WILMINGTON — North Carolina joined a national price-fixing lawsuit against software firm RealPage that highlights the company’s impact on rental housing costs in the state, including the Wilmington market.
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Attorney General Josh Stein announced Friday North Carolina had joined the U.S. Department of Justice and six other states in a national lawsuit against software firm RealPage Inc. for artificially and illegally raising apartment rents.
RealPage sells data analytics products that suggest ideal rent prices to property management companies. The lawsuit — filed in the U.S. District Court for the Middle District of North Carolina — alleges that RealPage’s landlord customers illegally share confidential information used for its pricing algorithm.
“I’m asking the court to stop RealPage and the landlords it works with from sharing this non-public information and scheming to inflate rental prices,” Stein said during Friday’s announcement. “This case is about fighting for fair rent for the people of North Carolina.”
Stein said his office found RealPage had been working to keep apartment rents “as high as possible” after a year-long investigation. The lawsuit cites statements from RealPage executives, such as claiming its product “ensures that [landlords] are driving every possible opportunity to increase price even in the most downward trending or unexpected conditions.”
RealPage disputes arguments that its software has contributed to the housing affordability crisis, which it claims is driven by other factors such as the undersupply of affordable housing, increasing demand, and inflation. It states it serves a much smaller portion of the rental market than alleged, its nonpublic data is used responsibly for pro-competitive uses, and that its customers have total discretion to accept its recommendations and reject them at far higher rates than alleged.
The lawsuit notes RealPage tracks rental housing units that use its revenue management products in North Carolina markets, including Wilmington.
In April, RealPage cited Wilmington as the fastest growing renter household market in the nation. The firm found, after 25 months of rent increases above national norms, that Wilmington had one of the “best showings nationwide” for its 2022 rental rate hike of 12.4% — nearly twice the national average.
New Hanover County’s fair market rent for a two-bedroom apartment increased 51% from 2018 to 2023, according to a January North Carolina Housing Coalition report, tying Charlotte for the fourth-largest hike in the state after Asheville, Durham-Chapel Hill, and Raleigh.
RealPage gained public scrutiny after a 2022 ProPublica investigation ignited more than 20 lawsuits throughout the country. Unlike a number of tenant-led lawsuits that have included RealPage’s clients as defendants, the new antitrust suit does not name specific property management firms.
However, the complaint cites statements from unnamed commercial landlords admitting to sharing confidential information with competitors to keep rents high, including:
“I always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and term. That’s classic price fixing.”
Prominent property management companies in Wilmington that use RealPage software include Greystar, Blue Ridge Companies, Hawthorne Residential Partners, Highmark Residential, Bell Partners, Drucker & Falk, Flournoy Companies, Cushman & Wakefield, and the Carroll Companies. They manage cumulatively at least 8,000 units.
Greystar — the country’s biggest property management firm — is named in class-action lawsuits for illegal price fixing with RealPage. Greystar manages Wilmington apartment units including Element Barclay, City Block, and Headwaters at Autumn Hall.
The lawsuit alleges RealPage pushes its clients to use its “auto-accept” settings to habitually receive its recommendations, leading landlords to effectively outsource rent pricing to the company.
The DOJ claims RealPage monitors compliance with preferred policies and discourages landlords from offering concessions to tenants. In 2022, Jeffrey Roper — the former president and principal scientist of RealPage’s pricing software division — told ProPublica one of the reasons his firm wanted to move to computer-generated pricing was because leasing agents have “too much empathy.”
UNC antitrust professor Barbara Osborne noted the burden of proof is different for the two federal violations cited in the lawsuit. The first claim — violation of Section One of the Sherman Act — argues RealPage restrained trade by helping competitors collude with confidential data.
“If the plaintiff can show that you’re negatively impacting a commercial market, it doesn’t matter how much of that commercial market you’re negatively impacting,” she said.
The second claim alleges RealPage has attempted to monopolize the revenue management software market, which she said would require a higher standard of evidence. The DOJ, North Carolina Attorney General’s Office, and other involved states request the court bar RealPage from anticompetitive activities and provide any additional relief deemed appropriate.
Tips or comments? Email journalist Peter Castagno at peter@localdailymedia.com.
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