America's Landlords Settle Claim They Used Rent-Setting Algorithms to Gouge Consumers Nationwide for $141 Million
In a landmark settlement, real estate giant Greystar and 25 other property management companies have agreed to collectively pay more than $141 million to settle a class action lawsuit accusing landlords of driving up housing costs by using rent-setting algorithms offered by the software company RealPage. The proposed settlement agreement, filed Wednesday in a Tennessee federal court, would require a judge's approval.
Greystar, the nation's largest landlord, would pay $50 million under the deal. The companies have also agreed to no longer share nonpublic information with RealPage for its rent algorithm, a key stipulation since plaintiffs say RealPage used that information to enable landlords to align their prices and push up rents.
"This settlement represents a fundamental shift in the multifamily housing industry and will help reverse the type of anticompetitive coordination alleged in the complaint," said David Lowe, lead attorney for the plaintiffs. "We're pleased that our efforts have led to this significant outcome."
The lawsuit, filed in 2020, claimed that RealPage's rent-setting algorithms allowed landlords to coordinate their prices and drive up rents nationwide. The company's software uses data from various sources, including property management companies like Greystar, to determine optimal rental rates.
Background and Context
Rent-setting algorithms have become increasingly popular among landlords in recent years as a way to optimize revenue and minimize vacancies. However, critics argue that these tools can perpetuate price gouging and exacerbate the affordable housing crisis.
RealPage's software uses machine learning and data analytics to analyze market trends, tenant behavior, and other factors to determine optimal rental rates. While the company claims its algorithms are designed to help landlords set fair prices, plaintiffs argued that they enabled anticompetitive coordination among landlords.
Implications for Society
The settlement has significant implications for the multifamily housing industry and consumers nationwide. By agreeing to stop sharing nonpublic information with RealPage, landlords will no longer be able to coordinate their prices using the company's algorithms.
"This is a major victory for tenants and consumers who have been affected by these anticompetitive practices," said Lowe. "We hope that this settlement will serve as a model for other industries to prevent similar abuses of power."
Current Status and Next Developments
The proposed settlement agreement still requires a judge's approval, which could take several months. If approved, the deal would mark one of the largest settlements in recent history involving anticompetitive practices in the multifamily housing industry.
As the industry continues to evolve, experts predict that this settlement will have far-reaching implications for the use of rent-setting algorithms and data analytics in real estate.
"This settlement is a wake-up call for landlords and property management companies to rethink their use of these tools," said Dr. Rachel Kim, a leading expert on housing policy and economics. "It's time for them to prioritize transparency and fairness over profit maximization."
*Reporting by Fortune.*
