ReportWire

Tag: RealPage

  • Settlement Reached That Limits Your Landlord’s Favorite Alleged Rent-Fixing Software

    [ad_1]

    The Department of Justice and the real estate platform RealPage just made a deal, and since it doesn’t completely dismantle RealPage, it’s not going to be seen as a total victory for tenants who hate RealPage. But it’s something, and it will most likely weaken the platform’s power to raise rents, as it will now be prevented from shuffling together nonpublic information from competing landlords when setting prices.

    According to the New York Times RealPage still denies having done anything wrong, per statements from Stephen Weissman, an attorney representing RealPage. The company is glad the government was willing to “bless the legality of RealPage’s prior and planned product changes,” Weissman said, “There has been a great deal of misinformation about how RealPage’s software works and the value it provides for both housing providers and renters.”

    RealPage, founded in 1998, is a multifaceted tool for landlords, not just a pricing aid. Its suite of features has been, according to press coverage and the federal charges that led to this settlement, an unseen poltergeist in renters’ lives for years, making life generally more miserable, even while most tenants had no idea it exists. For instance, according to a 2020 investigation by the New York Times and The Markup, RealPage was using flawed algorithms to perform background checks, and landlords were denying people homes based on nonexistent criminal charges.

    When it came to rents, RealPage itself at one point claimed that the landlords who used it faithfully were “driving every possible opportunity to increase price even in the most downward trending or unexpected conditions.”

    Then in August of last year, the Justice Department—along with eight state attorney generals—slapped RealPage with an antitrust suit. The legal filing makes for immensely gratifying reading, particularly when you know RealPage settled after being hit with the following accusation:

    “At bottom, RealPage is an algorithmic intermediary that collects, combines, and exploits landlords’ competitively sensitive information. And in so doing, it enriches itself and compliant landlords at the expense of renters who pay inflated prices and honest businesses that would otherwise compete.”

    The price recommendation systems in RealPage, called YieldStar and AI Revenue Management, worked by asking users—landlords—to enter nonpublic data on rental real estate that only landlords would generally have. That included private data from applications, rent amounts, leases renewed, units sitting unoccupied, and other numbers of this nature that can be used to quantify the state of the market in extremely granular detail. Not all of this data is part of the most recent version of RealPage’s software, but it’s how it worked historically.

    All this market information was heaped into a pile and combined with the data piles of other landlords, who are theoretically their competitors. The system would process all of this with an algorithm, and generate bespoke price recommendations for all landlords in an area, all using one another’s data.

    Making its data all the more comprehensive was its 80 percent market share, according to the DOJ. That alleged monopoly status theoretically meant landlords paid higher prices for RealPage, which were passed on to renters.

    And it apparently made rents go up. A 2022 ProPublica investigation found widespread RealPage adoption, and widespread rent increases to go with it. In Nashville, prices had recently gone up 14.5%, and ProPublica found that landlords were thrilled. In a testimonial, a real estate revenue manager said “The beauty of YieldStar is that it pushes you to go places that you wouldn’t have gone if you weren’t using it,” according to ProPublica.

    So instead of competing with one another to earn rents from people who need housing, the lawsuit claimed that, landlords joined forces with other landlords, and turned their competitive drives against their tenants. They didn’t actually set foot in a room with one another to engage in sinister price-fixing meetings. The software allegedly took care of it all for them. 

    If the settlement is approved by a North Carolina judge, RealPage will no longer be allowed to use information from current leases to train its algorithm, or to mix nonpublic data from different landlords together when making price recommendations. 

    Gail Slater, the DOJ’s antitrust division leader was quoted in a government news release as saying, “Competing companies must make independent pricing decisions, and with the rise of algorithmic and artificial intelligence tools, we will remain at the forefront of vigorous antitrust enforcement.” 

    [ad_2]

    Mike Pearl

    Source link

  • U.S. sues RealPage, alleging its software allows landlords to coordinate rent increases

    U.S. sues RealPage, alleging its software allows landlords to coordinate rent increases

    [ad_1]

    The U.S. Department of Justice on Friday sued a major real estate firm, alleging the company’s algorithmic software enables landlords across the country to set rent at artificially high rates.

    The lawsuit, joined by several states including California, focuses on software from Texas-based company RealPage. The software is used by many landlords to set rent prices for both vacant units and renewal rates for existing tenants.

    In a truly competitive market, authorities said, property owners would be forced to compete with each other, helping to drive down rental costs for Americans.

    However, according to the lawsuit, RealPage enabled the opposite.

    When becoming a client, supposedly competing landlords share nonpublic information — such as occupancy and rents on executed leases — with RealPage, which then uses that data to recommend rents at individual properties.

    “As Americans struggle to afford housing, RealPage is making it easier for landlords to coordinate to increase rents,” Assistant Atty. General Jonathan Kanter said in a statement.

    RealPage did not immediately return a request for comment.

