RealPage Aided ‘Cartel’ of Lessors Who Price-Fixed Multifamily Residential Real Estate Nationwide, Class Action Alleges

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Five plaintiffs allege “a cartel” of lessors has for at least the past six years colluded to artificially raise the prices of multifamily residential real estate in the United States to above competitive levels.

The 26-page antitrust complaint alleges the cadre of lessors, sometime around 2016, or possibly earlier, stopped pricing their leases based on their own assessments of how to best compete against each other and instead “replaced their independent pricing and supply decisions with collusion,” allegedly with the help of RealPage, Inc., a software and data analytics provider. 

As a result of the apparent collusion, prices have increased above competitive levels by seven percent each year, the case alleges. 

According to the suit, the lessors—Greystar Real Estate Partners, Lincoln Property Co., FPI Management, Mid-America Apartment Communities, Avenue5 Residential, Equity Residential, Essex Property Trust, Thrive Communities Management and Security Properties—agreed to use “a common third party,” defendant RealPage, who collected real-time pricing and supply level data and made unit-specific pricing and supply recommendations. Each lessor followed RealPage’s recommendations with the expectation that other lessors would do the same, the filing alleges. 

Per the case, the lessors in the past generally priced their units competitively to maximize occupancy, i.e., to keep “heads in the beds,” were incentivized to lower prices to attract lessees away from competitors, and independently determined when to put leases on the market, which resulted naturally in unpredictable supply levels. With the help of RealPage, however, the alleged cartel agreed not to compete on price, and instead coordinated both pricing and supply through “two mutually reinforcing mechanisms” with the goal of suppressing competition, the suit alleges. 

First, lessors outsourced daily pricing and ongoing revenue oversight to RealPage, thereby “replacing separate centers of independent decision-making with one,” the suit states. Per the complaint, RealPage collects up-to-the-minute data on the historical and contemporaneous pricing from participating lessors and standardizes that data to account for differences in the characteristics or “class” of the property in question. RealPage then sets prices for participating lessors using “a common formula” and “as though we own [the properties] ourselves,” the lawsuit says. Essentially, this amounts to the lessors replicating market outcomes that would exist if they operated not as competitors but as “a monopolist of residential leases, which is the goal of any cartel,” according to the case. 

The suit notes that although lessors can reject RealPage pricing through “an onerous process,” the company emphasizes the need for “discipline” among participating lessors, explaining that, for its services to be most effective in increasing rents, lessors must accede to the pricing recommendations at least 80 percent of the time. Per the case, these efforts are largely successful as, according to a RealPage employee, at least 80 percent, and as many as 90 percent, of the prices recommended by RealPage are adopted by participating lessors “without any deviation.” 

“As one Lessor explains, while ‘we are all technically competitors,’ RealPage ‘helps us work together,’ ‘to work with a community in pricing strategies, not to work separately,’” the complaint reads. 

Second, RealPage allowed the lessor defendants to coordinate their supply levels to avoid price competition, the case claims. In a competitive market, there are periods during which supply exceeds demand, which in turn puts downward pressure on prices as companies compete to attract lessees, the suit explains. RealPage, to “avoid the consequences of lawful competition,” provided the lessor defendants with information to “stagger” lease renewals to avoid oversupply, the case says. This led the lessors to hold vacant rental units unoccupied for periods of time to ensure that, “collectively, there is not one period in which the market faces an oversupply of residential real estate properties for lease,” the filing alleges. 

By staggering lease renewals to “artificially smooth out” the natural imbalances of supply and demand, RealPage and the lessor defendants also cut out any incentive to undercut or “cheat” on the cartel, the complaint adds. 

“This is a central mantra of RealPage, to sacrifice ‘physical’ occupancy (i.e., to decrease output) in exchange for ‘economic’ occupancy, a manufactured term RealPage uses to refer to increasing prices and decreasing occupancy (output) in the market,” the lawsuit contends. 

According to the case, RealPage has helped the lessors earn significant income by raising rents and essentially pushing people out of their residential leases, even throughout the pandemic-related market downturn.

This “misconduct” has hit members of the military and their families “particularly hard” as personnel on active duty are often required to rent apartments, the lawsuit continues. With long wait lists a barrier to more affordable on-post housing, many military members are forced to live in off-post private housing, for which their monthly basic allowance is often insufficient, the suit stresses.  

Per the suit, many veterans likewise depend on residential leases and have been forced into homelessness as a result of rising costs. 

“Approximately a quarter of the nation’s homeless veterans live in California, and many of them reside in San Diego. Nearly one in ten homeless individuals in San Diego served in the military.” 

The lawsuit looks to cover all persons and entities in the United States and its territories that are direct purchasers of multifamily residential real estate leases from a lessor defendant alleged to be participating in RealPage’s pricing software and/or lease renewal staggering software programs, or from a division, subsidiary, predecessor, agent or affiliate of any of the companies, at any time from October 18, 2018 until the defendants’ “unlawful conduct and its anticompetitive effects cease to persist.”

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