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From the department of “The rent is too damn high”

A lawsuit to watch.

Renters are suing Richardson-based RealPage and some of the largest property management firms in the nation for allegedly forming what they call a “cartel” to artificially inflate apartment prices above competitive levels.

Five renters are challenging RealPage and seven property management firms — including Dallas-based Lincoln Property Co. — days after ProPublica published an investigation on landlords’ use of RealPage’s proprietary YieldStar algorithm to push the highest possible rent prices on tenants for apartments across the U.S.

“RealPage strongly denies the allegations and will vigorously defend against the lawsuit,” said RealPage spokeswoman Natalie Dent. “Beyond that, we do not comment on pending litigation.”

Earlier this week in response to the ProPublica story, RealPage told The Dallas Morning News: “Revenue management software cannot control the market because it does not consider or have visibility into market availability. Additionally, the article implies vacancy and resident turnover have increased due to revenue management, which is exactly opposite of what has occurred, as both have steadily declined over the last decade even as revenue management software usage increased.”

The class-action suit was filed in U.S. District Court in the Southern District of California on behalf of all renters of multifamily real estate leases from landlords who have used RealPage’s pricing or lease renewal-taggering software.

“Today’s lawsuit plausibly alleges that lessors of rental units have coordinated to drive rents up to unprecedented levels, exacerbating the nation’s affordable housing crisis,” said Gary Smith Jr., an attorney at Hausfeld representing the renters. “We look forward to vindicating our clients’ rights in this important federal antitrust litigation.”

The suit claims landlords independently priced their leases based on their own assessments of how to best compete against other landlords until about 2016, when they agreed to use a common third party, RealPage, which collected real-time prices and supply levels and used that data to make pricing and supply recommendations. The landlords would follow RealPage’s suggestion with the expectation that others would do the same, the suit said.

The lawsuit is targeted at some of the largest managers of apartment complexes in the nation, including Greystar Real Estate Partners LLC, headquartered in Charleston, S.C.; Dallas-based Lincoln Property Co.; FPI Management Inc., based near Sacramento; Mid-America Apartment Communities Inc., based in the Memphis area; Chicago-based Equity Residential; Essex Property Trust, headquartered in the San Francisco Bay Area.; and three Seattle-based firms: Avenue5 Residential LLC, Thrive Communities Management LLC and Security Properties Inc.

You should read the Pro Publica article that seems to be the foundation of this lawsuit; you can also listen to this What Next TBD episode in which host Lizzie O’Leary interviews the author of the article about it. I don’t know what the likelihood of success is for this lawsuit. Federal suits can take years to work their way through the system, and SCOTUS looms at the end of the line if the result is too unfriendly to business interests. I do think this is an issue that could and should be championed by progressive politicians, and could gain a lot of traction. Nobody really likes the idea of secret algorithms taking advantage of regular people, so the opportunity to have a good fight for real oversight of a problem that’s costing lots of people lots of money is one that should be taken. I’ll keep an eye on this.

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