Federal Bureau of Investigation (FBI) done an unannounced raid of national corporate landlord Cortland Management on May 22, intensifying an investigation into an alleged rent-fixing conspiracy that may have already affected millions of Americans.
The surprise search was reportedly part of a criminal antitrust investigation by the US Department of Justice (DOJ) into RealPage, a 9 billion dollars software company that recommends rent increases for millions of housing units across the US
for RealPage blog threads forAtlanta, Georgia-based Cortland, which owned nearly 85,000 apartment units as of June 2022, used RealPage's algorithm to “secure consistent seller prices for their communities from Arizona to Georgia.”
RealPage's effects can be seen most in Atlanta, where software-based pricing affects more than 80% of rentals. Since 2016, rents in the city have increased by 80% — and higher vacancy rates haven't lowered prices.
Apartment building. Credit: Getty Images
The problem with RealPage, according to multiple ACTIONS filed in the past two years in California, Arizona, New York and other states, is that its algorithm raises rental prices in response to data collected from landlords — not on demand.
The owners “were not competing at all,” Arizona Attorney General Kris Mayes DECLARING in a February notice of lawsuit against RealPage.
“They were cooperating with each other,” Mayes said.
According to the Arizona lawsuit and others filed, the landlords provided RealPage with detailed information about rental prices, rental terms, amenities, move-out dates and occupancy rates.
“Using this sensitive data RealPage directed competitors on which units to rent, when to rent them and at what price,” said Mayes. “This was not a fair market at work, this was a fixed market.”
RealPage's reach is undeniable. or The DC lawsuit showed that 60% of apartment buildings in the area set prices using RealPage. IN Phoenix, Arizona70% of the apartment units were owned or managed by the company using its software.
Over 16 million rental units across the US used RealPage's algorithm as of 2020 blog post.
“That's a very large portion of the total inventory in the country when you consider that there are approximately 22 million investment-grade apartments in the US today,” Tracy Saffos, director of industry at RealPage, said in the same post.
Connected: Where are US rents falling the most?
RealPage's impact on tenants has been evident—even to company executives.
When asked about the role RealPage's technology played in driving apartment rents, company executive Andrew Bowen said that the software was “running it”.
“As a property manager, very few of us would be willing to increase rents by double digits in a month by doing it manually,” Bowen said.
Although RealPage told CNBC that its owner customers are not required to use the lease increases its algorithm that recommends, a 2022 investigation by ProPublica found that owners accepted 80-90% of the algorithm's suggestions.
RealPage sent “price advisors” to meet in person with landlords to follow up on their use of recommended rates, according to Arizona's February lawsuit against the company.
In the past ten years, rent inflation has outpaced the overall inflation rate 40.7%.
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