US Department of Justice accuses six major landlords of colluding to maintain high rents

On January 7th, the U.S. Department of Justice issued a statement saying that it is suing several major landlords for allegedly using algorithms to set rents and sharing sensitive information with competitors to reduce competition and increase profits.

The Department of Justice’s statement alleges that the six accused landlords engaged in improper behavior in rent setting, potentially violating antitrust laws. They utilized the anti-competitive pricing algorithms of the real estate management software RealPage to set rents and coordinated actions through various methods to reduce competition among landlords, harming the interests of millions of tenants.

These six major landlords include Greystar, LivCor, Camden, Cushman, Willow Bridge, and Cortland. These landlords operate over 1.3 million units in 43 states and the District of Columbia.

The attorneys general of Illinois and Massachusetts have joined the revised complaint as co-plaintiffs, bringing the total number of state and federal co-plaintiffs to 10.

Assistant Attorney General for the Antitrust Division at the Department of Justice, Doha Mekki, stated, “As Americans across the country work to afford housing, the landlords mentioned in today’s lawsuit shared sensitive information about rents, using algorithms to coordinate keeping rents high. Today’s action against RealPage and the six major landlords aims to put an end to their profit-driven practices and provide cheaper housing for millions nationwide.”

Many American renters are struggling in the housing market, with income growth failing to keep pace with rising rents. The latest data shows that in 2022, half of U.S. renters spent over 30% of their income on rent and utilities, reaching a historic high.

While there are many reasons contributing to the housing crisis, including a decrease in new housing construction over the past decade, the Department of Justice’s lawsuit alleges that large landlords also played a role.

The Department of Justice’s statement provides examples of how the accused landlords colluded to maintain high rents. They are accused of directly communicating with competitors’ senior executives about rents, occupancy rates, and other sensitive competitive topics. For example, Greystar provided Camden with information on recent renewal rates and its views on upcoming quarterly pricing, acceptance of pricing recommendations from RealPage, use of discounts, and competitive sensitive information on occupancy rates. Similarly, executives at Camden and LivCor communicated for several months about their pricing strategies, including plans for certain price increases.

These landlord companies are also accused of engaging in so-called “telephone surveys” or “market surveys” to exchange information. Property managers contacted competitors via phone or email, sharing competitive sensitive information about rents, occupancy rates, pricing strategies, and discounts, sometimes engaging in discussions.

Landlords are also accused of participating in “user groups” on RealPage to discuss how to adjust the rent pricing methods of this property management software and their own pricing strategies.

The landlords are also alleged to have shared information on RealPage software parameters with competitors. For example, Greystar’s income management director provided standard automatic acceptance parameters of their RealPage software at the request of Willow Bridge’s income management director, including daily and weekly limits and specifics on Greystar’s use of “automatic acceptance” for certain weeks.

Greystar Real Estate Partners, one of the defendants, stated, “Greystar has always conducted business with the utmost integrity. Greystar has never engaged in any anti-competitive behavior, and we will vigorously defend ourselves.”

A spokesperson for RealPage stated that their software is used in less than 10% of rental units in the US, and the frequency of use of their pricing recommendations is less than half. The spokesperson claimed that RealPage and its clients are being made scapegoats for the affordability issue of rent, attributing the rent surge to a shortage of housing supply.

However, the landlord Cortland has agreed to cooperate with the Department of Justice and has reached a settlement to end the use of algorithms and competitive sensitive data to set rents. Cortland manages over 80,000 rental units in 13 states.

Please note that the information in this article was referenced from the Associated Press report.