This story was initially revealed by ProPublica, a Pulitzer Prize-winning investigative newsroom. Join The Large Story e-newsletter to obtain tales like this one in your inbox.
On a summer season day final yr, a bunch of actual property tech executives gathered at a convention corridor in Nashville, Tennessee, to boast about certainly one of their firm’s signature merchandise: software program that makes use of a mysterious algorithm to assist landlords push the best attainable rents on tenants.
“By no means earlier than have we seen these numbers,” mentioned Jay Parsons, a vice chairman of RealPage, as conventiongoers wandered by. Residence rents had lately shot up by as a lot as 14.5%, he mentioned in a video touting the corporate’s providers. Turning to his colleague, Parsons requested: What position had the software program performed?
“I feel it’s driving it, fairly truthfully,” answered Andrew Bowen, one other RealPage govt. “As a property supervisor, only a few of us could be prepared to really increase rents double digits inside a single month by doing it manually.”
The celebratory remarks have been greater than swagger. For years, RealPage has offered software program that makes use of information analytics to recommend day by day costs for open models. Property managers throughout the US have gushed about how the corporate’s algorithm boosts income.
“The great thing about YieldStar is that it pushes you to go locations that you simply wouldn’t have gone in case you weren’t utilizing it,” mentioned Kortney Balas, director of income administration at JVM Realty, referring to RealPage’s software program in a testimonial video on the corporate’s web site.
The nation’s largest property administration agency, Greystar, discovered that even in a single downturn, its buildings utilizing YieldStar “outperformed their markets by 4.8%,” a big premium above rivals, RealPage mentioned in supplies on its web site. Greystar makes use of RealPage’s software program to cost tens of 1000’s of flats.
RealPage turned the nation’s dominant supplier of such rent-setting software program after federal regulators accredited a controversial merger in 2017, a ProPublica investigation discovered, tremendously increasing the corporate’s affect over condo costs. The transfer helped the Texas-based firm push the shopper base for its array of actual property tech providers previous 31,700 prospects.
The impression is stark in some markets.
In a single neighborhood in Seattle, ProPublica discovered, 70% of flats have been overseen by simply 10 property managers, each single certainly one of which used pricing software program offered by RealPage.
To reach at a advisable hire, the software program deploys an algorithm — a set of mathematical guidelines — to investigate a trove of information RealPage gathers from shoppers, together with personal data on what close by rivals cost.
For tenants, the system upends the apply of negotiating with condo constructing employees. RealPage discourages bargaining with renters and has even advisable that landlords in some instances settle for a decrease occupancy charge in an effort to increase rents and make more cash.
One of many algorithm’s builders advised ProPublica that leasing brokers had “an excessive amount of empathy” in comparison with pc generated pricing.
Residence managers can reject the software program’s strategies, however as many as 90% are adopted, in keeping with former RealPage staff.
The software program’s design and rising attain have raised questions amongst actual property and authorized consultants about whether or not RealPage has birthed a brand new sort of cartel that permits the nation’s largest landlords to not directly coordinate pricing, doubtlessly in violation of federal legislation.
Specialists say RealPage and its shoppers invite scrutiny from antitrust enforcers for a number of causes, together with their use of personal information on what rivals cost in hire. Specifically, RealPage’s creation of labor teams that meet privately and embrace landlords who’re in any other case rivals may very well be a purple flag of potential collusion, a former federal prosecutor mentioned.
At a minimal, critics mentioned, the software program’s algorithm could also be artificially inflating rents and stifling competitors.
“Machines rapidly study the one approach to win is to push costs above aggressive ranges,” mentioned College of Tennessee legislation professor Maurice Stucke, a former prosecutor within the Justice Division’s antitrust division.
RealPage acknowledged that it feeds its shoppers’ inside hire information into its pricing software program, giving landlords an aggregated, nameless take a look at what their rivals close by are charging.
An organization consultant mentioned in an electronic mail that RealPage “makes use of aggregated market information from quite a lot of sources in a legally compliant method.”
The corporate famous that landlords who use staff to manually set costs “sometimes” conduct cellphone surveys to examine rivals’ rents, which the corporate says may end in anti-competitive habits.
“RealPage’s income administration options prioritize a property’s personal inside provide/demand dynamics over exterior elements similar to rivals’ rents,” an organization assertion mentioned, “and subsequently assist eradicate the danger of collusion that might happen with guide pricing.”
