The Division of Justice and eight states on August 23 sued the personal equity-owned firm that allegedly operated as the center man in a nationwide property administration cartel that has despatched lease by means of the roof. The civil lawsuit accuses RealPage of performing as serving to to orchestrate an unlawful price-fixing scheme to cut back competitors amongst landlords to allow them to increase costs.
Notably, the behemoth actual property administration corporations utilizing RealPage’s collusion software program weren’t charged — but. RealPage and the rental administration corporations, lots of that are personal equity-owned, are additionally dealing with dozens of sophistication motion lawsuits from tenants. The DOJ additionally opened a prison investigation into RealPage, and the massive house homeowners and managers that use the corporate’s pricing software program, to find out if the agency is facilitating worth fixing, sources informed Politico in July.
Ought to they be charged with much more? That’s as a result of in a few of the cities the place Realpage-using Landlords dominate the market, we’re seeing the variety of homeless and deaths of unhoused individuals improve quickly. Correlation shouldn’t be causation however…
- Homeless numbers and deaths are up dramatically in areas the place Wall Road landlords are notably lively and have turned to collusion software program.
- That drives up rents and creates synthetic shortage.
- Among the many greatest causes cited for homelessness is the shortage of reasonably priced housing.
To actually get a really feel for the impact of the RealPage and property administration firm cartel, it’s greatest to have a look at particular person metro markets. That’s as a result of in cities like Seattle, San Francisco, New York, Boston, Nashville, Dallas, Atlanta, and so on. the market could be dominated by giant (oftentimes personal equity-owned) corporations, and if all of them are colluding utilizing RealPage, the impact could be huge.
Let’s focus right here on Los Angeles. Whereas the story is identical throughout many markets, LA additionally occurs to be the epicenter of US homelessness disaster.
Los Angeles County is the sixth largest multifamily market with 448,848 accomplished items. Strategic Actions for a Simply Financial system, an LA group that focuses on tenant rights and financial justice,
of their 2021 report, “Past Wall Road Landlords: How Non-public Fairness within the Rental Market Harms Tenants,” discovered that greater than two thirds of all LA Leases at the moment are owned by speculative funding automobiles.
Company landlords named within the RealPage lawsuits embody Essex Property Belief, Fairness Residential, and AvalonBay Communities — the three greatest gamers in LA actual property administration.
Mixed they management 35,020 multifamily items, or 7.8 p.c of LA County’s 448,848 items.
In response to lawsuits towards RealPage and enormous property administration corporations, there are one other 17 corporations that use RealPage’s rent-setting instrument in LA, and collectively, they account for simply greater than 52 p.c of all rental house buildings within the LA market. [1]
A separate lawsuit towards Santa Barbara-based Yardi, an organization just like RealPage, accuses it of utilizing its RENTmaximizer (now Income IQ) product to do precisely what RealPage is accused of doing.
While you throw Yardi into the combination, that signifies that 79 p.c of all multifamily rental items in LA County are being listed utilizing collusion software program.
Supply: Realpage, Inc., Rental Software program Antitrust Litigation (No. II), 3:23-md-03071, (M.D. Tenn. Feb 05, 2024) ECF No. 728
Widespread adoption of this collusion software program has helped LA lease costs undergo the roof in recent times. It’s up 41 p.c in comparison with 2016 — the yr when RealPage hit “vital mass.”
These identical mega landlords additionally shelled out thousands and thousands to efficiently cease California lease management poll measures in California in 2018 (Proposition 10) and in 2020 (Proposition 21) with Essex Property Belief spending $26.2 million, Fairness Residential paying $17.9 million, and AvalonBay Communities giving $17 million.
Homelessness and Deaths of Unhoused Skyrocket at Identical Time RealPage Achieves “Crucial Mass”
US homelessness was already a nationwide shame, however the numbers in recent times as speculative funding took over housing and started utilizing collusion software program have change into much more devastating.
A report from the College of California, San Francisco launched final yr — the biggest consultant examine of homelessness within the state in thirty years — discovered that financial elements have been the primary driver of homelessness, together with low wages, a sudden unaffordable expense, and the rising value of housing.
A latest UCLA survey exhibits that 4 in 10 renters in LA County fear about changing into homeless. The lawsuits towards RealPage and Yardi present why.
It’s not simply that these corporations have helped drive up lease. As Arizona Legal professional Normal Kris Mayes says in his state’s lawsuit towards RealPage, its algorithm usually advises landlords to intentionally maintain items vacant, limiting the housing provide. The lawsuits towards RealPage and statements by the corporate’s founder point out that RealPage performed a job in undersupply by advising property corporations to depart extra items vacant with a purpose to create a man-made shortage of leases. They discovered this helped their backside line as a result of they might cost extra for rented items, and so they may do that as a result of property managers know that their “opponents” are additionally utilizing RealPage’s system and won’t undercut them.
