Arizona sues corporate landlords, accuses of them of price-fixing rentals

PHOENIX (3TV/CBS 5) — Arizona Attorney General Kris Mayes is suing RealPage and nine corporate-owned landlord operators, accusing them of illegally price-fixing apartments and other rentals in the Phoenix and Tucson metropolitan areas.

“In the last two years, residential rents in Phoenix and Tucson have risen by at least 30% in large part because of this conspiracy that stifled fair competition and essentially established a rental monopoly in our state’s two largest metro areas. RealPage and its co-defendants must be held accountable for their role in the astronomical rent increases forced on Arizonans,” Mayes said in a news release on Wednesday morning.

According to Mayes, 36% of Phoenix households are renters, who have seen a 76% rent increase since 2016. Meanwhile in Tucson, 37% of households are renters who have seen a 30% rent increase.

Several tenants who rent from the companies in the lawsuit told Arizona’s Family while prices went up, no physical changes happened in their living areas. “They keep getting money from everybody but I don’t know what they are doing with all that money,” said one renter who didn’t want to be identified.

Some were even priced out as rent kept climbing. “I would say these last two to three years, it was a headache,” said another renter.

Which apartment communities or operators are named in the suit?

One of the companies named in the lawsuit, Apartment Management Consultants, is denying these claims. They say of the 85 properties they own in Arizona, only one uses the software.

The suit alleges that landlords conspired with RealPage, a company that provides detailed, nonpublic leasing data in every market, and used that information to conduct a price-fixing conspiracy. According to CNBC, RealPage recommends prices for about 4.5 million housing units.

“RealPage then used its revenue management algorithm to illegally set prices for all participants,” the Arizona Attorney’s Office said. Specifically, the state alleges that the defendants “conspired to enrich themselves during a period when inflation was at historic highs and Arizona renters struggled to keep up with massive rent increases.”

Mayes alleged RealPage provided training to the landlords and instructed them not to mention RealPage or pricing algorithms when explaining rent increases to tenants. Instead, she claims leasing companies were taught by RealPage to lie and to say that units were “individual” and “concessions” were built into the price. In reality, prices were set by RealPage in Phoenix and Tucson.

“We think this happened large in part the conspiracy that stifled the competition and essentially established a rental monopoly in our states two largest metro areas. RealPage and their co-conspirators concealed this illegal price-fixing scheme from potential renters,” Mayes said.

The attorney general also said RealPage used what they called “revenue management software,” where they compiled competitively sensitive data on unit pricing and occupancy provided by the nine defendant competitors. “They were not competing at all. They were colluding with one another. Using this sensitive data RealPage directed the competitors which units to rent, when to rent them and at what price. This was not a fair market at work, this was a fixed market,” she said.

State officials say such pricing methods violate the Arizona Uniform State Antitrust Act and the Arizona Consumer Fraud Act. The law states that entities cannot establish monopolies to control or fix prices. In 2023, ProPublica revealed that the RealPage software used algorithms to maximize profits, which experts stated could violate antitrust laws.

“What could be more unfair, what could be more deceptive than landlords who were using software and an algorithm to jack up the price of rent without telling renters that they were doing it? What could be more deceptive than landlords that were pumping information that should have been proprietary into a single entity, into a single set of software and then allowing that software to come up with the highest price possible? That is unfair under the law,” she explained.

Shortly after that report was filed, the Department of Justice filed a statement in support of tenants. “Automating an anticompetitive scheme does not make it less anticompetitive,” the DOJ said. Specifically, the feds said that algorithms themselves aren’t illegal to use but rather the way that it was being used with “competitors knowingly combin[ing] their sensitive, nonpublic pricing and supply information in an algorithm that they rely upon in making pricing decisions, with the knowledge and expectation that other competitors will do the same.”

If the lawsuit is successful, Mayes says she’d like to see restitution to renters, a court order to landlords to stop using RealPage and similar software and civil penalties paid out to the state.

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