The assertion mentioned RealPage’s software program additionally helps stop rents from reaching unaffordable ranges as a result of it detects drops in demand, like those who occur seasonally, and might reply to them by reducing rents.
RealPage didn’t make Parsons, Bowen or the corporate’s present CEO, Dana Jones, out there for interviews. Balas and a Greystar consultant declined to touch upon the file about YieldStar. The Nationwide Multifamily Housing Council, an business group, additionally declined to remark.
Proponents say the software program is just not distorting the market. RealPage’s CEO advised traders 5 years in the past that the corporate wouldn’t be large enough to hurt competitors even after the merger. The CEO of certainly one of YieldStar’s earliest customers, Ric Campo of Camden Property Belief, advised ProPublica that the condo market in his firm’s dwelling metropolis alone is so huge and numerous that “it will be exhausting to argue there was some sort of value fixing.”
What position RealPage’s software program has performed in hovering rents — which within the decade earlier than the pandemic almost doubled in some cities — is difficult to discern. Insufficient new building and the tight marketplace for homebuyers have exacerbated an present housing scarcity.
However by RealPage’s personal admission, its algorithm helps drive rents larger.
“Learn how YieldStar will help you outperform the market 3% to 7%,” RealPage urges potential shoppers on its web site.
Few tenants know that such software program, owned by a privately held firm, has had a hand in hire will increase throughout the nation.
In Boston, renter Kaylee Hutchinson mentioned she was puzzled when her landlord — unbeknownst to her, a RealPage shopper — advised her days into the primary pandemic lockdowns that her hire was going up. Constructing employees insisted that the market charge for her condo was 6.5% larger than she was paying, regardless of her protests that folks have been fleeing town.
A number of weeks later, she and her fiancé noticed a newly vacant unit of their constructing marketed on-line for much less. Considered one of their landlord’s insurance policies permitted transferring to a different unit owned by the corporate, so that they did.
Hutchinson, who’s an analyst for the police division, puzzled if a pc algorithm was behind constructing employees’s inflexibility. “It was fairly apparent they need to have been dropping costs,” she mentioned. “They have been digging their heels in.”
Hutchinson mentioned she watched flats in her constructing sit vacant at costs that didn’t make sense to her.
“A traditional mom-and-pop landlord, they’re fearful about having a superb tenant and defending their curiosity within the settlement,” Hutchinson mentioned. “These firms, they’ll simply change you.”
The origins of YieldStar
Considered one of YieldStar’s fundamental architects was a enterprise govt who had private expertise with an antitrust prosecution.
A genial, self-described “numbers nerd,” Jeffrey Roper was Alaska Airways’ director of income administration when it and different main airways started creating price-setting software program within the Nineteen Eighties.
Competing airways started utilizing widespread software program to share deliberate routes and costs with one another earlier than they turned public. The know-how helped head off value wars that will have lowered ticket costs, the Division of Justice mentioned.
The division mentioned the association might have artificially inflated airfares, estimating the associated fee to shoppers at greater than a billion {dollars} between 1988 and 1992. The federal government finally reached settlements or consent decrees for value fixing with eight airways, together with Alaska Airways, all of which agreed to alter how they used the know-how.
At one level, federal brokers eliminated a pc and paperwork from Roper’s workplace on the airline. He mentioned he and different creators of the software program weren’t conscious of the antitrust implications. “All of us received known as up earlier than the Division of Justice within the early Nineteen Eighties as a result of we have been colluding,” he mentioned. “We had no concept.”
When Roper returned to the US within the early 2000s after a stint in central and Japanese Europe, he mentioned, he found the condo rental business was to this point behind technologically that it resembled the rising markets he’d simply left.
Residence managers have been “principally pricing their product on a paper serviette,” mentioned Roper, who finally fashioned his personal firm.
Outdated computer systems and guide recordkeeping have been mainstays of the business. Leasing brokers gauged how their buildings in contrast by calling up rivals. “This was only a ripe enterprise,” with a number of cash and many alternatives for technological enchancment, Roper mentioned.
RealPage employed Roper as its principal scientist in 2004 to enhance software program it had purchased from Camden Property Belief, a big investor-backed proprietor and supervisor of condo buildings.
