Major Landlords Settle for Over $141 Million in Rent-Fixing Algorithm Lawsuit
ATLANTA – In a significant development for the U.S. rental market, real estate giant Greystar, the nation’s largest landlord, along with 25 other prominent property management companies, has agreed to a collective settlement exceeding $141 million. This proposed agreement aims to resolve a class action lawsuit that accused these landlords of unlawfully inflating housing costs by utilizing rent-setting algorithms developed by software company RealPage.
Settlement Details and Industry Shift
The settlement, filed Wednesday in a Tennessee federal court, awaits a judge’s final approval. Under the terms, Greystar alone would contribute a substantial $50 million. Crucially, all settling companies have also committed to discontinuing the practice of sharing nonpublic rental market information with RealPage for its rent algorithm. This stipulation addresses a core allegation by the plaintiffs: that RealPage leveraged this confidential data to enable landlords to coordinate pricing strategies and artificially drive up rents across numerous properties.
Attorneys representing the plaintiffs hailed the agreement as a “fundamental shift in the multifamily housing industry,” asserting that it will help reverse the alleged anti-competitive coordination that has impacted millions of tenants. The settlement funds, once approved, are slated for distribution among the vast number of renters included in the class.
The RealPage Algorithm at the Heart of the Lawsuit
The lawsuit centered on RealPage’s software, which provides daily rental price recommendations to landlords. Critics argued that by having access to a vast, confidential trove of market data, the algorithm facilitated a tacit form of price-fixing, pushing rents higher than they would be in a truly competitive market. Property management companies, while not mandated to follow these recommendations, allegedly often did, contributing to an upward pressure on rental rates.
Denials and Ongoing Legal Battles
Despite the settlements, all companies involved continue to deny any wrongdoing. They have, however, agreed to cooperate with plaintiffs in the ongoing legal battle against RealPage and more than a dozen other property management firms that have yet to reach a resolution. The legal scrutiny of RealPage extends beyond this class action; the company is also defending itself against a separate antitrust lawsuit filed last year by the Department of Justice and several state attorneys general. Greystar had previously reached a settlement in that specific government-led case in August.
RealPage’s Defense
RealPage, headquartered in Texas, has consistently maintained its innocence, arguing that its products are legal and that the plaintiffs fundamentally misunderstand their functionality. The company states its software is used on less than 10% of all rental units nationwide, and its price recommendations are adopted less than half the time. Furthermore, RealPage contends that the primary driver of escalating rents is a severe shortage of housing supply, not its algorithm. They assert that their pricing tools often advise landlords to decrease rents to maintain high occupancy and optimize overall revenue.
Breakdown of Other Significant Settlements
Beyond Greystar’s $50 million contribution, other significant settlements include:
- Iowa-based BH Management, which is set to pay $15 million.
- Denver-based Simpson Property Group, agreeing to $6.5 million.
The remaining companies’ individual settlements range from $550,000 to $6 million, underscoring the widespread nature of the allegations. Greystar itself, a global leader in real estate, manages an impressive portfolio of over 946,000 residential units across the United States, highlighting the potential scale of its influence on the housing market.
A Pivotal Moment for the Rental Industry
This series of settlements marks a pivotal moment, signaling increased accountability for sophisticated pricing technologies in critical sectors like housing and potentially paving the way for greater transparency and fair practices in the rental industry.
