Renters sue, accusing conglomerate lessors of price-fixing in rental markets near college campuses in several states
Attorneys at Hagens Berman today filed a lawsuit against some of the nation’s largest U.S. housing managers on behalf of college student renters who accuse the companies of price-fixing rents for apartments in student housing markets across the country.
The lawsuit, filed in the U.S. District Court for the Western District of Washington alleges that through a complex scheme of intentional data-sharing and collusion, the lawsuit’s 11 housing management company defendants agreed to fix the price of student housing. Attorneys say the defendants accomplished this unlawful agreement with the help of RealPage Inc., a third-party that connected the housing companies to real-time algorithm-driven shared data that includes “over 1 million student beds of in-depth market data” and key performance indicators for nearly 1,000 universities according to its materials.
RealPage specifically designed an algorithm for the student housing market, called YieldStar Student, to help lessors maximize revenue by raising rent prices that they charged students, according to the lawsuit. Attorneys say RealPage specifically touted that its software helped lessors shift from focusing on maximizing occupancy to maximizing profits. In other words, rather than try to rent every unit available, as would be expected in a competitive market, lessors using RealPage focused on charging higher rental prices to maximize revenue, even if it meant they left more units vacant. RealPage also specifically stated that it encouraged Lessor clients to stop offering discounts or other concessions to students that would lower the prices they paid for housing, the lawsuit states.
According to attorneys, the price-fixing occurred in college towns including towns such as Ann Arbor, Michigan; Austin, Texas; Columbus, Ohio; Eugene, Oregon; Gainesville, Florida; Salt Lake City, Utah; Seattle, Washington and Tucson, Arizona where college student renters were exposed to price-fixed rents. Defendants include Greystar Real Estate Partners LLC, Cushman & Wakefield Inc., BH Management Services, LLC, Campus Advantage Inc., Cardinal Group Holdings LLC, CA Ventures Global Services LLC, D.P. Preiss Company Inc. and The Michaels Organization LLC.
Today’s lawsuit seeks to represent a nationwide class consisting of anyone who leased student housing properties directly from any defendant or co-conspirator since January 2010 – a sizable number of renters and potentially hundreds of millions of dollars in rent. If you rent an apartment in a college town maintained by one of these defendants or did so since 2010, you may be affected by this active lawsuit.
The new lawsuit isn’t the first time Hagens Berman has fought for the rights of college students. It secured a $209 million settlement and Supreme Court win affecting NCAA college athletes. The firm has also secured multiple settlements against colleges and universities regarding COVID-19-related campus closures and continued fees and costs paid by tuition payers. The firm continues to fight those cases, along with additional litigation against the NCAA regarding compensation rights for college athletes’ name, image and likeness.
A “Super Competitive” Market Becomes Algorithmically Rigged
RealPage’s own materials state that the market for student housing real estate leases is “challenging” and “super competitive,” laying out a breakdown of typical giveaways and incentives that lessors use to entice would-be renters, including first month free deals or other giveaways, according to the lawsuit. Despite this natural incentive to lower their prices to attract renters from competitors and maximize occupancy, the class action states that in 2009, lessors increasingly replaced their independent pricing with collusion through their joint usage of RealPage’s algorithmic pricing model, which was powered by information collected from each of the lessors.
“The housing markets in college towns were once historically competitive, with many lessors vying for a very specific space, and under fair circumstances, one would not expect to see rents increasing in college towns, as we have uncovered,” said Steve Berman, managing partner at Hagens Berman representing the proposed class of college students. “Housing is a basic human right, not a metric for companies to gamble for profit. RealPage’s algorithm allowed it and other defendants in our lawsuit to rig the rental market.”
The lawsuit quotes Dave McKenna, vice president of student living at RealPage, who stated, “Student housing has some of the most demanding operational needs in the multifamily industry,” compounded by a different leasing cycle, leasing by the bed rather than by the unit, limited renewals of the same tenant, and a smaller customer base that is limited to the student population and further limited by on-campus housing requirements, enrollment changes and unique and time-sensitive needs.
RealPage’s platform and algorithm provided an unprecedented method for lessors to track competitors’ rents and collude to respond to changing rates in real time, in lockstep. In RealPage’s own words, lessors submitted data “as fine and granular as bits of sand,” including rents charged for each unit and each floor plan, lease terms, amenities, move-in and move-out dates. In presentations, RealPage highlighted that its software, and the related information exchange, allowed lessors to maximize profits by obtaining higher rents than they would otherwise have been able to obtain.
“In a competitive market, this strategy would quickly fail,” the lawsuit states. “…units listed at prices exceeding the market price would stay empty, and the property manager would eventually go out of business. In the market RealPage and Lessors created, each Lessor had mutual assurances that other Lessors would also keep prices high, leaving students with no choice but to pay what Lessors demanded.”
A Calculated Crime
According to the lawsuit, RealPage stated its revenue management software yielded a 2% to 7% revenue outperformance in the market, and one lessor named as a defendant in the lawsuit stated, “over the last 10 years, spanning about 150 projects, the services that [RealPage] provided have equated to a return on investment of about 300% on about 90% of those projects.” Campus Advantage states on its website that it saw an average rental rate increase of 8.3% across over 240 communities managed since 2003.
“There’s no mistake about it. This is a calculated crime,” Berman said. “Two to seven percent increases may sound small, but they are designed to be just significant enough to be profitable but not too much to negatively affect the market’s ability to pay. We believe RealPage and its co-conspirators know exactly what they’ve done and have calculated precisely how much they can squeeze out of each college town’s rental market without breaking it entirely.”
The lawsuit seeks repayment to those who have been charged increased rent prices due to this scheme and also seeks to hold the companies liable under federal antitrust law, the Sherman Act, under which damages may be multiplied punitively.
Hagens Berman is a global plaintiffs’ rights complex litigation law firm with a tenacious drive for achieving real results for those harmed by corporate negligence and fraud. Since its founding in 1993, the firm’s determination has earned it numerous national accolades, awards and titles of “Most Feared Plaintiff’s Firm,” MVPs and Trailblazers of class-action law. More about the law firm and its successes can be found at www.hbsslaw.com. Follow the firm for updates and news at @ClassActionLaw.