Roper rapidly realized he required information — a variety of information — to get the algorithm working correctly. He started constructing a “grasp information warehouse” that pulled in shopper information from different RealPage functions, similar to these for leasing managers.
A proof-of-concept model of the software program had carried out effectively in exams at city homes Camden supplied for hire in its dwelling metropolis of Houston.
On the time, the road behind Camden’s city homes was shut down whereas a grocery retailer was being constructed. Leasing employees needed to low cost hire for the city homes due to the nuisance, mentioned Kip Zacharias, who labored with Camden as a marketing consultant.
As a substitute, YieldStar steered boosting rents. “We have been like, ‘Guys, simply attempt it,’” Zacharias mentioned.
The models ended up renting for considerably greater than employees had anticipated, he mentioned. “That was sort of the eureka second,” Zacharias mentioned. “For those who’d listened to your intestine, you’ll have lowered your value.”
The apply of reducing hire to fill a emptiness was a reflex for a lot of within the condo business. Letting models sit empty may very well be pricey and nerve-wracking for leasing brokers.
Such brokers generally hesitated to push rents larger. Roper mentioned they have been typically friends of the individuals they have been renting to. “We mentioned there’s manner an excessive amount of empathy happening right here,” he mentioned. “This is without doubt one of the causes we needed to get pricing off-site.”
Unimpeded by human worries, YieldStar’s value will increase generally led to extra tenants leaving.
Camden’s turnover charges elevated about 15 proportion factors in 2006 after it carried out YieldStar, Campo, the corporate’s CEO, advised a commerce publication a couple of years later. However that wasn’t an issue for the agency: Regardless of having to switch extra renters, its income grew by 7.4%.
“The web impact of driving income and pushing individuals out was $10 million in revenue,” Campo mentioned. “I feel that reveals holding the heads within the beds above all else is just not all the time the very best technique.”
(Reminded of that quote, Campo advised ProPublica it “sounds terrible” and doesn’t mirror how he or Camden views renters at present. “We essentially consider our prospects are a very powerful a part of our enterprise,” he mentioned. “We’re not about pushing individuals out.”)
Climbing rents on the similar time benefited all landlords, the business realized. “A rising tide lifts all boats,” one actual property govt and income administration proponent advised the business publication Yield Professional in 2007.
One of many best threats to a landlord’s revenue, in keeping with Roper and different executives, was different corporations setting rents too low at close by properties. “If in case you have idiots undervaluing, it prices the entire system,” Roper mentioned.
Roper wasn’t the one technologist engaged on an condo pricing algorithm. Donald Davidoff, the first developer of rival software program known as Lease Hire Choices, or LRO, mentioned he designed his program in another way, to move off any issues about collusion.
As a substitute of counting on a digital warehouse that features competitor information, Davidoff used a fancy formulation and public market information to steer LRO’s algorithm. The system relied on incremental value shifts to handle demand for flats, mentioned Davidoff, an MIT-educated former rocket engineer. “That’s not dissimilar to altering a trajectory of a rocket via inflection of a nozzle,” he mentioned — making small adjustments that may dramatically alter one thing’s course over time.
Davidoff mentioned he was cautious to keep away from options which may run counter not solely to anti-discrimination legal guidelines, such because the Honest Housing Act, but additionally those who bar rivals from conspiring to set costs.
“I had many conversations with attorneys to know the place the boundaries are,” he mentioned. “Anyone who’s constructing certainly one of these programs or is concerned in these ought to care rather a lot about honest housing and will care rather a lot about value collusion to keep away from each.”
Roper advised ProPublica that when he was creating the YieldStar software program greater than a decade in the past, he was involved about avoiding each points. He additionally mentioned he didn’t need to misuse personal information in pricing.
“I used to be extremely sensitized to: You simply don’t do it,” Roper mentioned.
Regardless of variations within the software program’s design, RealPage acquired LRO in 2017 after months of scrutiny by the antitrust division of the Justice Division. Federal regulators assessment mergers above a sure measurement — proper now, it’s transactions valued at $101 million — and sometimes enable them to proceed after solely a preliminary assessment. However some are flagged for a extra intensive look. The federal government can problem a merger in courtroom if it believes it may considerably hurt competitors.
RealPage’s buy of LRO obtained such a re-assessment, however the DOJ allowed it to proceed in late 2017. The division didn’t reply to requests for remark.