The 2021 report by Strategic Actions for a Simply Financial system additionally exhibits that the identical mega landlords utilizing collusion software program are the primary culprits behind extra frequent use of the Ellis Act to mass evict tenants.
Certainly, in line with one of many lawsuits, the CEO of Camden Property Belief, Ric Campo, bragged about utilizing RealPage and “pushing individuals out” of leases they might now not afford.
Covid-19 protections for renters have been allowed to run out final yr on April 1, and evictions have come roaring again since, rising effectively above pre-pandemic ranges. Regardless of all of the whining about tenants residing rent-free, knowledge exhibits that almost all of evictions are for a median quantity owed of $2,678.84, which is just just a little greater than the common worth of a month’s lease in LA. Unsurprisingly, the county’s homeless inhabitants rapidly grew by 10 p.c after pandemic protections expired.
If somebody doesn’t have both monetary means or a powerful help system, an eviction can usually imply changing into homeless. Whereas most consider it would solely be non permanent, it usually shouldn’t be. And the numbers in recent times as speculative funding took over housing and started utilizing collusion software program are completely devastating.
LA residents proceed to fall into homelessness quicker than individuals on the streets are moved into housing. The county now has greater than 75,500 unhoused individuals — a 61 p.c bounce since 2016. This occurs to coincide with the takeoff of collusion software program from the likes of RealPage and Yardi.
Additionally since 2016, nationwide homelessness started to reverse its downward pattern in a giant manner. From PBS:
Homelessness basically has been again on the rise since 2016, in line with HUD knowledge. Between 2007 and 2016, the variety of individuals reported in point-in-time counts as experiencing homelessness dropped from round 647,000 to simply beneath 550,000. Since then, homelessness slowly however steadily elevated yr over yr, till 2023 noticed a pointy bounce from round 582,000 to greater than 653,000.
The variety of Individuals dying on the streets has additionally skyrocketed in that point.
A examine final yr from The Guardian and the College of Washington discovered that throughout 73 US cities and counties there have been a minimum of 18,000 deaths of individuals experiencing homelessness over the 2016 to 2020 time interval with the quantity rising 77 p.c over that five-year interval. (The federal authorities makes no effort to depend the variety of homeless deaths, and lots of consider the quantity to be a lot larger.)
In LA, the will increase have been notably devastating. In response to the Los Angeles County Division of Public Well being the mortality fee amongst individuals experiencing homelessness elevated 56 p.c from 2019 to 2021. It has since plateaued and at an alarmingly excessive fee. In 2023, 2,033 individuals died, a staggering 291% improve from the 519 instances recorded in 2014.
The information is sort of absolutely an undercount because the medical expert solely has jurisdiction over deaths thought of violent, sudden or uncommon, or the place the deceased has not not too long ago seen a physician.
Overdoses performed a serious position within the deaths studied, accounting for a 3rd of the deaths.
Brett Feldman, the director of USC road medication and who additionally treats unhoused sufferers mentioned, “No person needs to be hooked on fentanyl. They’re often attempting to flee their actuality and the struggling on the road, and lots of began utilizing medication to deaden the ache of homelessness.”
Homeless persons are dying at elevated charges of different issues that may be prevented if that they had a house or common entry to preventative medical care, similar to warmth and chilly publicity, visitors accidents, heart problems and diabetes.
Even minor infections can change into life-threatening as homeless people not often search remedy because of considerations over prices and the actual fact they’re preoccupied with the place they’ll sleep and what they’ll eat.
One of many greatest causes extra homeless persons are dying is just the rise within the variety of homeless. And that’s very true of older Individuals.
The variety of Californians 55 and older who sought homelessness providers soared 84 p.c between 2017 and 2021, in line with the state’s Homeless Information Integration System. That’s in comparison with a 43 p.c improve throughout all age teams.
A February examine revealed within the well being coverage analysis journal Well being Affairs which discovered the loss of life fee greater than tripled between 2011 and 2020, concluded that “the best type of mortality prevention is stopping the incidence of homelessness within the first place.”
And but the federal government is a bystander to the carnage:
This scale of preventable loss of life represents a type of mortal systemic exclusion during which governments have failed to fulfill probably the most fundamental wants of individuals experiencing homelessness.
