Other LanguagesWashington joins 8 AGs, federal government accusing RealPage and landlords of unlawfully working together to boost profits
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SEATTLE — Attorney General Bob Ferguson partnered with a bipartisan group of eight attorneys general and the federal Department of Justice to file a lawsuit today accusing a national software company of conspiring with landlords to inflate rental prices.
The lawsuit accuses RealPage of sharing competitively sensitive, nonpublic data through its software with competing landlords to help them raise rents to maximize profits. An estimated 800,000 leases in Washington were priced using RealPage revenue management software since 2017.
One potential RealPage client called the company’s model “classic price fixing.”
RealPage also facilitates “user group” meetings between competing landlords, where competitive information is shared and discussions on pricing are encouraged.
As one RealPage vice president explained: “There is a greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the industry down.”
The lawsuit also asserts that the software encourages landlords to raise rents even when they have more empty units on the market. The practices artificially inflate rents, the lawsuit asserts. Washington state has some of the highest housing costs in the country.
“RealPage colluded to fix prices and keep rents rising in order to boost profits,” Ferguson said. “The cost of housing is putting a strain on too many working families. My legal team and I will stand up to this collusion and fight for affordable rents for Washingtonians.”
The lawsuit, filed today in the U.S. District Court for the Middle District of North Carolina, asserts that RealPage violated the federal Sherman Antitrust Act.
The lawsuit asserts that RealPage uses nonpublic, competitively sensitive data it collects from landlords to feed its algorithm, which produces coordinated pricing recommendations to maximize the profits of all of its landlord users. The stated goal is to reduce competition and increase profits. The lawsuit asserts RealPage’s software products — AI Revenue Management, Yieldstar and LRO — often recommend rents that remain the same or increase even when occupancy is decreasing and landlords are having trouble filling units. In a competitive market, low occupancy rates often produce lower rents.
AI Revenue Management, or AIRM, is RealPage’s newest product, which uses artificial intelligence to aid in setting rents. RealPage has planned to use AIRM to replace its older software, Yieldstar and Lease Rent Options, or LRO. RealPage has become the dominant revenue management software provider for U.S. landlords.
Washington has some of the highest housing costs
Washington has some of the highest housing costs in the nation. A recent report by the National Low Income Housing Coalition found that Washington has the fifth highest “housing wage” — the hourly wage required to afford rent on a two-bedroom home — in the U.S. A Washington working family needs to make about $40 per hour, or more than $83,000 per year, to avoid spending more than 30% of their income on rental costs for a two-bedroom home. The average Washington renter only makes $29 per hour.
According to a Washington Post analysis of rental data, Washington has seen some drastic rent increases in the last five years above the national average. For example, rents in Pierce, Snohomish, Whatcom, Walla Walla and Thurston counties have risen more than 25% since 2019. Skagit, Benton and Spokane county rents rose more than 30%, and Chelan County rents jumped by 41%. Nationally, rents have climbed about 19% in the same timeframe.
Across the country, a quarter of U.S. households — approximately 10.4 million — spent more than half of their income on rent in 2021. That’s an increase of about 1 million households since 2019. By 2022, 12.1 million households spent more than half of their income on rent.
The average non-college graduate spent 30% of their income on rent in 2000. By 2017, that jumped to 42% of their income spent on rent.
Though college graduates spend a lower percentage of their income on rent, their share is also increasing. In 2021, college graduates spent 24% of their income on rent on average. In 2022, they were spending more than a third of their income.
Ferguson opened investigation in January 2023
Ferguson opened his investigation in January of 2023 after a story by ProPublica detailed how RealPage’s algorithm could contribute to rising rents across the country.
Ferguson’s investigation found that RealPage collects nonpublic, competitively sensitive data from its users to feed the algorithms in its revenue management software. Landlords who use RealPage software agree to provide their data, which the software combines with data from other landlords.
The algorithm then recommends rents — in many cases increasing them. In feedback to RealPage about its software, one potential client said: “I always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and term. That’s classic price fixing.”
RealPage’s software creates pricing recommendations that will not go below a hard floor, though they may exceed a soft ceiling at the top of the market.
RealPage also discourages price negotiations and concessions for renters in favor of the highest possible price in several ways. First, RealPage’s training advises new clients to set its software to automatically accept its pricing recommendations. If a client doesn’t want to use auto-accept, RealPage advisors are trained to convince them to turn it on.
RealPage also encourages property managers to accept its pricing recommendations by forcing them to enter an explanation any time they decline the software’s recommendations. When RealPage’s advisers see the declines, they can be escalated to property owners.
RealPage software also advises landlords to keep prices high even when occupancy is down, the lawsuit asserts. The software also recommends adjusting lease timeframes to avoid a glut of units hitting the market at the same time — for instance, recommending 13-month leases instead of 12. That way, rent prices don’t go down because of increased supply.
What we’re seeking
Ferguson’s lawsuit seeks to stop RealPage’s illegal practices and force RealPage and landlords to stop exchanging sensitive nonpublic competitive information and colluding to align their pricing.
Assistant Attorneys General Brian Rowe, Rachel A. Lumen, Kendall Scott Cowles and Sarah Smith-Levy; Paralegals Alicia N. Stensland, Christina Baker, Kristina Clarke, Connor Hopkins, Tracy Jacoby and Kellie Tappan; Investigator Tony Perkins; and Economic Analyst Matthew Paskash are working on the case for Washington.
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