9 landlords sued over 'astronomical' apartment rent hikes in Arizona

Corrections & Clarifications: A previous version of this article included a photo of a development unrelated to the landlords charged with price fixing.

Nine prominent landlords and a software company engaged in a price-fixing operation that led to "astronomical" apartment rent hikes in Arizona's two largest metro areas, Attorney General Kris Mayes' office alleged in a lawsuit filed Wednesday.

The lawsuit alleges Texas-based software company RealPage, Inc., which works for landlords to collect data on the rental market and set prices, and the multi-family landlords conspired to drive up costs.

Mayes said the companies had "directly contributed to Arizona’s affordable housing crisis.”

"They tricked tenants into paying more for rent than they otherwise would have, and they did this at a time when inflation had skyrocketed and Arizona's affordable housing crisis was among the worst in the nation," Mayes said.

Metro Phoenix rents saw a 30% increase in 2021, the highest in the nation. Many tenants saw increases of hundreds of dollars a month when trying to renew in 2022, and this year renters are getting a small break as median monthly rates have decreased slightly.

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According to Mayes' office, RealPage gathers private data on pricing and occupancy from competitors offering apartment leases and then directs participating competitors "which units to rent and at what price."

Previously, apartment managers would have competed with one another to fill units and set their rents, the lawsuit says. But by outsourcing pricing decisions to RealPage, which used an algorithm to tell the companies how much to charge, the companies stood to profit off big rental increases at the expense of tenants, the lawsuit alleges.

RealPage "calls this process 'Revenue Management' or 'RM.' The State and antitrust scholars call it price fixing," reads Mayes' lawsuit filed in Maricopa County Superior Court. The lawsuit, which repeatedly cites reporting by the nonprofit investigative newsroom ProPublica, says RealPage directed the rental companies not to reveal they used the software.

Based on analysis by the Attorney General's Office, rents in the Phoenix area set via the RealPage algorithm were 12% higher than other units. In Tucson, the rates were 13% higher, the lawsuit says.

That "cartel" operation violates the Arizona Uniform State Antitrust Act, which restricts conspiracies that restrain trade and monopolies, and the Arizona Consumer Fraud Act, which prohibits deceptive and unfair practices and concealing "material facts in connection with a sale," according to the lawsuit.

Lawsuits against RealPage and landlords have been brought several times before in other states. Twenty-one federal cases were consolidated together in Nashville, Tennessee, and another was filed in Washington, D.C., late last year. Mayes said the Washington, D.C., lawsuit inspired her own case.

RealPage denied the allegations in both cases but did not respond to a request for comment Wednesday. Most of the landlords named in Mayes' lawsuit did not respond to a request for comment.

Mayes' lawsuit seeks an injunction to stop the practice and appoint a monitor to ensure any court orders are carried out. She seeks civil penalties under state law and said in a news conference she would ask a court to issue a monetary penalty that could go to renters who were victims of the scheme.

"I want them paid back for the rent that they ... should not have had to pay if this scheme had not been in place," the Democratic attorney general said. The conspiracy had been ongoing since at least 2016 and could impact hundreds of thousands of renters, Mayes said.

The landlords named in the Arizona lawsuit are:

• Apartment Management Consultants, L.L.C., of Utah

• Avenue5 Residential, L.L.C., of Washington

• BH Management Services, L.L.C., of Iowa

• Camden Property Trust, of Texas

• Crow Holdings, L.P / Trammell Crow Residential, of Texas

• Greystar Management Services, L.P., of South Carolina

• HSL Properties, Inc., of Tucson

• RPM Living, L.L.C, of Texas

• Weidner Property Management, L.L.C., of Washington

Mayes said there are other companies that used RealPage, but the complaint named the largest ones.

But one of those, Apartment Management Consultants, denied Mayes' accusations. It said it had no direct role with the software and would seek to be dismissed from the case.

AMC manages 18,000 apartments at about 85 properties in Arizona, according to a statement from the company, and just one used RealPage RM software. The choice to use the software was "solely made by the property owner, who worked directly with the RealPage sales team." The company said AMC was not a party to that contract.

Richie Taylor, a spokesperson for Mayes, said in response that the office had evidence AMC had prior contracts with RealPage and noted AMC was a defendant in the separate class action lawsuit ongoing in Tennessee.

Reach reporter Stacey Barchenger at stacey.barchenger@arizonarepublic.com or 480-416-5669.

This article originally appeared on Arizona Republic: Arizona attorney general sues landlords over apartment rent hikes