Real estate giant Greystar and 25 other property management companies have agreed to collectively pay more than $141 million to settle a class action lawsuit accusing landlords of driving up housing costs by using rent-setting algorithms offered by the software company RealPage.
Greystar, the nation’s largest landlord, would pay $50 million under the proposed settlement agreement, which was filed Wednesday in a Tennessee federal court. The deal would still require a judge’s approval.
The companies have also agreed to no longer share nonpublic information with RealPage for its rent algorithm — a key stipulation, since plaintiffs say RealPage used that information to enable landlords to align their prices and push up rents.
“This represents a fundamental shift in the multifamily housing industry and will help reverse the type of anticompetitive coordination alleged in the Complaint,” attorneys wrote in the settlement filing.
All companies involved in the settlement deny wrongdoing and have agreed to help plaintiffs in the ongoing case against RealPage and more than a dozen other property management firms that have not reached settlements. RealPage and others are also fighting an antitrust lawsuit filed last year by the Department of Justice and several state attorneys general. Greystar reached a settlement in that case in August.
The settlement funds from the class action lawsuit would be distributed among millions of tenants included in the settlement class.
In a statement, Greystar said these settlements “allow us to move forward and remain focused on serving our residents and clients.” Headquartered in South Carolina, Greystar manages more than 946,000 units nationwide, according to the National Multifamily Housing Council.
RealPage has vehemently denied any wrongdoing and argues that the plaintiffs misunderstand how their product works. RealPage, which is based in Texas, has said its software is used on fewer than 10% of rental units in the U.S., and that its price recommendations are used less than half the time.
“While the proposed settlements … do not include RealPage, we are encouraged to see this matter move toward closure,” Jennifer Bowcock, RealPage’s senior vice president for communications, said in a statement. “RealPage continues to believe that this litigation is without merit and that our revenue management products, and our customers’ use of them, have always been legal.”
RealPage software provides daily recommendations to help landlords and their employees price their available apartments. The landlords do not have to follow the suggestions, but critics argue that because the software has access to a vast trove of confidential data, it helps RealPage’s clients charge the highest possible rent.
RealPage argues that the real driver of high rents is a lack of housing supply. It also says that its pricing recommendations often encourage landlords to drop rents since landlords are incentivized to maximize revenue and maintain high occupancy.
Among the other defendants, Iowa-based BH Management would pay $15 million, while Denver-based Simpson Property Group would pay $6.5 million. The other companies’ settlements range between $550,000 and $6 million.