More than 25 property management companies, including real estate giant Greystar, have agreed to pay over $141 million to resolve a class action lawsuit. This lawsuit alleged that these landlords used rent-setting software from RealPage to unfairly increase housing costs for tenants across the United States. The proposed settlement, filed in a Tennessee federal court, awaits judicial approval.
Key Takeaways
- Over 25 property management firms agreed to a $141 million settlement.
- The lawsuit claimed landlords used RealPage algorithms to inflate rents.
- Greystar will pay $50 million as part of the agreement.
- Companies will stop sharing nonpublic data with RealPage for its algorithm.
- All settling companies deny wrongdoing but will aid plaintiffs against RealPage.
Major Real Estate Companies Agree to Settlement Terms
The settlement involves a significant number of major players in the multifamily housing industry. Greystar, recognized as the nation's largest landlord, is set to contribute the largest portion of the settlement funds. Under the terms, Greystar would pay $50 million. This agreement marks a notable development in the ongoing legal challenges against companies using algorithmic rent-setting tools.
The proposed deal was submitted to a federal court in Tennessee on Wednesday. A judge must still approve the settlement before it becomes final. This approval process will determine when and how the funds are distributed to affected tenants.
Settlement Snapshot
- Total Settlement: Over $141 million
- Number of Companies: 26 (including Greystar)
- Largest Contributor: Greystar ($50 million)
- Smallest Contributor: $550,000
Changes to Data Sharing Practices
A central component of the settlement is the agreement by these property management companies to cease sharing nonpublic rental data with RealPage for its rent algorithm. Plaintiffs in the case argued that RealPage used this confidential information to allow landlords to coordinate pricing and drive up rents across the market.
“This represents a fundamental shift in the multifamily housing industry and will help reverse the type of anticompetitive coordination alleged in the Complaint,” attorneys for the plaintiffs stated in the settlement filing.
This change in data sharing practices is seen as a crucial step towards preventing future alleged anticompetitive behavior. It aims to restore more competitive pricing dynamics within the rental market.
Denials of Wrongdoing and Ongoing Legal Battles
Despite agreeing to the settlement, all companies involved continue to deny any wrongdoing. They maintain that their use of RealPage's software was legal and proper. However, these firms have also committed to assisting the plaintiffs in their ongoing case against RealPage and more than a dozen other property management companies that have not yet reached settlements.
RealPage itself is currently fighting a separate antitrust lawsuit. This lawsuit was filed last year by the Department of Justice and several state attorneys general. Greystar previously reached a settlement in that specific case in August.
Background on RealPage
RealPage is a Texas-based software company providing various property management solutions. Its rent-setting algorithms offer daily recommendations to landlords for pricing available apartments. The company states its software is used on less than 10% of U.S. rental units and that its price recommendations are followed less than half the time.
Tenant Compensation and Company Statements
The funds from this class action settlement are intended for distribution among millions of tenants who are part of the settlement class. The exact mechanism and timeline for this distribution will be determined following judicial approval.
Greystar, headquartered in South Carolina, manages a significant portfolio of properties. According to the National Multifamily Housing Council, the company oversees more than 946,000 units nationwide. In a statement regarding the settlements, Greystar indicated that these agreements allow the company to "move forward and remain focused on serving our residents and clients."
RealPage's Defense and Market Impact
RealPage has consistently denied any illegal activities. The company argues that the plaintiffs' understanding of its product is flawed. RealPage maintains that its software helps landlords maximize revenue and maintain high occupancy rates, sometimes recommending lower rents. They suggest that the primary cause of high rents is a lack of available housing supply.
Jennifer Bowcock, RealPage’s senior vice president for communications, stated, “While the proposed settlements ... do not include RealPage, we are encouraged to see this matter move toward closure. RealPage continues to believe that this litigation is without merit and that our revenue management products, and our customers’ use of them, have always been legal.”
Critics argue that even if landlords are not required to follow RealPage's suggestions, the software's access to extensive confidential market data gives its clients an unfair advantage. This access, they claim, enables landlords to charge the highest possible rent, reducing competition.
Details of Other Settlements
Beyond Greystar's $50 million contribution, other defendants have also agreed to pay varying amounts. Iowa-based BH Management will contribute $15 million to the settlement fund. Denver-based Simpson Property Group is set to pay $6.5 million.
The remaining companies involved in the settlement have agreed to payments ranging from $550,000 to $6 million. These individual contributions reflect the varying scales of their operations and their alleged involvement in the rent-setting practices under scrutiny.