Homelessness is often the results of a confluence of things, however on condition that RealPage, Yardi, and actual property administration behemoths play such an outsize position in rental costs, emptiness/provide, and evictions, it’s onerous to consider they didn’t straight trigger people to change into homeless, a few of whom died on the streets when if that they had been housed they probably would have lived.
We’ll see what the DOJ comes up with in its prison case being constructed towards Realpage and firm, it positive could be good if the costs transcend antitrust violations.
I’m definitely no lawyer (possibly some within the readership can chime in), but when RealPage and firm are responsible of price-fixing and cartel habits that led to unaffordability, elevated evictions, and a man-made shortage, would it not be an excessive amount of of a stretch to cost them with one thing like involuntary manslaughter for the preventable deaths of homeless people who misplaced shelter because of the RealPage et al prison price-fixing conspiracy?
Consultant of American Neoliberalism
After all, placing RealPage and personal equity-owned actual property managers on trial for such crimes would even be an indictment of at the moment’s financial system and authorities in America.
As a result of actually the story of RealPage and speculative funding taking up shelter is a narrative that’s consultant of the broader economic system — similar to in different fundamental necessity industries just like the healthcare and meals industries. You would transpose the next crude chart I drew as much as different industries and the story largely stays the identical.
And naturally the federal government has a chance to intervene at every stage however has did not do something to this point. As a substitute governments wish to throw homeless individuals into jail.
As Kamala mentioned in her massive financial speech, it’s an “a chance economic system” — one the place “everybody can compete.”
Once I learn that quote that “everybody can compete” it made me consider a scene that comes on the finish of the 2012 movie “Killing Them Softly” (based mostly on the 1974 novel “Cogan’s Commerce” by George V. Higgins). As an Obama speech that features traces like “out of the numerous we’re one” performs within the background on a bar TV, the hitman Cogan offers the actual trickle-down social values of the American higher class:
And it’s, after all, bipartisan. Speculative funding by the massive monetary gamers went into overdrive throughout Obama’s foreclosures regime, and authorities has for many years largely withdrawn from any effort aside from minor band-aids to forestall rapacious practices just like the one practiced by RealPage and firm. Trump picked up the place Obama left off. When RealPage acquired its largest competitor in 2017 some DOJ employees reportedly raised considerations concerning the merger however have been overridden by political appointees of former President Donald Trump.
The Biden administration surprisingly did go within the different course with appointments on the DOJ Antitrust Division and the Federal Commerce Fee, which are literally utilizing their powers on behalf of the American individuals. We’ll must see what comes out of the DOJs work on this case and if their and the FTC’s welcome efforts are allowed to proceed beneath the following administration.
For now academia, the media, and finance are nonetheless wanting to work with RealPage’s founder and spend money on Thoma Bravo, which acquired RealPage in 2021, in line with the Non-public Fairness Stakeholder Challenge.
Regardless of the lawsuits towards RealPage, greater than 30 US public worker pension funds have invested a complete of just about $4 billion in Bravo’s Fund XIV, the fund that acquired RealPage. These pension funds embody the California Public Workers Retirement System, New York State Frequent Retirement Fund, and the Washington State Funding Board. The College of Texas Funding Administration Firm (UTIMCO) has been a big investor in Thoma Bravo, making six separate commitments into the corporate totaling $425 million. These commitments included a $125 million dedication to Bravo’s Fund XIV, (the fund which acquired RealPage in 2021). The College of Texas at Austin can be collaborating with Steve Winn, the founding father of RealPage, to develop $200 million sustainable analysis amenities. Winn claims that Texas has “a fragile ecosystem that we have to shield,” and states that preserving the “land and the water for future generations of Texans is necessary.” Nevertheless, The Actual Deal notes that the amenities could be adjoining to Winn’s Mirasol Springs, a 1,400 acre growth that has been the topic of considerations about ecological hurt. The collaboration seems to be a chance for some optimistic press for the billionaire.
All that wealth and energy is constructed on the damaged backs of working individuals, lots of whom have been merely discarded after they may now not sustain.
As Matthew Fowle with the College of Pennsylvania Housing Initiative and co-author of the February examine displaying the skyrocketing loss of life fee of homeless Individuals put it:
“It’s in contrast to every other mortality pattern that we actually see in demography. It’s akin to one thing like a pure catastrophe or conflict.”
That’s most likely as a result of it’s a category conflict, and there’s no scarcity of conflict criminals.
Notes
[1] They embody AIR, AMC, Avenue5, Bell, Bozzuto, Brookfield, Camden, CONAM, FPI Administration, Greystar, Pinnacle, Associated, Sares Regis, Simpson, Trammell Crow, UDR, Windsor, and Winn.
