As previously discussed on the Private Equity Stakeholder Project blog, the property management software corporation RealPage has been under scrutiny from several senators after the 2022 ProPublica expose. RealPage is owned by Thoma Bravo, a Chicago-based private equity firm that currently maintains over $130 billion in assets.
Concerned about RealPage’s involvement in the housing crisis, in November of 2022, Senators Elizabeth Warren, Bernie Sanders, Tina Smith, and Edward Markey released a public letter to RealPage CEO Dana Jones. Claiming the corporation birthed “a new kind of cartel,” the senators took issue with the amount of private information RealPage provided to landlords. Disabled people, tenants of color, and low income tenants were named by the senators as some of the hardest hit by RealPage software keeping prices “artificially” high. The senators also expressed issues with the incentives that RealPage provides landlords to maintain empty units, which counteracts attempts by the federal government to increase housing supply. The lawmakers claimed that RealPage software was “facilitating a never-ending race to setting the highest possible rents.”
Private Equity Stakeholder Project Blog, October 2023
In November 2023, DC Attorney General Brian L Schwalb announced a lawsuit against RealPage, and 14 DC landlords. The lawsuit accuses the landlords of price-setting through collusion, and states that RealPage technology was used to set rents for more than 50,000 apartments in DC. In a press release, the Attorney General’s office stated that “at a time when affordable housing in DC is increasingly scarce, our office will continue to use the law to fight for fair market conditions and ensure that District residents and law-abiding businesses are protected.” The lawsuit alleges that RealPage is responsible for the pricing of 60% of units in large multi-family buildings, and 30% of regular multi-family buildings in Washington DC. In the Washington-Arlington-Alexandria Metropolitan Area, RealPage is allegedly responsible for pricing in over 90% of units. The Attorney General is aiming to
- Stop RealPage and the defendant landlords from engaging in anticompetitive behaviors that artificially inflate rent prices for District tenants.
- Appoint a corporate monitor to ensure that RealPage and the defendant landlords do not engage in further anticompetitive misconduct.
- Secure financial compensation for the District and residents whose rents were unlawfully raised.
Also in November 2023, the group of tenants who are suing RealPage in Tennessee received some positive news. The US Department of Justice backed the tenant’s lawsuit, arguing that it should move forward, and that if allegations against RealPage were found to be true, landlords who used the shared algorithm provided by RealPage were acting in a way that violated antitrust law. Also as mentioned previously on the PESP blog, the Department of Justice’s antitrust division is continuing its investigation into RealPage’s business practices. Despite RealPage’s attempt to dismiss the lawsuit, Chief U.S. District Judge Waverly Crenshaw in Nashville ruled against RealPage and Thoma Bravo, and said that they had to answer to the tenant’s claims. According to Judge Crenshaw, “the most persuasive evidence” against RealPage and Thoma Bravo was the “undisputed” fact that RealPage relied on non-public and sensitive information in order to operate its algorithm.
As the saga with RealPage continues on a national scale, along with lawsuits in Tennessee and the District of Columbia, the software company and Thoma Bravo are generating negative press that may impact public perception. It remains troubling that more than 30 public employee pension funds have invested a total of almost $4 billion in Bravo’s Fund XIV (the fund that acquired RealPage), when pension funds maintain that they have a fiduciary responsibility to their pensioners. The headline risks associated with RealPage, along with the implications of the pending antitrust actions against it, make continued investment into RealPage riskier by the day.