    The company previously called similar allegations false and misleading, saying clients can decline its recommendations, which at times include dropping rent.

    But in its complaint, the Justice Department pointed to instances where RealPage described its software as a tool for maximizing rent and outperforming the market. Authorities also alleged the company made it more difficult for landlords to reject its recommendations than accept them.

    “There is greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down,” a RealPage executive said, according to the lawsuit.

    At another point, RealPage described its tools as ensuring landlords are “driving every possible opportunity to increase price even in the most downward trending or unexpected conditions,” the complaint says.

    Antitrust enforcement has been a focus of the Biden administration. The Justice Department has sued major companies such as Google and Apple, alleged they engaged in anticompetitive behavior.

    Vice President Kamala Harris has also criticized the use of rent-setting algorithms while running for president.

    In a statement, Atty. Gen. Merrick B. Garland said the Justice Department would continue to aggressively enforce antitrust laws.

    “Americans should not have to pay more in rent because a company has found a new way to scheme with landlords to break the law,” Garland said.

    [ad_2]

    Andrew Khouri

    Source link

  • DOJ Sues RealPage, Alleges Harm to Millions of Renters | Entrepreneur

    DOJ Sues RealPage, Alleges Harm to Millions of Renters | Entrepreneur

    [ad_1]

    The U.S. Department of Justice (DOJ) sued RealPage on Friday after a two-year investigation that included an unannounced FBI raid of a national corporate landlord. The DOJ alleged that Richardson, Texas-based RealPage, which sells real estate software, decreased competition among landlords and artificially inflated rents for millions of tenants across the country.

    “We allege that RealPage’s pricing algorithm enables landlords to share confidential, competitively sensitive information and align their rents,” attorney general Merrick B. Garland stated in a press release.

    The DOJ filed the 115-page complaint in the U.S. District Court for the Middle District of North Carolina on Friday. The antitrust lawsuit details how RealPage signed contracts with landlords who would otherwise be competitors and collected sensitive, detailed information about rent prices, lease terms, amenities and occupancy rates.

    RealPage then allegedly fed the information to its AI-driven algorithm, which gave landlords recommendations on how to price rentals and set terms for rental agreements. The DOJ also accused the company of ensuring landlords accepted its recommendations by sending out pricing advisors to meet with them for “accountability conversations” and adding an “auto accept” feature so landlords would automatically approve price increases.

    In 2020, RealPage said its software collected data on 16 million rental units of the 22 million investment-grade apartment units in the U.S., indicating its broad reach.

    U.S. Attorney General Merrick Garland (C), U.S. Deputy Attorney General Lisa Monaco (L) and U.S. Acting Associate Attorney General Benjamin Mizer (R). Photo Credit: Anna Moneymaker/Getty Images

    “As Americans struggle to afford housing, RealPage is making it easier for landlords to coordinate to increase rents,” assistant attorney general Jonathan Kanter of the Justice Department’s Antitrust Division stated, adding that “competition – not RealPage – should determine what Americans pay to rent their homes.”

    The DOJ filed the lawsuit with the attorneys general of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee and Washington. State attorneys general for Arizona and Washington, D.C., have already taken legal action against RealPage this year.

    Related: State Attorneys General Sue RealPage, Landlords Over ‘Astronomical’ Rent Hikes: ‘This Was Not A Fair Market At Work’

    In a statement, RealPage said the DOJ’s claims were “devoid of merit” and “will do nothing to make housing more affordable.” The lawsuit “seeks to scapegoat pro-competitive technology,” the company claimed.

    The non-partisan nonprofit American Economic Liberties Project (AELP) took a different stance. In an emailed statement to Entrepreneur, AELP senior legal counsel Lee Hepner pointed to RealPage’s own marketing, highlighted by the DOJ, which stated that the company took “every possible opportunity” to raise prices.

    “Working people have enough problems affording daily necessities without RealPage bragging that it seizes ‘every possible opportunity’ to increase rents,” Hepner stated.

    Related: This Simple Money Formula Helped Me Escape My 9-5 and Find Financial Freedom

    [ad_2]

    Sherin Shibu

    Source link

  • Arizona sues apartment landlords for ‘immoral’ rent price-fixing scheme

    Arizona sues apartment landlords for ‘immoral’ rent price-fixing scheme

    [ad_1]

    Arizona Attorney General Kris Mayes filed a lawsuit Wednesday against software company RealPage and nine residential landlords, alleging they engaged in a massive conspiracy to price gouge at least 100,000 renters in Phoenix and Tucson.

    RealPage sets prices for apartment units based on an algorithm that maximizes profit, according to the lawsuit filed in Maricopa County Superior Court. Some 70% of multifamily apartment units listed in the Valley are owned, operated or managed by companies that have contracted with RealPage. In Tucson, it’s about 50% of units.

    “Renters are not dealing with a competitive market,” Mayes told Phoenix New Times at a press conference on Wednesday. “They are dealing with a monopoly that is engaged in anti-competitive price fixing.”

