Massachusetts landlords face lawsuits over pricing algorithm

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The Justice Department, eight states and tenants allege that RealPage’s software violates antitrust laws and increases rents.

Jim Morrison — Boston.com Correspondent

September 5, 2024 | 10:55 AM

The U.S. Department of Justice and attorneys general in eight states have filed lawsuits against the alleged AI-powered property management software system. antitrust violations.

The Justice Department — and the states of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee and Washington — accuse RealPage Inc. of violating the Sherman Act and harming “millions of Americans” by reducing competition among landlords in apartment pricing. RealPage uses data to “maintain its monopoly in the commercial revenue management software market.” complaintThe lawsuit filed in North Carolina states:

“RealPage’s excessive, anti-competitive conduct enables landlords to undermine fair pricing and limit housing options while preventing necessary competition,” Acting Assistant Attorney General Benjamin C. Mizer said in a press release on Aug. 23. action“The Department is committed to eliminating illegal schemes and practices aimed at strengthening corporate interests at the expense of consumers.”

More than 30 lawsuits alleging antitrust violations against RealPage have been consolidated in federal court. Bisnow reported.

A ProPublica investigation I found this rents Buildings using RealPage’s AIRM software (formerly YieldStar) have increased significantly in some markets nationwide. The problem is the Lease Rent Option feature, which collects sensitive rent data from landlords, analyzes it, and uses it to recommend new leases to other customers. An October 2022 ProPublica report cited Boston tenant Kaylee Hutchinson, who faced a 6.5% rent increase during the COVID-19 pandemic when units in her building were left vacant and urban exodus occurred.

Referring to housing experts, National Public Radio reported On August 23, “in some markets across the country, half or more of homeowners use RealPage’s pricing algorithm.”

RealPage has published a six-page response to the allegations websiteIt argues that its management software offers potential residents and housing providers greater choice and flexibility in lease terms, supports compliance with Fair Housing Laws, uses no personal or demographic data to generate rental price recommendations, and helps ensure that potential residents have access to the best pricing available to everyone. It argues that landlords set their own prices and that acceptance rates for these recommendations are “vastly exaggerated.”

A RealPage spokesperson declined to list the company’s Massachusetts customers but said in an email: “In Boston, AIRM/YieldStar has a market penetration of only 8.0% and LRO (Lease Rent Option) has a market penetration of only 5.1%. AIRM/YieldStar customer acceptance rates are less than 50%.”

Tenants and prospective tenants in Massachusetts have no way of knowing whether their landlords are using the software and lease option feature. Some tenants have filed their own lawsuits against RealPage.

Some of Massachusetts RealPage’s customers are named in these lawsuits.

WinnResidential Manager Company— a Massachusetts condominium complex with 18 apartments, according to a map on its website — be suitable.

“WinnCompanies does not use this software for income management anywhere in the country and has not done so for nearly a year,” a spokesperson for the developer wrote. “The company denies the allegations made in this lawsuit and argues that it should be dismissed from the lawsuit at this time. It is important to note that, unlike the other defendants named in this lawsuit, 90 percent of the apartments WinnResidential manages are income-restricted or rent-restricted, meaning rents are set based on household income and thresholds set annually by the government.”

Capital HousingWith 25 rental properties in Massachusetts, also named but did not respond to the Globe’s request for comment.

Bell Partners Inc. And Lincoln Real Estate Company all have property in Massachusetts and are named in the lawsuits. None responded to requests for comment.

Avalon Bay, which has 35 properties in Massachusetts, uses the software but not Lease Rent Option. It said in its second-quarter earnings call that it suit, Bisnow reported On August 10th.

All of the organizations named in the lawsuits denied the allegations.

Doug Quattrochiexecutive director of the trade association Mass Home OwnersHe said his organization “doesn’t talk about what our rents are.” “We don’t ask people to tell us their financial situation, but it would be very interesting.”

Renters in the current market are already at a disadvantage because the market favors landlords. Real estate attorney Richard D. Vetstein Vetstein Law Group One person in Framingham said there’s not much tenants can do if their landlord raises the rent.

“You rarely see this, but occasionally a tenant will negotiate a cap on how high the renewal increases can be in the lease before signing,” Vetstein said. “But that’s very, very rare because landlords, especially in this market, don’t want to be locked into something that is essentially rent control.”

Beyond that, there’s only one other option for a tenant facing a major increase, he said.

“Don’t renew and go somewhere else,” he said.

Jim Morrison can be reached at: (email protected)Follow him on X @jimmorrison617.