Jesse Jones: Lawsuit claims biggest landlords in Western Washington are colluding to raise rents

SEATTLE — The price of rent is a huge issue - from south King County to Pierce County… And in Seattle, it’s simply out of control.

“The first time I rented in Seattle, I paid $1500 for a two-bedroom, and now I pay $1500 for a studio,” says Seattle renter Holly McConnell.

Now, explosive allegations say some of the biggest landlords in the country are illegally colluding using ‘rental pricing algorithms’ to boost and fix rates in rental markets.

“Doesn’t have a chance. Computers are fixing prices in a way that could not be accomplished years ago. And, the American consumer is getting hurt,” says attorney Steve Berman. He has filed a class action lawsuit against Yardi Systems and more than 15 apartment owners and management companies for using a piece of software called “RentMaximizer.”

Steve says “RentMaximizer collects all the landlord’s data, pricing data, occupancy data, bedroom data. And the landlord knows. Well, if I charge this price, it’ll be the same as the other guys. So, I can keep my price up.”

See this all comes under the Sherman Act, a federal law that says agreements among competitors to fix prices is a crime.

“You know, in the old days, when people price fixed, they got into a room. And we had to prove they were in the room, which was hard to prove usually. But here they’re openly using these algorithms to set prices. It’s kind of amazing.” Steve also says the software is driving up rent by at least 6%.

The landlords in the lawsuit own properties all over Puget Sound. The companies include HNN Properties based in Bellevue with 29 units in King, Pierce, and Snohomish Counties. Its website says it’s proud to be one of the leading providers of affordable rental housing in Washington. Pillar Properties in Seattle boasts it operates 1800 units in the Pacific Northwest.

Jack Smith of Tacoma isn’t happy about what that could do to his rent. “So, they come together and come up with their own price. Yeah. Okay. That doesn’t seem that fair at all.”

The State of Arizona and the District of Columbia are suing a company named RealPage for using similar ‘rental pricing algorithms.’

Two companies who allegedly use the RealPage software in our area are Greystar which owns or operates 130 properties in the region. And Thrive Communities which has more than 90.

Lee Hepner is Senior Legal Counsel for the American Economic Liberties Project. He told us Seattle has, about 300,000, multifamily apartments and about half of them now use RealPage.

“We have seen the housing crisis result in rents that are 51% higher than they were in 2016. And a good part of that may be attributable to the software algorithms recommending those high rents,” says [said] Hepner.

Raymond Harmon of Seattle says he’s familiar with the company, “Yeah. RealPage. Every time I see that, it’s a red flag for me. I’m aware of the class action suit happening, and I’m all for it.”

King County Councilperson Theresa Mosqueda says the Seattle neighborhood of Belltown has been hit especially hard. “We know that this is a national crisis. 70% of the rental units that are offered in Belltown are offered only through ten companies. Those ten companies, those corporate landlords use RealPage. We have seen the costs of rental units increase by 55%. That’s $1,200 increase in just 2021 to 2022. We know that this is having an impact in our local economy on our housing market.”

Real Page has sent this statement in response to our report:

“RealPage’s revenue management software is purposely designed and built to be legally compliant, and we will vigorously defend against this lawsuit as it is wrong on both the facts and the law. The complaint is based on a fundamental misunderstanding of how revenue management software works and the significant benefits that it offers for residents, property managers, and the rental housing ecosystem as a whole. The software recommends rates in all directions–oftentimes recommending rent reductions. Our customers retain 100% control over the rents they offer, and they accept, reject, or modify the software’s recommendations at widely varying rates.”

We have not heard back from Yardi Systems, HNN Associates, Pillar Properties, Greystar, or Thrive Communities. Residents like Kerry Belrose of Auburn have had enough, “You keep driving these prices up and people will be moving. Like, I plan in about September to move to Chillicothe, Ohio.”