US: A group of 18 property management companies, together with property management software company Yardi Systems Inc., have been named in an antitrust class-action lawsuit, accusing the alleged cartel of orchestrating a nationwide scheme to fix the cost of multifamily apartment rent.
The lawsuit, was filed in the US District Court for the Western District of Washington by attorneys at law firm Hagens Berman, and accuses the conspirators of colluding to coordinate pricing through the usage of a centralised, automated pricing software called RENTmaximizer, created by Yardi Systems in 2011. By 2013, the software was used to price eight million residential units. The new lawsuit falls on the heels of the law firm’s class action against RealPage alleging similar rent price-fixing tactics.
The class action names as defendants or co-conspirators the following property management companies using Yardi’s RENTmaximizer and Revenue IQ revenue management software: Bridge Property Management LLC, Calibrate Property Management LLC, Clear Property Management LLC, Dalton Management Inc., HNN Associates LLC, LeFever Matson, Manco Abbott Inc., Morguard Corporation, Pillar Properties LLC, Summit Management Services Inc., Creekwood Property Corporation (Tonti Properties), Legacy Partners Inc., Jones Lang Lasalle Incorporated (JLL), Alco Management Inc., McWhinney Property Management LLC, KRE Group Inc., Towne Properties and Tribridge Residential LLC.
“Our antitrust legal team has uncovered what we believe to be a clear gaming of the system through controlled, lockstep algorithmic increases to fix the cost of rent — one that has affected millions of renters,” said Steve Berman, managing partner and co-founder of Hagens Berman. “Housing is a basic human need. What these companies have done is both legally and morally bankrupt.”
The class action centres on Yardi’s RENTmaximizer, a software used to automatically manage the rental pricing of multi-unit properties across the country.
The lawsuit alleges that, through Yardi’s software, otherwise competing rental companies teamed up to outsource their pricing decisions to Yardi, thus artificially eliminating any competition between them.
“Defendant Yardi and the Operator Defendants collectively used Yardi’s RENTmaximizer software to coordinate on setting supracompetitive pricing on multifamily properties across the nation,” the lawsuit states. “In a competitive market, these companies would compete on rental prices to attract renters — that is, they would set rents in accordance with the fundamentals of supply and demand.”
The class action alleges that use of Yardi’s RENTmaximizer has led to property companies “aggressively” raising rents. The lawsuit cites a “test run” economic analysis finding an average overcharge of six per cent on units priced using RENTmaximizer in certain areas, consistent with Yardi’s public statements that RENTmaximizer leads to, on average, a six per cent average increase in lessors’ net rental income. The lawsuit also identifies statements by numerous lessors who have used RENTmaximizer to raise rents, including one who explained in 2016 that, without RENTmaximizer, “[w]e simply wouldn’t have raised rents that much or that quickly on our own”.
The lawsuit cites a confidential witness and former employee of Bridge Property Management who stated the pricing practice gave “an unfair advantage” to lessors because they “all know what they should be renting for” by using the same pricing platform. The lawsuit brings claims of violation of federal antitrust laws and seeks to recover losses of those who paid inflated rent, as well as injunctive relief putting an end to the price-fixing scheme.
Yardi responded with a company statement which said: “On Friday September 8, a lawsuit was filed against Yardi and some clients who use Yardi’s Revenue IQ (formerly RENTmaximizer) software. The lawsuit alleges Yardi conspired with its clients through Revenue IQ to exchange competitively sensitive and non-public information in order to illegally inflate rent prices and suppress lease supply. Yardi and the Revenue IQ software does none of this.”
“First, Revenue IQ does not ‘mandate’ anything, including advertised rent (called ‘asking rent’) or price increases. In fact, Revenue IQ regularly adjusts prices upward and downward based on supply and demand. Many clients also use Revenue IQ to prioritize steady occupancy rather than rent growth, and the software includes settings to help clients comply with various rent control requirements and state-of-emergency rent cap programs. Second, Revenue IQ is not ‘a black box’ that makes collusive pricing decisions, and Revenue IQ does not use (and has never used) confidential, competitor, or non-public rent data for adjusting asking rents. On the contrary, asking rent adjustments are individualised and based only on:
• A client’s own property unit availability, prospect traffic, and leasing activity.
• The asking rents for comparable properties that the client selects, which come from the client’s own research, public information collected through surveys, and information from public websites.
• The over 200 Revenue IQ configurations that clients can set, adjust, and readjust based on each client’s own individual priorities, goals, and objectives, and clients can even choose to use only their own property data for making asking rent adjustments.
In sum, there is nothing illegal about revenue management, and the allegations in the complaint have no merit. Yardi stands behind Revenue IQ and will vigorously defend this ill-conceived lawsuit,” said the company.