The approval allowed RealPage to amass its solely vital competitor, Roper mentioned, including, “I used to be stunned the DOJ let that undergo.”
RealPage was pricing 1.5 million models, and the acquisition of LRO would double that, Steve Winn, RealPage’s then-CEO, mentioned at a mid-2017 investor convention. “I don’t suppose there’s any focus, sufficient focus, of shopping for or pricing energy right here” to warrant DOJ issues, he mentioned. A 3rd firm had a considerable footprint out there, Winn mentioned, however property managers’ personal guide pricing processes or proprietary programs have been RealPage’s largest competitor.
“We anticipate our mixed platform to drive accelerated, sustained income development,” Winn mentioned in a media launch saying the deal.
RealPage’s affect was burgeoning. That yr, the agency’s goal market — multifamily buildings with 5 or extra models — made up about 19 million of the nation’s 45 million rental models. A rising share of these buildings have been owned by corporations backed by Wall Road traders, who have been among the many most keen adopters of pricing software program.
RealPage renamed its mixed pricing software program AI Income Administration. By the top of 2020, the agency was reporting in a Securities and Trade Fee submitting that its shoppers used its providers and merchandise to handle 19.7 million rental models of all sorts, together with single-family houses. The personal fairness agency Thoma Bravo purchased the general public firm a couple of months later for $10.2 billion.
Winn, whose web price Forbes estimates at $1.7 billion, stepped apart. He didn’t reply to requests for remark.
A spokesperson for Thoma Bravo declined to remark.
Who makes use of the software program and the way it works
Someplace round 2016, in keeping with one commerce group, the business’s use of the pricing software program started to attain “crucial mass.”
The extra property managers who signal on to RealPage providers, the extra information flows into the corporate’s repository. That in flip aids its pricing service, which the corporate says “leverages multifamily’s largest lease transaction database.”
RealPage’s shoppers embrace a number of the largest property managers within the nation. Many favor cities the place hire has been rising quickly, in keeping with a ProPublica evaluation of 5 of the nation’s prime 10 property managers as of 2020. All 5 use RealPage pricing software program in no less than some buildings, and collectively they management 1000’s of flats in metro areas similar to Denver, Nashville, Atlanta and Seattle, the place rents for a typical two-bedroom condo rose 30% or extra between 2014 and 2019.
Greystar and FPI Administration every management a whole bunch of buildings in metro areas the place rents have risen steeply lately. And Fairness Residential, Lincoln Property Firm and Mid-America Residence Communities every handle dozens of buildings in high-growth markets.
In distinction, these similar firms management fewer buildings in metro areas similar to Philadelphia; Tampa, Florida; and Chicago, the place rents have elevated extra slowly, the evaluation discovered.
Many elements might trigger RealPage shoppers to cluster in excessive rent-growth markets. The corporate’s shoppers might gravitate towards such markets as a result of these areas will bear extra hire hikes and so supply a chance to earn more money, as an example. However RealPage says its software program steers pricing that beats the market in areas the place it operates.
RealPage’s algorithm calculates how demand for flats responds to adjustments in value — what’s referred to as value elasticity.
The algorithm takes under consideration traits of flats, just like the variety of bedrooms. It additionally considers elements similar to what number of extra of a fancy’s flats are prone to change into out there within the close to future. Property managers can modify settings in keeping with their priorities — similar to how full they need their buildings to be.
The software program additionally analyzes hire costs within the broader market, the corporate mentioned. That information can present perception into how rivals’ buildings situated close to the shopper — similar to inside, say, a half-mile or mile radius — are being priced, mentioned Ryan Kimura, a former RealPage govt.
One benefit RealPage’s information warehouse had was its entry to precise lease transactions — giving it the true rents paid, as a substitute of merely these a landlord marketed, RealPage mentioned.
Property managers can’t take a look at the unpublished information anybody rival is sharing with YieldStar, Roper and different former RealPage staff mentioned.
Nicole Lott mentioned that when the constructing the place she labored as a property supervisor close to Dallas began utilizing YieldStar, the software program decided that comparable buildings within the space have been charging extra. It pushed for steep will increase.
“It actually jumped charges up,” Lott mentioned. “Leasing slowed all the way down to a crawl.”
