by Jamil Ragland CTNewsJunkie
Attorney General William Tong joined the US Department of Justice and attorneys general from nine other states in a lawsuit this week against six of the nation’s largest landlords over their use of algorithmic pricing software to set their rental rates.
The amended complaint alleges that the landlords’ use of YieldStar – a software package developed by Texas-based RealPage, Inc. that shares lease data – is a form of collusion or price-fixing.
Growth in the use of YieldStar software has coincided with spiking prices for rental housing in Connecticut and around the nation.
In August, CTNewsJunkie reported a $359-per-month increase in the average cost of a Fair Market Rent in Connecticut over the previous 19 months. That spike in rental rates – exacerbated by a shortage of affordable housing – was part of the focus of Gov. Ned Lamont’s State of the State address on Wednesday.
The lawsuit alleges that Greystar Real Estate Partners LLC (Greystar); Blackstone’s LivCor LLC (LivCor); Camden Property Trust (Camden); Cushman & Wakefield Inc and Pinnacle Property Management Services LLC (Cushman); Willow Bridge Property Company LLC (Willow Bridge), and Cortland Management LLC (Cortland) all use algorithmic pricing schemes that harmed renters by actively participating in a scheme to set their rents using each other’s competitively sensitive information through common pricing algorithms.
Greystar, Pinnacle and Willow Bridge all own properties in Connecticut.
“A family’s selection of an apartment reflects a complex set of values and criteria including comfort, safety, access to schools, convenience, and critically, affordability,” the complaint states. “To ensure they secure the greatest value for their needs, renters rely on robust and fierce competition between landlords.”
However, the suit alleges that RealPage distorts that competition by sells landlords commercial revenue management software that enables landlords to sidestep vigorous competition to win renters’ business.
The complaint says that many of the largest landlords in the US – including Greystar, Camden, Cortland, Cushman & Wakefield and Pinnacle, LivCor, and Willow Bridge, each of whom would otherwise be competing with each other – “submit or have submitted on a daily basis their competitively sensitive information to RealPage. This nonpublic, material, and granular rental data includes, among other information, a landlord’s rental prices from executed leases, lease terms, and future occupancy. RealPage collects a broad swath of such data from competing landlords, combines it, and feeds it to an algorithm.”
Tong said that sharing that sensitive data distorts the price of housing for renters in Connecticut and across the nation.
“I don’t have to tell anyone – rent is completely unaffordable and out of control right now,” Tong said. “We are alleging today that some of the nation’s largest landlords – including three operating in Connecticut – rigged the market using unfair algorithmic pricing to suppress competition and jack up costs for millions of renters. Today’s amended complaint represents a major expansion of our initial complaint against RealPage. We’re going to follow the facts where they lead, and won’t hesitate to use the full extent of our joint state and federal enforcement authority to give American families a fair chance at an affordable home.”
Federal officials also said landlords must stop the collusion that’s keeping prices high.
“While Americans across the country struggled to afford housing, the landlords named in today’s lawsuit shared sensitive information about rental prices and used algorithms to coordinate to keep the price of rent high,” said Acting Assistant Attorney General Doha Mekki of the Justice Department’s Antitrust Division. “Today’s action against RealPage and six major landlords seeks to end their practice of putting profits over people and make housing more affordable for millions of people across the country.”
The amendment is an addition to the original lawsuit filed in August by Tong, the DOJ, and other states against RealPage, Inc. for its “unlawful scheme to decrease competition among landlords in apartment pricing and to monopolize the market for commercial revenue management software that landlords use to price apartments.”
A report by ProPublica published in 2022 found that companies that use RealPage’s YieldStar software “outperformed” the local housing market by 3 to 7%. Critics say that the use of this data by major landlords drives rental prices up because the companies are essentially cooperating when setting prices.
The proliferation of revenue management software has not been specifically linked to the explosion in rental prices here in Connecticut, but use of the software appears to coincide with the increase. An analysis of data from the Department of Housing and Urban Development (HUD), provided by RentData.org, showed a $359 jump in the average cost of the “Fair Market Rent” in Connecticut since the end of 2022, representing a 23.68% increase from $1,514 to $1,873.
Connecticut rental prices have been trending upward for years, but from 2006 to 2022, it only averaged a 2.56% increase per year. From Jan. 1, 2023, through Aug, 26, 2024, the average annual increase is about 11.25%.
The issue has also caught the attention of the state’s federal delegation as well. In March 2023, US Sen. Richard Blumenthal sponsored two bills that he said would stop price gouging by landlords who share pricing data through the software. However, neither the Preventing Algorithmic Collusion Act (S.3686) nor the Preventing the Algorithmic Facilitation of Rental Housing Cartels Act (S.3692) made much progress in last year’s Congress. Both bills died in committee.