website, the 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.

The California anti-trust class action lawsuit was based on an investigation of RealPage published by the non-profit ProPublica.

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.