Student management

RealPage, operators accused of having fixed the rents of student accommodation

RealPage has been hit by a second federal class action lawsuit that accuses the proptech company and a host of student housing operators of conspiring to “artificially inflate” the price of student housing in the United States.

Gabriel Navarro, a University of Washington student, filed the lawsuit this month in U.S. District Court for the Western District of Washington in Seattle.

Similar to an antitrust class action lawsuit filed in California in October by a group of tenants, the Washington lawsuit accuses RealPage and several leading rental real estate operators of illegally sharing competitive rent data through the rental management platform. RealPage’s YieldStar revenue and agree to raise rents.

“RealPage provided pricing information to student housing providers, allowing them to closely analyze their prices against their competitors on a room-by-room basis,” Navarro’s lawsuit said.

The lawsuit specifically alleges collusion over student housing rents in Seattle, Ann Arbor, MI and Gainesville, FL.

As in the California class action, Navarro’s lawsuit names nine prominent housing operators as defendants, in this case managers of student housing portfolios, including the company that owns the apartment campus where Navarro lives and a New York-based brokerage firm.

However, the lawsuit provides no evidence that the operators did anything other than accept YieldStar’s price recommendations as Yieldstar’s customers; it alleges that RealPage’s platform illegally shares competitive rental data with its customers.

RealPage released a terse statement saying it “strongly denies” the Washington lawsuit allegations and will vigorously defend itself against the lawsuit. “Beyond that, we don’t comment on pending litigation,” the company said.

Last month, after the first class action lawsuit against RealPage was filed in California, the company provided GlobeSt. with a statement specifically denying the allegation that the company illegally provides competitive rental data through its YieldStar platform.

“RealPage’s revenue management software is deliberately designed to comply with the law,” the company’s statement said. “It focuses on the internal dynamics of supply and demand in a particular property and does not consider or have any visibility into availability (supply) in competing properties.”

According to the Texas-based proptech company’s website, YieldStar software combines rental transaction data from more than 13.5 million units and uses AI-powered algorithms to “unlock hundreds of basis points of hidden returns through price optimization”.

The company claims that its algorithms allow new users to achieve “up to 400% return on investment in one year” for owners, operators and investors.

The California antitrust class action lawsuit was based on a RealPage investigation published by the nonprofit organization ProPublica.

The ProPublica article quotes RealPage executives bragging at a CRE conference last year that the company’s data analysis tool, used to suggest daily prices for open apartments, has led to increases double-digit rents across the country.

ProPublica said RealPage’s 2017 acquisition of Rainmaker Group’s Lease Rent Option business effectively gave the Texas-based company a monopoly over the predictive analytics used to set rental prices, expanding RealPage’s customer base to 31. 700 customers.

In one Seattle neighborhood, ProPublica found that 70% of apartments were operated by 10 property managers, all of whom used RealPage’s pricing software. Property managers can reject software-recommended prices, but rarely do, ProPublica reported.

According to the nonprofit, RealPage discourages negotiation with renters because rental agents have “too much empathy” with computer-generated prices. ProPublica said RealPage encouraged landlords to accept lower occupancy rates in order to raise rents.