National landlords are settling in with California to take on tenants in LA and elsewhere

Greystar, which manages dozens of apartment complexes in Southern California, has settled a lawsuit accusing the property giant and other landlords of artificially keeping rents high.

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

A national apartment owner and manager was charged in a lawsuit filed by the U.S. Department of Justice in January that focuses on software from RealPage that is used by multiple apartment operators to set rental rates for vacant units and renewal rates for existing tenants.

The lawsuit alleges that Graister and other landlords illegally use RealPage to share property information so they can adjust their prices and raise rents.

Grester manages nearly 1 million apartments in the United States, according to real estate information provider CoStar. It is one of the largest apartment managers in the country.

Last week, Greystar agreed to stop using software offered by any company, including RealPage, that uses sensitive competitive data to adjust rental prices, California Atty. Gen. Rob Bonta said. Greystar also agreed to cooperate in the ongoing prosecution of RealPage and other alleged owners.

“Whether it’s through a smoke-filled backroom deal or through an algorithm on your computer screen, combining price gouging is illegal,” Bonta said.

Greystar, 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 fines and fees to nine states, including California.

“We are pleased that this matter has been resolved and are focused on serving our residents and customers,” said Greystar spokesman Garrett Didrian.

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

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

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

The company has previously called such allegations false and misleading, saying customers can reject its offers, which sometimes include offers to lower rental prices.

But in its complaint, the Justice Department cited instances where RealPage described its software as a tool to maximize rents and outperform the market. Officials also claimed that the company made it more difficult for landowners to reject their proposals rather than accept them.

“There’s a lot of good in everybody being successful that’s basically trying to compete against each other in a way that really keeps the whole industry down,” a RealPage executive said, according to the lawsuit.

Elsewhere, RealPage described its tools as ensuring that landlords “seize every possible opportunity to raise prices even in extremely low trends or unexpected circumstances,” the complaint says.

Greystar and other landlords discussed sensitive topics of competition — including pricing strategies, rents and parameters set for RealPage software — directly with each other, Bonta said.

As a result, Bonta said, RealPage knew what competing landlords were charging and could use that information to increase profits for landlords by suggesting landlords adjust or raise their prices accordingly, thereby eliminating competition, and leaving tenants with no choice but to pay artificially high prices.

Without competitive pressure, landlords don’t offer price cuts or discounts common in rental markets, such as a free month or waived fees, the attorney general said.

The settlement is a “big deal” for tenants, said K Agbeyi of the nonprofit Private Equity Investor Project.

“Grestar is essentially not allowed to use RealPage’s rental price adjustment features,” they said. “It casts doubt on the long-term stability of RealPage, when the largest owner in the country is banned from using them.”

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

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

Times staff writer Andrew Khoury contributed to this report