EVERETT — An Everett renter is among several suing some of the nation’s biggest property managers and a company that makes price-setting software, alleging they created a “cartel” to “artificially inflate the prices of multifamily residential real estate in the United States above competitive levels.”
The potential class-action lawsuit, filed last week in the U.S. District Court in San Diego, comes from five renters in California and Washington. Four of them were tenants at Greystar properties, in Redmond, San Francisco and San Diego. The fifth rented from Security Properties Residential in Everett, starting last month. All say they paid higher rents due to the practices of their property management companies and a third-party company, RealPage.
Security Properties Residential, a Seattle-based company, owns several buildings in Snohomish County, including Olin Fields on Holly Drive, Charter Club Apartments near Silver Lake and Helm Apartments just east of I-5 south of Everett, according to its website.
The complaint claims nine of the nation’s largest property managers worked together through RealPage to minimize competition. Those property management companies together own hundreds of thousands of apartments across the country. Security Properties Residential owns about 22,000 in 18 states, according to the complaint.
“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,” Gary Smith Jr., an attorney for the renters, said in a press release. “We look forward to vindicating our clients’ rights in this important federal antitrust litigation.”
Until several years ago, the managers priced their leases themselves, according to the 26-page lawsuit. They had an incentive to lower prices to seem appetizing to tenants, driving rent levels in line with supply and demand.
But around 2016, that changed, the complaint says: They replaced independent pricing with “collusion.” The Texas-based RealPage collected pricing and supply data to make recommendations to the property management companies. That has allowed those major companies to coordinate and to replicate “the market outcomes one would observe if they were a monopolist of residential leases, which is the goal of any cartel,” the plaintiffs allege.
This can have a huge impact in some markets.
In one Seattle neighborhood, for example, ProPublica, a nonprofit investigative news site, found 70% of apartments were managed by just 10 companies, all of which used RealPage’s pricing software.
RealPage leaders have boasted that the company’s software helped drive rising rents in recent years, the lawsuit claims. And its website has reportedly bragged their clients could raise rents between 5% and 12% year-over-year, with its help.
Meanwhile, property managers also held vacant apartments unoccupied for months at a time to keep supply in check, keeping prices higher with the aid of RealPage, according to the complaint. Before this, companies wouldn’t want units to sit empty without any rent payments.
The plaintiffs, all of whom claim they paid more than they would have without RealPage, argue those behaviors violate federal law. They claim the practices affect “tens of thousands if not hundreds of thousands” of tenants.
In a statement Tuesday afternoon, RealPage said its software is “purposely built to be legally compliant.”
“Revenue management is commonly used across many industries, and innovations in this area have been to the mutual benefit of both consumers and vendors,” the statement reads. “RealPage’s software is but one of a number of such tools available in the marketplace to property operators across the U.S.”
The company argued rent prices are “determined by various factors including supply and demand as well as each property owner’s unique circumstances.” It noted a housing supply shortage drives prices higher.
As for the complaint, RealPage “strongly deny the allegations and will vigorously defend against the lawsuit.”
Security Properties Residential did not immediately respond to requests for comment Tuesday afternoon.
Jake Goldstein-Street: 425-339-3439; jake.goldstein-street@heraldnet.com; Twitter: @GoldsteinStreet.
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