The New Jersey Attorney General’s Office, in conjunction with the Division of Consumer Affairs, announced an antitrust lawsuit against RealPage, LeFrak, AvalonBay, Bozzuto, Veris Residential, along with other large landlords, over an alleged rent-raising scheme.
By John Heinis/Hudson County View
“The defendants in this case unlawfully lined their pockets at the expense of New Jersey renters who struggled to pay the increasingly unlivable price levels imposed by this cartel,” AG Matt Platkin said in a statement.
“Today we’re holding them accountable for unlawful conduct that fueled the state’s affordable housing crisis and deprived New Jerseyans of their fundamental right to shelter.”
RealPage and the 10 landlords allegedly agreed to set rents for multifamily housing properties statewide based on RealPage’s algorithmic pricing software and to exchange sensitive, non-public information to align their prices and avoid competition that would otherwise keep rent prices down.
The complaint, filed partially under seal today in the U.S. District Court for the District of New Jersey, alleges the defendants engaged in multiple violations of the federal Sherman Act, the New Jersey Antitrust Act, and the New Jersey Consumer Fraud Act (CFA).
The other defendants are the Morgan Properties Management Company, Kamson Corp., Realty Operations Group, Greystar Management Services, Aion Management, Cammeby’s Management Co. of New Jersey, and Russo Property Management.
AvalonBay is a large landlord in Hoboken that is suing the city and their rent leveling board over their rent control exemption.
They are also being sued by five tenants citing rent increases approaching 30 percent, with elected officials speaking up over similar tactics by the Bozzuto Group.
Meanwhile, LeFrak and Veris Residential own a number of properties in Downtown Jersey City and the latter has been called out by labor union 32BJ SEIU for allegedly not paying laborers fair wages.
Both the Jersey City and Hoboken City Councils unanimously approved resolutions asking the legislature to ban rent-setting algorithms last summer.
“Colluding to raise rents is illegal. Today, I thank NJ Attorney General Matt Platkin for taking action by suing many of Jersey City’s biggest developers and landlords for illegally raising your rents. Last year, I was proud to stand with 32BJSEIU members all across the state and call on Trenton to ban RealPage from operating in New Jersey,” Ward E Councilman James Solomon said in a statement.
“Allegedly, RealPage — alongside many of Jersey City’s most prominent developers — directly contributed to our city’s affordable housing crisis by fixing rent prices here so they could profit. This is despicable behavior, and I look forward to swift justice on behalf of our city.”
The complaint also references additional New Jersey landlords as unnamed co-conspirators.
These are landlords owning or managing multifamily rental properties who are believed to have also unlawfully colluded to raise rents by collectively setting rents based on RealPage’s software and unlawfully agreed to exchange competitively sensitive information (collectively known as “participating landlords”).
The investigation into the alleged conspiracy is ongoing and additional defendants may be named.
According to the complaint, at the heart of the price-fixing scheme is RealPage’s Revenue Management (RM) Software. RealPage offers three RM products to landlords—YieldStar, AI Revenue Management (AIRM), and Lease Rent Options (LRO).
The products are functionally similar in that they automate pricing of multifamily units using algorithms fueled by RealPage’s vast data repositories.
Stated simply, these products employ statistical models that use data—including proprietary, non-public data—to estimate supply and demand for multifamily housing that is specific to particular geographic areas and unit types.
It then generate a price to charge for renting those units that maximizes the landlord’s revenue. RealPage charges the landlord an initial setup fee and then a monthly fee for each multifamily residential unit.
In addition to fees, participating landlords compensate RealPage by providing their valuable proprietary data.
Specifically, participating landlords, including defendant landlords, agree to share their non-public information with competitors and know that their competitors’ information is being used to generate the rents they charge.
For example, a “One Master Agreement” with RealPage expressly obligates the landlord to provide RealPage with “correct and accurate” data and acknowledge that RealPage may use that data to operate its products (including the RealPage RM Software), the complaint says.
The complaint asserts that in some instances, landlords’ employees may disclose the use of RealPage’s RM Software, but they misrepresent the nature of the algorithm to renters.
Specifically, these employees mislead consumers to believe that the RM Software merely determines what the “market rate” is.
In truth, RealPage’s RM Software does not merely determine a “market rate” but instead generates a supra-competitive price designed to push the entire market higher, the complaint alleges.
Overall, the complaint alleges the defendants violated the Sherman Act and the New Jersey Antitrust Act, as well as the New Jersey Consumer Fraud Act by engaging in commercial practices that violate state and federal antitrust laws, which constitute unlawful commercial conduct under the law.
Each violation of the Sherman Act and New Jersey Antitrust Act constitutes a separate unlawful practice and violation of the New Jersey Consumer Fraud Act.
The complaint also alleges that RealPage engaged in unconscionable commercial practices and acts of deception, including engaging in an unlawful rent-setting scheme to inflate prices for multifamily real estate leases in New Jersey by offering the RM software and related services to participating landlords.
Finally, the complaint alleges that certain landlords engaged in unconscionable practices, acts of deception, or misrepresentations under the Consumer Fraud Act.
Among other allegations, the complaint alleges that the defendant landlords engaged in an unlawful conspiracy to set prices for multifamily apartment leases in New Jersey through the advertising and offering of rates for apartment leases to consumers.
They state also claims the landlords employed misleading consumer-facing communications strategies designed to obfuscate the cause of rent increases and limit the information available to consumers.
The lawsuit seeks a number of remedies, including an injunction to stop the defendants from engaging in anticompetitive and consumer fraud practices, the appointment of a corporate monitor, equitable relief, and the disgorgement of any profits generated.
Editor’s note: This story was updated with a comment from Jersey City Ward E Councilman James Solomon.
