Is this rent increase criminal?

November 2, 2023 11:41 AM

Washington D.C. Attorney General Brian Schwalb is suing RealPage and 14 of the city's biggest landlords, which he dubbed a "cartel," for allegedly inflating rent costs based on calculations from RealPage Revenue Management Software. Big landlords are colluding to raise rents, D.C. lawsuit alleges, April Rubin, Axios. Previously.

Schwalb's lawsuit (PDF) charges the defendants with violating DC's Antitrust Act and "overcharging residents millions."

D.C. Attorney General Sues 14 Of The City’s Biggest Landlords For Colluding To Inflate Rental Prices, Morgan Baskin, DCist
Major landlords, RealPage sued in DC for alleged rent-fixing scheme, Laya Neelakandan, CNBC

from 2022:
Rent Going Up? One Company’s Algorithm Could Be Why, Heather Vogell, ProPublica
Company That Makes Rent-Setting Software for Apartments Accused of Collusion, Lawsuit Says, Heather Vogell, ProPublica

and then there were two (tenant suits):
Tenants Are Suing Landlords for Allegedly Price-Fixing Rents with Software and the Feds Could Get Involved, Roshan Abraham, Vice: "The DOJ has requested to participate in a lawsuit by tenants alleging that landlords colluded using RealPage software to artificially inflate rents."

From the Axios story:

The software company actively "polices" landlords to ensure that they comply with the rent cost it generates, the lawsuit alleges. Failure to impose the RealPage rents could lead to landlords being expelled from the organization, according to the suit.

...

U.S. Senators Amy Klobuchar (D-Mn.), Richard Durbin (D-Il.) and Cory Booker (D-N.J.) in a letter last November asked the Justice Department to investigate "anticompetitive concerns" around RealPage.

posted by kristi (23 comments total)

pleaseohpleaseohpleaseohplease outlaw this shit.
posted by Silvery Fish at 11:44 AM on November 2, 2023 [25 favorites]

I'm in DC and my landlord is one of the 14. Really eager to see where this goes.
posted by capricorn at 11:47 AM on November 2, 2023 [14 favorites]

It's bad for the landlords, who are alleged to be participating in a cartel by way of uploading their competitive data to a third party. "Collusion, but on a computer" is still collusion. I don't know how they even defend against the charges unless they can prove either that they didn't really upload private competitive data or that they weren't actually bound by the pricing recommendations. They're all profitable enough, and well enough politically connected, that they will assuredly just pay whatever fines and brush it off while nobody in the office of the mayor actually acts to enforce any settlements or prevent the next version of the same problem.

OTOH it's an existential threat to the service provider, RealPage. This is basically all they do. If they're (correctly) determined to be providing the mechanism for an illegal price fixing scheme they're going to have to dial back to being a simple "market research" provider, and they'll have a huge target on their backs for whatever they do after that.
posted by fedward at 12:05 PM on November 2, 2023 [9 favorites]

I suspect we encountered this when we moved to Savannah Ga - Our rent was determined by what they quoted and called "Market Rates" of surrounding real estate (the company itself owned other local building complexes and in multiple properties in other states/cities)

Imagine that.
posted by djseafood at 12:16 PM on November 2, 2023 [4 favorites]

Between this and the National Association of realtors judgement this week, it's been a good week for loosening the vise grip of grifters on the "free market" of housing.
posted by Dashy at 12:42 PM on November 2, 2023 [12 favorites]

To me, this [if true] is the damning part that elevates it beyond market research or a software algorithm:

The software company actively "polices" landlords to ensure that they comply with the rent cost it generates, the lawsuit alleges. Failure to impose the RealPage rents could lead to landlords being expelled from the organization, according to the suit.

If it was just "market research" and an algorithm that landlords could choose to use their recommended rents or not, that's one thing. Not great, but a harder case to prove collusion. But if you get kicked off the platform if you don't charge what the computer spits out? Yikes. I worked in an organization tangential to this industry when revenue management software was first gaining traction and that was not my understanding of how it worked 10-15 years ago. If it has really gone this far then a correction is desperately needed.
posted by misskaz at 12:46 PM on November 2, 2023 [11 favorites]

In reading the ProPublica article, it looks like the reference to "being expelled from the organization" might be talking about the User Group, not all customers of the platform itself.

Still, it's wild to me as someone who has worked in the professional/trade association universe for nearly two decades, that they would be so incautious about collusion/price fixing. In the orgs I've worked for (501c3 or 501c6 nonprofits), it has always been top of mind to forbid discussions about how to price services at conferences and in online forums hosted by the org. You didn't even want to have the appearance of price fixing, let alone actually doing it. I suppose when you have a nonprofit status that could be placed in jeopardy, you're likely to be more cautious than a for-profit user group, but it still surprises me.
posted by misskaz at 1:04 PM on November 2, 2023 [3 favorites]

This is basically all they do

It really sounds bad for them, and if so I'm glad to see 'em go. But I'm also a pedant and so must point out that the primary thing they do is process rent payments.
posted by capricorn at 1:08 PM on November 2, 2023 [2 favorites]

