The Federal Bureau of Investigation has raided the headquarters of Cortland Management, a prominent corporate landlord based in Atlanta, in a move against suspected rent price manipulation. This operation is part of a broader Department of Justice investigation into an alleged conspiracy among large landlords to artificially inflate rental prices through collusion.
At the heart of the investigation is RealPage, a $9 billion advanced property management software utilized by many corporate landlords across the United States. RealPage’s algorithm is designed to optimize rent prices by analyzing detailed data from landlords, including occupancy rates, rent prices, lease terms, and more.
According to a 2022 exposé by ProPublica, RealPage’s software allegedly facilitates and encourages coordination among landlords to raise rents beyond what would be feasible in a competitive market.
RealPage’s influence is particularly notable in Atlanta, where more than 80% of rentals are affected by its pricing recommendations. Since 2016, rents in Atlanta have increased by 80%, a rate not justified by vacancy rates, which typically drive prices down when they rise.
The problem with RealPage, according to multiple lawsuits filed in states such as California, Arizona, and New York, is that its algorithm responds to data from landlords rather than actual market demand. Arizona Attorney General Kris Mayes stated in a February lawsuit announcement, “Landlords were not competing at all; they were colluding with one another.” She added, “This was not a fair market at work; this was a fixed market.”
RealPage’s software is used extensively across the country, affecting over 16 million rental units as of 2020. A lawsuit in Washington, D.C., revealed that 60% of apartment buildings in the area use RealPage for pricing.
The software collects detailed data from participating landlords, including occupancy rates, rent prices, lease terms, and other proprietary information. This data-sharing enables landlords to set rental prices collaboratively, rather than independently, which is suspected to be a form of price-fixing. The software’s “auto-pilot” feature can even adjust rents automatically without human intervention, further streamlining the process of coordinated price hikes.
The use of RealPage software by corporate landlords has coincided with substantial rent increases in many metropolitan areas. In Phoenix, for example, landlords using RealPage control about 70% of multifamily apartment units. Similarly, in Atlanta, over 53% of the multifamily rental market is managed by landlords using this software. These concentrations have contributed to significant rent hikes; in Atlanta alone, rents have surged by 56% since 2016.
The DOJ’s investigation has already led to multiple class-action lawsuits and legal actions by the Attorneys General of Arizona and Washington, D.C. These lawsuits argue that RealPage’s practices effectively create a cartel-like environment, where landlords collectively agree to raise prices, undermining free market competition. Arizona’s lawsuit highlights that RealPage employs “pricing advisors” to ensure compliance with its recommended rates, describing this as “policing the conspiracy”.
RealPage has denied any wrongdoing, asserting that the claims misinterpret the role of revenue management software in market dynamics. The company maintains that there is no direct causal link between its software and increased market-wide rents, and it plans to defend itself vigorously against these accusations.
However, the evidence presented in various lawsuits suggests a coordinated effort to manipulate rental prices, with RealPage’s software playing a central role. In response to rising rents, some corporate landlords have acknowledged the impact of RealPage’s technology. Andrew Bowen, a RealPage executive, admitted that the software was “driving” rent increases, adding, “As a property manager, very few of us would be willing to actually raise rents double digits within a single month by doing it manually.”
Local officials and housing advocates are raising alarms about the influence of corporate landlords and the need for stricter regulations. Atlanta City Councilmember Jason Winston noted the significant impact of these practices on housing affordability, stressing the need for robust tenant protections to counteract the power of corporate landlords.
Although RealPage claimed to CNBC that its landlord clients are not obligated to follow the rent increases suggested by its algorithm, the ProPublica piece found that landlords implemented 80-90% of these recommendations. Furthermore, according to a February lawsuit filed by Arizona, RealPage dispatched “pricing advisors” to meet with landlords in person to ensure they adhered to the suggested rates.
Over the past decade, rent inflation has surged, outpacing overall inflation by 40.7%.
Information for this briefing was found via Entrepreneur and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
