Landlords Put on Notice Amid DOJ Investigation into 'Housing Cartel'"

A "housing cartel" isn't something out of a lawless state, but a concern in major U.S. cities where corporate landlords allegedly conspired with RealPage, a Texas-based real estate software company, to inflate rents. Recently, the FBI issued a warrant to Atlanta-based Cortland Management, one of the nation's largest landlords, as part of an antitrust probe by the DOJ into price-fixing in multifamily housing. Cortland Management, boasting a $218 billion valuation and managing 85,000 units across 13 states, finds itself at the center of these allegations.

RealPage vigorously defends itself, refuting claims of price-fixing on its website and emphasizing its role in recommending rent decreases in many instances. The company operates globally, managing over 24 million units worldwide, including 4.5 million rental apartments in the U.S., using algorithmic pricing in collaboration with management clients. This aspect of their business has drawn the FBI's scrutiny.

Since its acquisition by private equity firm Thoma Bravo for nearly $10 billion in 2021, RealPage has faced mounting complaints, including class-action lawsuits spanning from Seattle to New Jersey. Tenants argue that RealPage's dominance in the housing market leads to inevitable rent hikes, whether they renew their leases or move to different properties managed by firms using RealPage's software.

The initial complaints coalesced into a consolidated case in Federal District Court in Nashville, catching the DOJ's attention and prompting the ongoing antitrust investigation. If substantiated, allegations against RealPage could result in significant legal repercussions for some of the country's largest multifamily landlords, whose properties are often bundled into Real Estate Investment Trusts (REITs) traded on Wall Street, potentially yielding billions in lawsuits.

The political landscape adds pressure, with housing affordability a key issue for the Biden administration. Senators Peter Welch and Ron Wyden introduced legislation targeting algorithmic rent price-fixing, underscoring concerns that such practices undermine fair competition and exacerbate housing crises.

RealPage isn't alone in facing DOJ scrutiny; its competitor Yardi Systems also faces similar allegations. The DOJ's intervention reflects a longstanding commitment to fostering competition in the housing market, with recent actions against major real estate entities and associations marking a broader effort to ensure fair practices.

While settlements are common in DOJ cases due to the agency's formidable resources, RealPage and its clients brace for potential fallout amid mounting legal challenges and public scrutiny. The impact extends beyond legal costs, affecting industry dynamics and the availability of affordable housing—a critical concern amidst nationwide housing shortages and economic uncertainties.

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