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Cartels - how to hike the rent (or how the DC attorney general is suing landlords) [1]
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Date: 2023-11-03
DC's attorney general is suing 14 of the city's largest landlord firms, claiming they entered into agreements with a property management software firm to keep rent prices high in a city with a housing affordability crisis. Oh, the glory of AI and algorithms to make our lives better by making it easier for markets to collude and raise prices!
From a report: The complaint, filed earlier today by Attorney General Brian Schwalb, focuses on the multifamily landlords' use of software from Texas-based firm RealPage, which suggests rental prices based on a pricing algorithm. Key to those models, according to the suit, is the data fed in from the landlords and the pressure RealPage puts on them to stick to the code-derived rental rates. "RealPage and the defendant landlords illegally colluded to artificially raise rents by participating in a centralized, anticompetitive scheme, causing District residents to pay millions of dollars above fair market prices," Schwalb said in a release tied to the complaint.
The collaboration "amounts to a District-wide housing cartel," Schwalb said, noting that "well over" 30 percent of buildings with five or more units use RealPage's software, along with 60 percent of 50-unit-plus buildings. Across a wider Washington-Arlington-Alexandria area, more than 90 percent of units in large buildings are subject to RealPage pricing, according to Schwalb's office. RealPage's rent management service, YieldStar, has come under increasing scrutiny in recent years. RealPage and the property management firms utilizing their software were the subject of a class-action suit filed in the Southern District of California in October 2022, alleging the "cartel" artificially inflated prices. The Department of Justice's Antitrust Division opened an investigation in November 2022 into RealPage's role in potential landlord collusion.
Below is the link to the actual lawsuit filed, incase you want to see if your rental company is on the list, since some might be national companies The legal compliant
57. RealPage documents show the methods by which the company suppresses the Defendant Landlords’ independent price decision-making while also securing their cooperation in the cartel. RealPage training documents state: “You should be compliant”—i.e., each, individually participating landlord must impose the rents generated by the RealPage RM Software—“90+% of the time to see the best results in your revenue management.” This principle is reinforced during in-person trainings when landlords join the cartel.
From what I understand, part of the agreement is that you are actually disallowed by the company from renting any lower than their listed rate, if you use their service.
That is where it becomes collusion to raise prices. If they didn't require landlords working with them to use the prices they set, and just had them as loose guidelines, it actually would be legal.
With the requirement of using their minimums, over time the prices will move upward because no one is able to negotiate lower than the floor they defined by algorithm.
From the lawyer filing the case
"The defendant landlords are some of the largest providers of multifamily housing in the District, and the Office of the Attorney General’s(OAG) investigation revealed that RealPage’s technology was used to set rents for more than 50,000 apartments across DC, in violation of the District’s Antitrust Act."
"With this lawsuit, OAG is seeking to secure financial compensation for the District and residents whose rents were unlawfully raised."
The software company is national, odds are DC is not the only city using the software to collude on prices, which in turn increases profits from the property developer to the management companies, and the stock shares/financial instruments setup for these LLC’s ect...
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