In a far less-noticed law enforcement action, the FBI this week conducted a dawn raid of corporate landlord giant Cortland Management over what’s called algorithmic price-fixing. This corporate real estate management firm, based in Atlanta, rents out 85,000 units across thirteen states. But Cortland is allegedly part of a much bigger conspiracy orchestrated by a software and consulting firm named RealPage to increase rents nationwide by coordinating landlord pricing decisions and holding apartments off the market. How much bigger? Well, there’s a civil antitrust action in Tennessee that’s been going on since 2023, where the argument is that RealPage has been working with at least 21 large landlords and institutional investors, encompassing 70% of multi-family apartment buildings and 16 million units nationwide, to systematically push up rents. And RealPage isn’t just some software company distorting rental markets, it’s also owned by Thoma Bravo, one of the biggest private equity firms in the U.S. So yeah, this scandal matters. (RealPage is also lobbying up, which politically connected firms do…)
How does the cartel allegedly work? Well large corporate landlords, who would normally compete with one another for tenants via price or quality, have since 2016 stopped doing so. Instead, they all share “detailed real-time data regarding pricing, inventory, occupancy rates, and unit types that are or will be coming available to rent” every day with one another through RealPage’s revenue management system, which in turn sends back recommendations on pricing.
Landlords adopt RealPage recommendations on pricing 80-90% of the time, which explicitly drives up revenue by holding apartments off the market. As the architect of RealPage once explained, “[i]f you have idiots undervaluing, it costs the whole system.” It’s not just an information-sharing and price recommendation engine. RealPage has ‘pricing advisors’ that monitor landlords and encourage them to accept suggested pricing, it works to get employees at landlord companies fired who try to move rents lower, and it even threatens to drop clients who don’t accept its high price recommendations. This one’s a very clear conspiracy. Allegedly.
Cortland is located in Atlanta, where 81% of multifamily rental unit prices are set via software. And rent in that city has exploded, up 80% since 2016. What’s odd about this price increase is that vacancy rates have been inching up, and when there’s more supply, prices should come down. But they aren’t. What seems to have happened in the period between 2015-2017 is that a bunch of landlords started using RealPage pricing recommendations. Then in 2017, RealPage bought its main rival, Lease Rent Option, giving it perfect information into the supply and demand for apartment rentals. Here’s a map of Atlanta properties using RealPage’s software.
The Department of Justice is clearly deep in an investigation of RealPage and its cartel. And this one looks criminal. It’s also fascinating that the FBI is involved. The FBI, though historically it had a big role in antitrust investigations for its first hundred years, hasn’t really done much in this area since the early 2000s. I don’t know what conclusions to draw from that
