Cushman & Wakefield, Greystar Added to Rental Collusion Case

(Bloomberg) — The Justice Department is thrusting the largest rental property managers into the spotlight as it expands a price-fixing lawsuit alleging widespread collusion in the housing rental market. 

In an amended lawsuit against RealPage Inc., a top software provider to the multifamily rental industry, the Justice Department on Tuesday accused seven major landlords including a Blackstone Inc. portfolio company, Cushman & Wakefield Plc, Greystar Real Estate Partners LLC of illegally colluding to drive up rent prices. In a separate filing, the Justice Department said it was settling with one of the landlords, Cortland Management LLC.

Landlords understand that RealPage’s products “use their data to recommend prices not just for their own units, but also for competitors,” the Justice Department said. “Landlords agree to provide this information for use by their competitors because they understand they will be able to leverage the sensitive information of their rivals in turn.”

As part of the settlement, Cortland agreed to stop using shared algorithms and competitively sensitive data to set rents. The company said in a statement that it was pleased to put the investigation behind it and that the Justice Department had closed a separate criminal investigation.

Representatives for the other firms didn’t immediately respond to requests for comment.

Last year, the DOJ sued Thoma Bravo LLC’s RealPage for allegedly violating antitrust law by helping property owners and managers collude on millions of units across the country. 

The Biden Administration has made antitrust enforcement and competition policy a central piece of its economic agenda, particularly in key industries that impact people’s daily lives like housing. 

Managing the lawsuit will fall to the incoming Trump Administration and Gail Slater, President-elect Donald Trump’s pick to run the DOJ’s antitrust division.

In the original complaint filed in August by the DOJ and a group of state attorneys general in North Carolina federal court, antitrust enforcers said RealPage’s software, which helps landlords set rental unit pricing, has effectively raised prices on renters illegally. 

The lawsuit represents the Justice Department’s first big algorithmic collusion case as alleged schemes become more sophisticated through the use of technology.

In addition to Cushman & Wakefield and Greystar, the new defendants include Camden Property Trust, Blackstone’s Livcor LLC, Pinnacle Property Management Services LLC and Willow Bridge Property Company LLC.

The DOJ is also accusing the property companies of colluding outside of RealPage. “At a February 2020 industry event, representatives from Cushman & Wakefield and two other landlords shared tips on collecting information on concessions and net effective rents from competitors,” according to the complaint. “The suggestions included bi-weekly and monthly meetings with competitors, sponsored ‘cocktail hours for regional competitors to share info and build relationships and rapport,’ and using Google Drive documents to share information on a weekly basis.”

The private data that landlords share with RealPage include a unit’s effective rent, rent discounts, rent terms, lease status and unit characteristics such as layout and amenities, according to the complaint. The landlords also share “the number of potential future renters who have visited a property or submitted a rental application.”

Housing affordability was a key issue in the presidential election. President Joe Biden specifically criticized collusion in the rental market in his most recent State of the Union address. The average US rent has skyrocketed by 33% since the beginning of the pandemic, according to a Zillow index.

The case is US v. RealPage Inc. et al, 24-cv-00710, US District Court, Middle District of North Carolina. 

–With assistance from Patrick Clark.

(Updates with Cortland comment beginning in fourth paragraph.)

More stories like this are available on bloomberg.com