She and different employees challenged the software program, asking the division of her firm that oversaw YieldStar for a assessment, she mentioned. The owner ended up elevating charges extra step by step, she mentioned.
“We didn’t suppose we may get these charges,” she mentioned. “In some instances we have been proper and in some instances we’d have been mistaken.”
Kimura, a former RealPage govt who labored on the agency for 3 years earlier than leaving in 2021, mentioned the corporate would sometimes see pushback from property employees on about 10%-20% of the software program’s suggestions. It was a part of the method. “If they’re approving each charge and it’s 100% acceptance,” he mentioned, “they principally have a blindfold on and are pushing a button.”
RealPage claims its software program will enhance income and reduce vacancies. However at occasions the corporate has appeared to induce condo homeowners and managers to cut back provide whereas rising value.
Throughout an earnings name in 2017, Winn mentioned one massive property firm, which managed greater than 40,000 models, realized it may make extra revenue by working at a decrease occupancy stage that “would have made administration uncomfortable earlier than,” he mentioned.
The corporate had been in search of occupancy ranges of 97% or 98% in markets the place it was a pacesetter, Winn mentioned. However when it started utilizing YieldStar, managers noticed that elevating rents and leaving some flats vacant made more cash.
“Initially, it was very exhausting for executives to simply accept that they might function at 94% or 96% and obtain a better NOI by rising rents,” Winn mentioned on the decision, referring to web working revenue. The corporate “started using RealPage to function at 95%, whereas seeing income will increase of three% to 4%.”
However the software program’s supporters say it’s not driving the nation’s housing affordability drawback.
Although hovering hire is giving the business a “black eye,” Campo mentioned, the offender is a variety of demand and never sufficient provide — not income administration software program. The software program simply helps managers react to tendencies sooner, he mentioned.
“Would you moderately do your work at present on a typewriter or a pc?” he requested. “That’s what income administration is.”
Utilizing software program like YieldStar is “taking what we used to do manually on a yellow pad and calling individuals on the cellphone and placing it on a codified system the place you’re taking the errors out of the pricing,” he mentioned.
RealPage, Seattle and rising rents
To see how rent-setting software program could make a distinction, look no additional than Seattle, the place over the previous few years rents have risen sooner than nearly anyplace within the nation, some research present.
Giant condo buildings in a single ZIP code simply north of downtown, sandwiched between the House Needle and Pike Place Market, are overwhelmingly managed by RealPage shoppers, ProPublica discovered.
The fashionable Belltown neighborhood, with its stay music venues and residential towers, had 9,066 market charge flats in buildings with 5 or extra models as of June, in keeping with the info agency CoStar and Residences.com. Property administration was extremely concentrated: The ZIP code’s 10 greatest administration corporations ran 70% of models, information confirmed.
All 10 used RealPage’s pricing software program in no less than a few of their buildings, in keeping with staff, information releases and articles in commerce publications.
Costly markets with excessive rents, like Seattle, are inclined to have “very excessive” charges of income administration use by landlords, Roper mentioned.
Two buildings within the ZIP code — one with income administration software program and the opposite with out — reveal diverging approaches to pricing flats.
The Fountain Courtroom flats, 320 models clustered round a courtyard with a fountain, are a couple of half-mile from Amazon’s company headquarters. The constructing is owned and managed by Essex Property Belief, whose executives advised traders in a 2008 earnings name that they have been implementing YieldStar within the belief’s condo buildings.
On the Fountain Courtroom, hire has risen 42% since 2012, CoStar information reveals — steeper than the 33% common enhance for comparable downtown buildings.
Tenant Amanda Tolep and her husband have been approaching the top of their lease for a one-bedroom on the six-story constructing close to the top of 2021 once they realized hire would bounce about $400, to $1,600. The rise amounted to 33% — in a single yr.
Tolep had been working as a barista and launching her personal nutrition-related enterprise. Her husband labored for a financial institution. They anticipated their hire to go up, realizing that they had obtained a “COVID deal.” However the measurement of the bounce, together with different nuisances — like stolen packages and noise from a close-by hearth station — led them to look elsewhere.
After discovering costs just like their raised hire at a number of different neighborhood buildings, the couple determined to depart town and transfer a half-hour’s drive north.
A spokesperson for Essex declined to remark. Not one of the different greatest property managers commented on the file about their use of income administration.