Once again proving that just because the computers let you do thing, doesn't mean it's legal to do.
posted by drewbage1847 at 1:20 PM on November 2, 2023 [9 favorites]

Wow these guys are stupider than street thugs. Everyone knows if you're going to engage in crime, you don't write it down.
posted by seanmpuckett at 1:25 PM on November 2, 2023 [3 favorites]

I don’t suppose the fine will be rental stock being seized and nationalized will it?
posted by GenjiandProust at 1:28 PM on November 2, 2023 [7 favorites]

asset forfeiture is for poor people.
posted by j_curiouser at 1:36 PM on November 2, 2023 [7 favorites]

I'm against asset forfeiture for anyone, including landlords, but looks like the Supreme Court has other ideas: Justices Doubt Test Favoring Prompt Post-Seizure Hearings
posted by Mr.Know-it-some at 1:53 PM on November 2, 2023 [1 favorite]

I don’t suppose the fine will be rental stock being seized and nationalized will it?

I can't recall victims ever getting anything from asset forfeiture. Doesn't it typically go to the cops and governments?
posted by srboisvert at 2:51 PM on November 2, 2023 [3 favorites]

I don't know if it was this software and program in particular - and doubt that it was - but this kind of shit is how/why I ended up homeless back in about 2013 even though I was in a low income building and property management organization where I and many of my neighbors were on disability, rent assistance and fixed incomes.

Thanks to Amazon (and Amazon specifically) driving up all the rents in my neighborhood, my rent non-figuratively doubled in the space of just about two years. I remember the manager saying something like "Well, we *have* to adjust rent to match local rent prices and markets!" and I wasn't having it and was just like "Really? Says who? Isn't this supposed to be a low income housing group!?"

No one's rent should DOUBLE in two years, especially in a low income housing group operated by a non-profit NGO and vastly exceeding inflation rates or cost of living increases for people on SSI/SSDI fixed incomes.
posted by loquacious at 3:55 PM on November 2, 2023 [25 favorites]

I don't know if any of you have seen the argumentation related to this on places like Reddit etc. but it is clear to me that the neoliberal dogma that we have been drilled in for 40 years has been fairly fairly successful at getting people to take the side of cartels against people.
posted by Pembquist at 3:56 PM on November 2, 2023 [10 favorites]

If I've understood this situation correctly, I'm reminded of the fascinating book The People's Republic of Wal-Mart, which looks at how certain major firms (like Wal-Mart), often thought of as successes under capitalism, actually use extensive central planning to mitigate the inefficiencies of the free market and get an edge on their competition.

Many people balk at public housing as uneconomical, or authoritarian. But these private landlords correctly understood that they could more efficiently make money by just collectively deciding what the price of housing should be. This is terrible and exploitive. But what if citizens and governments decided that we could more efficiently provide housing by deciding on a much lower, fixed price, instead of living or dying by "what the market decides".
posted by AAALASTAIR at 5:01 PM on November 2, 2023 [16 favorites]

"Letting the market decide" is the original "the algorithm did it"

Mammon. His name is Mammon, y"all. Get yr Sigils out, service is Fridays.
posted by eustatic at 7:37 PM on November 2, 2023 [4 favorites]

I don't know if any of you have seen the argumentation related to this on places like Reddit etc. but it is clear to me that the neoliberal dogma that we have been drilled in for 40 years has been fairly fairly successful at getting people to take the side of cartels against people.

Lol, the Miami subreddit has been sharpening their pitchforks and soaking their torches in ammonium perchlorate for a couple of years now thanks to the absurd rent increases that have been going around since COVID. Not difficult to understand when you could get a pretty nice three bedroom house for $2400 a month 4 years ago and today you might get lucky and find a one bedroom apartment in a poorly maintained building for that.

When the issue was more of a "we aren't building enough housing and what we are building is all sort high end stuff being bought by outsiders as second homes and left empty" they were all like "them's the breaks", but when prices started increasing 30-50% a year primarily because of cartel effects and owners of rental units started leaving them empty instead of charging what people were willing to pay and collecting massive application fees for units they never intended to rent there was a lot more upset.
posted by wierdo at 9:06 PM on November 2, 2023 [4 favorites]

As someone who had to find new housing this year and wondered what was going on with rent, this is great news.
posted by Ahniya at 11:36 PM on November 2, 2023 [1 favorite]

Honestly, I'd be equally happy with explicitly outlawing application fee scams as seeing action taken on this price fixing. Maybe other jurisdictions have done so, but here in South Florida one of the reasons they can get away with price fixing even if it results in low occupancy is that landlords can easily make as much or more money on application fees as they do having a unit occupied. At $200 a person who you never intend to rent a unit to at any pricr, it doesn't take many people to make up the difference.
posted by wierdo at 4:18 AM on November 3, 2023 [3 favorites]

paging chairman mao to the courtesy phone please ...
posted by nofundy at 5:39 AM on November 3, 2023

They talked about Realpage on the Cyber podcast this week. They also did a story on another company that’s disrupting usury, Rhino. They offer a service where instead of a security deposit, tenants pay a non-refundable monthly fee, and then still have to pay for wear and tear on the apartment when they leave. Landlords love it!
posted by rodlymight at 9:40 AM on November 3, 2023