The U.S. Justice Department is suing several large landlords, including a Chicago-based firm, for allegedly coordinating to keep Americans’ rents high by using both an algorithm to help set rents and privately sharing sensitive information with their competitors to boost profits.
The lawsuit arrives as U.S. renters continue to struggle under a merciless housing market, with incomes failing to keep up with rent increases. The latest figures show that half of American renters spent more than 30% of their income on rent and utilities in 2022, an all-time high.
That means eviction notices and protracted court cases in which children face the highest eviction rates, with 1.5 million evicted each year, according to Princeton University’s Eviction Lab.
While the housing crisis has been attributed to several causes, including a slump in homes built over the last decade, the Justice Department’s lawsuit claims major landlords are playing a part.
The department, along with 10 states including Illinois, North Carolina, Tennessee, Colorado and California, is accusing six landlords that collectively operate more than 1.3 million units in 43 states and the District of Columbia of scheming to avoid lowering rents.
“Access to affordable housing is a basic human right. It is unacceptable that the people of Illinois should have to pay higher rental rates because a scheme to utilize new technology and break a long-standing law has stacked the odds against them,” said Illinois Attorney General Kwame Raoul. “My office will continue to enforce the antitrust laws to protect competition that will give Illinois renters housing options that best meet their needs.”
Chicago-based Cushman & Wakefield, one of the landlords named in the suit, said in a statement to the Tribune that its property management company, Pinnacle Property Management Services, also named in the suit, does not set pricing.
“We believe that revenue management software can help property owners efficiently manage rents and help prevent discrimination and bias in decision-making, but ultimately, Pinnacle is solely a property manager and does not own any properties or set strategy, pricing, or occupancy targets. We also do not decide whether the properties managed by Pinnacle use revenue management services and software, which software provider to use, if any, and whether to accept recommendations provided by such software.”
Landlord Greystar Real Estate Partners LLC, also a defendant in the case, declined a request for comment from The Associated Press, but published an unsigned statement on its website.
“Greystar has and will conduct its business with the utmost integrity. At no time did Greystar engage in any anti-competitive practices,” the statement read. “We will vigorously defend ourselves in this lawsuit.”
The lawsuit accuses the landlords of sharing sensitive data on rents and occupancy with competing firms via email, phone calls or in groups. The information shared allegedly included renewal rates, how often they accept an algorithm’s price recommendation, the use of concessions such as offering one month free, and even their approach to pricing for the next quarter.
The Justice Department said one of the six landlords agreed to cooperate with prosecutors. The proposed settlement would restrict how the company can use their competitors’ data and algorithms to set rents.
“Today’s action against RealPage and six major landlords seeks to end their practice of putting profits over people and make housing more affordable for millions of people across the country,” said Doha Mekki, the acting assistant attorney general for the department’s antitrust division in Tuesday’s press release.
Those landlords were added to an existing lawsuit against RealPage, which runs an algorithm that recommends rental prices to landlords. Prosecutors say the algorithm uses sensitive competitive information, allowing landlords to align their prices and avoid competition that would otherwise push down rents.
Jennifer Bowcock, RealPage’s senior vice president for communications, said in a statement to the AP that their software is used on fewer than 10% of rental units in the U.S., and that their price recommendations are used less than half the time.
“It’s past time to stop scapegoating RealPage — and now our customers — for housing affordability problems when the root cause of high housing costs is the under-supply of housing,” Bowcock said.
Chicago Tribune reporter Lizzie Kane contributed.