About six blocks away, hire has not gone up as dramatically at The Humphrey Residences, a historic six-story brick constructing with 74 models.
John Stepan, a author for a tech firm, moved right into a studio within the 1923 constructing somewhat greater than a yr in the past. It was small, however he appreciated the excessive ceilings, hardwood flooring and farmhouse-style kitchen. He had secured a COVID deal, too: one month free, with hire of $1,295 a month after that.
A number of months earlier than his lease was up, the constructing notified him that hire would enhance by $50, which amounted to a couple of 3.9% rise. “It was surprisingly low,” mentioned Stepan, who left solely as a result of he discovered a apartment to purchase close by.
Tami Drougas, the asset supervisor who oversees The Humphrey and two different Seattle-area buildings for the native actual property developer who owns them, mentioned she doesn’t use a income administration system.
“I don’t consider in them,” she mentioned. “That’s nice and advantageous for bigger companies. However I feel it takes the humanity out of what we do.”
After 24 years within the business, she mentioned, she sees good relationships with tenants and distributors as the important thing to working a constructing efficiently. She mentioned The Humphrey has low prices associated to vacancies.
The constructing’s hire has barely budged lately, she acknowledged. “We’ve rather a lot much less turnover and I really feel like that retains bills down,” Drougas mentioned.
Seattle has been hit notably exhausting by hovering rents. One report discovered town had the steepest hire development of any main metropolis within the nation over the last decade ending in 2019. Nearly 46,000 Seattle households have been spending greater than half their incomes on housing, making them what federal requirements name “severely cost-burdened,” in keeping with a 2021 research town commissioned. Many households have hassle paying for requirements like meals and medical care when their hire eats up 30% or extra of their revenue.
“Many others have been priced out of Seattle altogether on account of quickly rising rents and housing costs,” the research mentioned.
It additionally discovered that folks with larger incomes typically “down rented,” selecting cheaper flats that will in any other case have been out there to individuals making much less. Seattle ought to have had a surplus of 9,000 flats inexpensive to individuals making 80% or much less of the median revenue, the research discovered. However tenants’ down renting as costs rose turned that surplus right into a deficit of 21,000.
As the provision of flats has shrunk, so has the selection of landlords. The startling focus of property administration in Belltown mirrors a nationwide development.
The variety of flats managed by the nation’s 50 largest property managers has grown yearly for 14 years, in keeping with the Nationwide Multifamily Housing Council, which surveys buildings with 5 or extra models.
These corporations oversaw about 1 in 6 such flats nationwide in 2019, amounting to three.6 million models. By 2021, the quantity had risen to nearly 4.2 million.
James Nelson, a former financial institution examiner and mortgage dealer, seen the focus of landlords when he and his associate moved to Seattle in 2018.
Troubled by astronomical dwelling sale costs and excessive rents, Nelson started taking a look at what was occurring within the broader market.
After some digging, he discovered that many if not a lot of the greater condo managers in Seattle gave the impression to be utilizing price-setting software program. “The identify RealPage stored popping up,” mentioned Nelson, who’s retired and writing a e book on his analysis. “I went in and seemed on the applied sciences that they have been utilizing.”
He concluded the landlords have been utilizing tech to do precisely what RealPage marketed it may do — assist them cost excessive rents and beat the market.
“There is no such thing as a competitors,” he mentioned.
Issues about competitors
RealPage’s software program has gained traction at a time when the Biden administration, involved about rising costs and company focus, is trying to bolster enforcement of guidelines meant to make sure competitors is flourishing.
To win instances, antitrust prosecutors have historically wanted to point out that rivals agreed amongst themselves to tamper with pricing. “If rivals agreed amongst themselves to make use of the identical algorithm and to share data amongst themselves with the aim of stabilizing pricing, that will be per se unlawful,” mentioned Stucke, the previous antitrust prosecutor.
In the event that they merely shared data with out agreeing to govern pricing, the query of whether or not antitrust legislation was violated could be extra complicated, he mentioned. Stucke mentioned he knew of no instances the place firms had been prosecuted for what’s referred to as tacit collusion whereas utilizing the identical algorithm to set costs.
However Maureen Ok. Ohlhausen, who was then the appearing chair of the Federal Commerce Fee, mentioned in a 2017 discuss that it may very well be problematic if a bunch of rivals all used the identical exterior agency’s algorithm to maximise costs throughout a market.
