National landlord settles with California for gouging renters in L.A. and elsewhere

Greystar, which manages dozens of apartment complexes in Southern California, has settled a lawsuit that alleges the property giant and other landlords colluded to keep rents artificially high.

The unusual action is aimed at limiting rent increases in Southern California, where rents already are among the highest in the country.

The national apartment landlord and manager was a defendant in a lawsuit filed in January by the U.S. Department of Justice that focuses on software from RealPage that is used by many apartment operators to set rent prices for vacant units and renewal rates for existing tenants.

The lawsuit alleges Greystar and other landlords were illegally using RealPage to share proprietary data so they could align their prices and drive up rents.

Greystar manages nearly 1 million apartments in the U.S., according to real estate data provider CoStar. It is one of the country’s largest apartment managers.

Last week, Greystar agreed to stop using software offered by any company, including RealPage, that uses competitively sensitive information to align rent prices, California Atty. Gen. Rob Bonta said. Greystar also agreed to cooperate in the ongoing prosecution of RealPage and other defendant landlords.

“Whether it’s through smoke-filled backroom deals or through an algorithm on your computer screen, colluding to drive up prices is illegal,” Bonta said.

Greystar, which is based in Charleston, S.C., manages about 333 multifamily rental properties in California that use RealPage’s pricing software, the attorney general said.

The company has agreed to pay $7 million in penalties and fees to nine states, including California.

“We are pleased this matter is resolved and remain focused on serving our residents and clients,” Greystar spokesman Garrett Derderian said.

A representative of RealPage, based in Richardson, Texas, could not be immediately reached for comment.

In a competitive market, authorities said, property owners would be forced to compete with each other, helping to drive down rental costs for Americans.

But RealPage undermined some of that competition, the lawsuit said, by
recommending rents at individual properties based on non-public information it received from landlords.

The company previously called similar allegations false and misleading, saying clients can decline its recommendations, which at times includes suggestions to drop rental rates.

But in its complaint, the Justice Department cited instances where RealPage described its software as a tool for maximizing rent and outperforming the market. Authorities also alleged the company made it more difficult for landlords to reject its recommendations than accept them.

“There is greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down,” a RealPage executive said, according to the lawsuit.

At another point, RealPage described its tools as ensuring landlords are “driving every possible opportunity to increase price even in the most downward trending or unexpected conditions,” the complaint says.

Greystar and other landlords discussed competitively sensitive topics — including pricing strategies, rents and selected parameters for RealPage’s software — directly with each other, Bonta said.

As a result, Bonta said, RealPage knew what competing landlords were charging and could increase profits for landlords by using that information to recommend landlords set or raise their prices uniformly, thereby eliminating competition, and leaving renters no choice but to pay artificially high prices.

Without competitive pressure, landlords have no incentive to decrease prices or offer discounts common in rental markets, like a free month or waived fees, the attorney general said.

The settlement is a “big deal” for renters, said K Agbebiyi of the nonprofit Private Equity Stakeholder Project.

“Greystar is essentially not allowed to use the rental price setting component of RealPage,” they said. “That places doubt about the long-term stability of RealPage, when the largest landlord in the country is banned from using them.”

Other apartment managers named in the suit are Camden, Cushman & Wakefield/Pinnacle, LivCor and Willow Bridge.

The states of North Carolina, Colorado, Connecticut, Illinois, Massachusetts, Minnesota, Oregon and Tennessee joined in the settlement with Greystar.

Times staff writer Andrew Khouri contributed to this report