Connecticut Attorney General William Tong has joined seven other states in an anti-trust lawsuit against RealPage, Inc., a property management software company that services major rental market areas in Connecticut, alleging the company pooled together private rental pricing information from landlords to drive up rental prices, instead of forcing landlords to compete in a free market.
“We know that renters across Connecticut and our country are already struggling to afford high rent prices. RealPage allegedly used their algorithm to take advantage of vulnerable renters by restricting competition, thus depriving them of the affordable housing everyone deserves,” Tong said in a press release.
The court complaint cites internal documents, and statements by RealPage executives and participating landlords, that its software is “driving every possible opportunity to increase price,” and is “avoiding a race to the bottom” through competition, including lowering rental prices, offering discounts, concessions, and better lease terms.
“There is greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down,” a RealPage executive said. According to the complaint, a landlord said he loved the product because it was “classic price fixing.”
“Landlords agree to share their competitively sensitive data with RealPage in return for pricing recommendations and decisions that are the result of combining and analyzing competitors’ sensitive data,” the press release states. “This creates a self-reinforcing feedback loop that strengthens RealPage’s grip on the market and makes it harder for honest businesses to compete on the merits.”
The effect of RealPage’s algorithm and pricing practices could be enormous, according to the lawsuit, with the company controlling 80 percent of commercial revenue management software for multi-family units in the country. The lawsuit comes as Connecticut and the country face rising housing and rental costs since the pandemic.
According to Zillow, the median rent for apartments and condos is currently $1,736 per month, an increase of $148 since last year, and 15 percent higher than the rest of the country. Redfin placed the median rental cost at $1,816 per month. In July, Consumer Affairs ranked Connecticut as the worst rental market in the country.
In Connecticut, much of the debate over the state’s high housing and rental costs has focused on municipal zoning laws, with reform advocates arguing that zoning restrictions need to be eased for more housing, particularly multi-family housing, to be built more quickly, increasing the supply to lower the demand.
Legislation pushed at the state level has attempted to incentivize housing in areas close to public transit or override some local zoning laws. Those measures have all either failed or been watered down.
Opponents to such legislation argue those laws are essentially attempting to override local control of building and housing, and that Connecticut has an affordability problem, with Connecticut facing higher prices for practically everything that contributes to the rising cost of housing.
The average rent in Connecticut has been increasing over the past twenty years, regardless of Connecticut’s stagnant population growth, but the average rent saw a significant increase in the years following the pandemic, during which Connecticut’s real estate market saw a dramatic upswing in price as New Yorkers jumped across the border and bought up houses in Fairfield County to avoid the more congested New York City area.
Connecticut’s foray into the anti-trust lawsuit against RealPage comes as Connecticut’s rental costs make more national news, with a documentary released about Connecticut residents struggling to find housing in Stamford, one of the state’s most expensive rental markets, was recently released, and a Connecticut mother of two was highlighted by the New York Post and Fox News claiming that she had to move into a hotel’s on-site apartment because she could not find a rental within her budget.
“Americans should not have to pay more in rent because a company has found a new way to scheme with landlords to break the law,” U.S. Attorney General Merrick B. Garland said. “We allege that RealPage’s pricing algorithm enables landlords to share confidential, competitively sensitive information and align their rents. Using software as the sharing mechanism does not immunize this scheme from Sherman Act liability, and the Justice Department will continue to enforce antitrust laws and protect the American people from those who violate them.”
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One year ago I had to leave my beloved CT because as a retired teacher from Texas , my retirement could not accommodate the inflated rent at an apartment complex in Groton. Today, one year later that same small one bedroom apartment that I paid 1522$ a month for plus utilities , is renting for over 2100$! The same footprint and nothing added to the apartment that would justify the over 600$ increase!!! CT does not have affordable housing! Period!!