She steered substituting “a man named Bob” in every single place the phrase algorithm seems.
“Is it OK for a man named Bob to gather confidential value technique data from all of the individuals in a market after which inform everyone how they need to value?” she mentioned. “If it isn’t OK for a man named Bob to do it, then it most likely isn’t OK for an algorithm to do it both.”
By way of a consultant, Ohlhausen declined to touch upon RealPage.
RealPage’s software program raises a number of issues, consultants mentioned.
Courts have frowned on sharing nonpublic information amongst rivals. Lease transaction information is just not all the time public.
So far as RealPage’s declare on its web site that it makes use of “disciplined analytics that stability provide and demand to maximise income development,” Stucke mentioned that companies can’t often management provide and demand on their very own. “Usually that’s left to market forces,” he mentioned.
The RealPage Consumer Group — the discussion board for condo managers who use the corporate’s merchandise — encourages rivals to work collectively, one thing that has been challenged as anti-competitive in antitrust prosecutions, too. The corporate’s web site says the group goals to “promote communications between customers,” amongst different issues.
Beginning out with 10 members in 2003, the group has grown to greater than 1,000 individuals, in keeping with the web site. A dozen subcommittees, together with two centered on income administration, meet in invitation-only periods on the firm’s annual convention, RealWorld, and take part in a convention name every quarter.
These types of collaborations, Stucke mentioned, “may increase an antitrust purple flag.”
If shoppers are tampering with market forces, their assertions in RealPage advertising and marketing movies that its software program retains costs and occupancy “extra secure” may additionally change into related in courtroom, Stucke mentioned. Comparable feedback have been used as proof in earlier antitrust instances.
And the exhortations by RealPage and actual property executives for firms to make use of YieldStar and let some models sit vacant to lift costs are paying homage to a authorized case within the early 1900s, he mentioned, the place lumber firms shared data and a directive to cut back provide in an effort to push up costs.
In an electronic mail to ProPublica, RealPage dismissed the notion that the corporate was utilizing market information improperly.
The corporate mentioned that utilizing precise rents helps the corporate “seize a more true image of value elasticity and affordability,” which reduces the chances a unit is overpriced. And the lease transaction information RealPage is utilizing isn’t all the time personal; generally such information is disclosed, the corporate mentioned, similar to when publicly traded actual property corporations make studies.
The FTC, which has broad authority to deliver enforcement instances towards companies for anti-competitive practices, mentioned in 2021 that it was in search of a extra energetic position in such instances.
A spokesperson for the FTC declined to touch upon RealPage’s pricing software program.
The company has tangled with RealPage earlier than: In 2018, the corporate agreed to pay $3 million to settle an FTC criticism that the corporate had didn’t do sufficient to ensure private data utilized in its tenant screening product was correct. RealPage didn’t admit wrongdoing within the settlement.
Greater rents are burdening extra tenants
Drama over rising hire prices — now a key driver of inflation — has been more and more public. The yr earlier than the pandemic, roughly 46% of renters within the U.S. spent greater than 30% of their revenue on hire and subsequently met the definition of cost-burdened, Harvard College’s Joint Middle for Housing Research discovered.
In mid-September in Washington, D.C., indignant protesters disrupted the usually sedate yearly convention held by the Nationwide Multifamily Housing Council. Earlier than safety ejected them, they seized the stage and recounted how their households had been harmed by an incapability to seek out protected, inexpensive housing.
On the middle of the acrimonious debate has been RealPage’s Jay Parsons.
Since RealPage’s personal July convention, he’s repeated a statistic, compiled from an organization information set of latest lease transactions, that market-rate condo renters are solely spending round 23% of their revenue on hire.
“The truth is that rents can solely rise as incomes rise,” Parsons advised The New York Instances final month. “If individuals can’t afford it, you possibly can’t lease it.”
However his sunny view has drawn sharp rebukes.
“That is demonstrably false,” wrote Ben Teresa, co-director of the RVA Eviction Lab at Virginia Commonwealth College, on Twitter. “One of many defining traits of housing markets within the final 40 years has been rents rising sooner than wages.
“The issue is kind of exactly that persons are paying rents they’ll’t afford,” he wrote.
ProPublica’s Maya Miller contributed reporting and Doris Burke contributed analysis.
