RealPage at Center of ‘Collusion’ Among Lessors to Artificially Inflate Student Housing Prices, Class Action Alleges

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A proposed class action alleges RealPage, Inc. and a collection of lessors have illegally agreed to artificially inflate the prices of student housing in college towns nationwide. 

The 32-page antitrust complaint alleges that around 2009, the lessor defendants replaced their independent pricing and supply decisions with “collusion” as RealPage, a data analytics and property management software provider, rolled out its “Revenue Management” program with a focus on student housing, a market historically considered challenging and “super competitive.” 

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According to the suit, the lessors—GreyStar Real Estate Partners, Cushman & Wakefield, Pinnacle Property Management Services, BH Management Services, Campus Advantage, Cardinal Group Holdings, CA Ventures Global Services, D.P. Preiss Company, The Michaels Organization and Interstate Realty Management—agreed to use RealPage software, which collects real-time pricing and supply levels, and then received “forward-looking, unit-specific pricing and supply recommendations” from RealPage based on “a common algorithm using shared data.” Importantly, each lessor “agreed to follow” RealPage’s recommendations, with the expectation that the other lessors would do the same, the case says. 

RealPage’s help gave the lessors the “unprecedented” ability to “facilitate collaboration among operations” and track each other’s rent with precision, the filing relays. The “granular” information submitted by the lessors to RealPage, including rents charged for each unit and floor plan, lease terms, amenities, and move-in and move-out dates, was used by the company to recommend a price for each unit that a lessor owned, the suit states. 

Ultimately, this gave each lessor the courage to charge an inflated price based on “the implicit assurance that all of their competitors were doing the same,” the lawsuit alleges. 

“Together, RealPage and Lessors have successfully driven rents higher for students across the country,” the suit claims, noting that RealPage has stated that its revenue management software yielded a two- to seven-percent revenue outperformance in the market. 

Per the lawsuit, those in the industry recognize student housing as a “unique market with unique challenges.” Further, revenue management services also regard student housing differently than other types of rental housing in that there exists a constant churn of tenants, rent responsibilities and lease cycles, the case relays. 

Before RealPage “facilitated collusion” among the lessor defendants, the lawsuit says, the companies acted independently to attempt to maximize occupancy. Lessors had only a short amount of time to set rent prices and ensure “heads in beds” at the start of each school term, and every day a unit was left empty marked a lost opportunity to earn revenue, so lessors offered “sufficiently attractive pricing” to maintain occupancy levels, the case states. 

At one point, the suit continues, RealPage described the status quo among the lessor defendants as “leav[ing] money on the table.” In the wake of the lessors’ “widespread adoption” of RealPage’s software, the companies “swiftly and concertedly” shifted from competition with one another to a collusive “price over volume” market strategy, which in a truly competitive market would effectively crash and burn, the complaint claims. 

“RealPage and participating Lessors adopted a new strategy: increasing prices notwithstanding market conditions and tolerating the lost revenue resulting from any unrented and empty housing units. In a competitive market, this strategy would quickly fail—any units listed at prices exceeding the market price would stay empty, and the property manager would eventually go out of business. In the market RealPage and Lessors created, each Lessor had mutual assurances that other Lessors would also keep prices high, leaving students with no choice but to pay what Lessors demanded.” 

According to the lawsuit, the lessors are in essence “squeezing an already-tight housing market,” in particular in college towns where there is an “inelastic” demand that most of the time outpaces supply. Within weeks of students arriving for the fall term, when competition between the lessors is most intense, the customer base for lessors dwindles as students settle in, classes begin, and the companies once again have market power, the case explains. 

“The collusion between Lessors and RealPage eliminate [sic] this short, early competitive stage of the student housing cycle,” the suit states. “Whereas without RealPage, ‘in fear of empty beds, some properties offer concessions or discounts for early rental decisions,’ RealPage allowed Lessors the confidence to start the semester with prices at $450 and stay there.” 

Even if some beds remained empty, the lawsuit goes on, the monopoly rents facilitated by RealPage helped justify the units left unrented. 

The filing says that it was not until recently that the defendants’ conduct became widely known. The lawsuit states that it was only after the publication of an October ProPublica report that there existed a comprehensive breakdown of the “full scope of the confidential services that RealPage provides to its clients in the real estate industry.” 

“Indeed, to this day, it is not publicly known the number of companies that participate in RealPage’s Yieldstar Student algorithm,” the case says. 

Last month, RealPage was at the center of a proposed class action that alleged it aided a “cartel” of lessors to artificially fix the prices of multifamily residential real estate nationwide. In line with the suit outlined on this page, the case alleged the lessors at some time stopped pricing their leases based on their own assessments of how best to compete with each other and instead began using RealPage’s real-time recommendations, expecting that other lessors would do the same. 

The suit looks to cover all persons and entities in the United States that are direct purchasers of student housing real estate leases from a lessor participating in RealPage’s pricing software programs, or from a division, subsidiary, predecessor, agent, or affiliate of such lessor, at any time between January 1, 2010 “until the Defendants’ unlawful conduct and its anticompetitive effects cease to persist.” 

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