    With the use of RealPage software becoming widespread, the free market ceases to be free, fair or transparent, and landlords can effectively conspire to raise prices through the software’s algorithm, the lawsuit argues.

    Landlords using RealPage software charged 12% more compared with landlords who didn’t use it, Mayes’ office estimated. She said that number, based on a sample of 30,000 units, is conservative.

    The lawsuit makes Arizona the first state in the country to sue RealPage, which Mayes suspects is engaging in the same activities across the country. The attorney general in Washington, D.C., also filed a lawsuit against RealPage and local landlords in November 2023.

    click to enlarge

    Arizona Attorney General Kris Mayes highlighted the defendants accused of price fixing during a press conference on Wednesday.

    TJ L’Heureux

    ‘They knew what they were doing’

    The antitrust lawsuit comes as housing costs, evictions and homelessness have skyrocketed in Phoenix since landlord use of RealPage software became more common in 2016. Between 2016 and 2021, rent soared by 80%. Last year, rent increased by about 10%. In October 2023, evictions reached a high not seen since the Great Recession in 2008.

    Mayes also noted that RealPage profit maximization moves the landlords’ focus from occupancy and instead pushes for rent increases — even if that means leaving units vacant.

    “It used to be landlords would be worried about vacancy rates, and they would be worried about being able to compete against the landlord next door,” Mayes said. “Now they don’t have to worry about any of that, because they’re all charging the same high rent. And they aren’t deviating from it because RealPage tells them not to.”

    If you’ve been in an apartment building in the Valley, and it seemed strangely empty, the lawsuit might help explain why so many units are vacant while evictions and homelessness are at all-time highs. Mayes said the scheme works because landlords agree to outsource their pricing authority to RealPage — rather than competing with one another.

    “This is a case where the software and AI were being used in what can only be described as immoral,” Mayes told New Times. “They knew what they were doing. They knew they could use technology to jack up their profits at the expense of Arizonans, and that is absolutely not OK.”

    Mayes wants RealPage and the landlords named in the lawsuit to pay restitution to renters who have been harmed by the alleged conspiracy. The attorney general is also asking the court for an injunction requiring the defendants “to stop their anti-competitive practices.”

    “Every dollar of increased rent that the cartel illegally squeezes from renters is money they would not have otherwise paid in the absence of the conspiracy,” the lawsuit reads.

    While only nine corporate landlords are named in the lawsuit, Mayes said the number is likely to increase during the discovery process. The landlords named in the lawsuit are Apartment Management Consultants, Avenue5 Residential, BH Management Services, Camden Property Trust, Crow Holdings/Trammell Crow Residential, Greystar Management Services, HSL Properties, RPM Living and Weidner Property Management.

    RealPage could not be immediately reached for comment on Friday.

    Hiding a conspiracy from the public

    Mayes called RealPage and landlords who engaged with the company “insidious” for attempting to conceal the alleged price-fixing conspiracy from renters and the public.

    A damning passage in the lawsuit alleges that RealPage taught its landlords how to avoid detection of the conspiracy, creating training materials that encouraged landlords to avoid mentioning the software and instead say units were being “priced individually.”

    “RealPage encouraged concealment to avoid detection,” the lawsuit reads.

    The attorney general also claimed RealPage put significant pressure on participants to ensure they adopted its prices. According to Mayes, this is called “policing the conspiracy” to make sure no one sets prices lower than other landlords.

    Mayes claimed RealPage policed the conspiracy in four ways:

    • Employing pricing advisers whose job was to “monitor and report on weekly rents” and meet with landlords to ensure that properties were implementing the company’s set rates.
    • Chilling landlords’ employees by tracking the identity of employees who request a deviation from RealPages’ rates, which can lead to them being fired.
    • Threatening to drop landlords that reject RealPage’s set rates.
    • Encouraging landlords to automatically accept RealPage’s prices.

    Mayes said the alleged conspiracy violates the Arizona Uniform State Antitrust Act and the Arizona Consumer Fraud Act, which she called “two statutes that have not been used nearly enough in this state.”

    “What could be more unfair, what could be more deceptive, than landlords who were using software and an algorithm to jack up the price of rents without telling renters that they were doing it?” Mayes asked during the press conference. “That is unfair under the law.”

    Mayes said the soonest renters could see relief is if the court tells landlords that they must immediately cease using the software to keep prices higher than in competitive markets.

    In an era of dawning artificial intelligence, the lawsuit could bring about a landmark case that challenges certain uses of AI and algorithms.

    “Given the involvement of Wall Street, of algorithms, of AI now in this space, I think it’s fair to ask a lot of hard questions about what’s going on out there,” Mayes said. “I think it’s important to challenge the use of this technology in this way to harm Arizonans.”

    Mayes also said she will encourage attorneys general across the country, whether Democrats or Republicans, to investigate RealPage and file similar lawsuits.

    [ad_2]

    TJ L’Heureux

    Source link