How Responsible Is the Rental Housing Cartel for the Explosion in Homelessness? 

The Department of Justice and eight states on August 23 sued the private equity-owned company that allegedly operated as the middle man in a national property management cartel that has sent rent through the roof. The civil lawsuit accuses RealPage of acting as helping to orchestrate an illegal price-fixing scheme to reduce competition among landlords so they can boost prices.

Notably, the behemoth real estate management companies using RealPage’s collusion software were not charged — yet. RealPage and the rental management companies, many of which are private equity-owned, are also facing dozens of class action lawsuits from tenants. The DOJ also opened a criminal investigation into RealPage, and the large apartment owners and managers that use the company’s pricing software, to determine if the firm is facilitating price fixing, sources told Politico in July.

Should they be charged with even more? That’s because in some of the cities where Realpage-using Landlords dominate the market, we’re seeing the number of homeless and deaths of unhoused people  increase rapidly. Correlation is not causation but…

• Homeless numbers and deaths are up dramatically in areas where Wall Street landlords are particularly active and have turned to collusion software.
• That drives up rents and creates artificial scarcity.
• Among the biggest reasons cited for homelessness is the lack of affordable housing.

To really get a feel for the effect of the RealPage and property management company cartel, it’s best to look at individual metro markets. That’s because in cities like Seattle, San Francisco, New York, Boston, Nashville, Dallas, Atlanta, etc. the market can be dominated by large (oftentimes private equity-owned) companies, and if all of them are colluding using RealPage, the effect can be enormous.

Let’s focus here on Los Angeles. While the story is the same across many markets, LA also happens to be the epicenter of US homelessness crisis.

Los Angeles County is the 6th largest multifamily market with 448,848 completed units. Strategic Actions for a Just Economy, an LA organization that focuses on tenant rights and economic justice,

in their 2021 report, “Beyond Wall Street Landlords: How Private Equity in the Rental Market Harms Tenants,” found that more than two thirds of all LA Rentals are now owned by speculative investment vehicles.

Corporate landlords named in the RealPage lawsuits include Essex Property Trust, Equity Residential, and AvalonBay Communities — the three biggest players in LA real estate management.

Combined they control 35,020 multifamily units, or 7.8 percent of LA County’s 448,848 units.

According to lawsuits against RealPage and large property management companies, there are another 17 companies that use RealPage’s rent-setting tool in LA, and together, they account for just more than 52 percent of all rental apartment buildings in the LA market. [1]

A separate lawsuit against Santa Barbara-based Yardi, a company similar to RealPage, accuses it of using its RENTmaximizer (now Revenue IQ) product to do exactly what RealPage is accused of doing.

When you throw Yardi into the mix, that means that 79 percent of all multifamily rental units in LA County are being listed using collusion software.

Widespread adoption of this collusion software has helped LA rent prices go through the roof in recent years. It is up 41 percent compared to 2016 — the year when RealPage hit “critical mass.”

These same mega landlords also shelled out millions to successfully stop California rent control ballot measures in California in 2018 (Proposition 10) and in 2020 (Proposition 21) with Essex Property Trust spending $26.2 million, Equity Residential paying $17.9 million, and AvalonBay Communities giving $17 million.

Homelessness and Deaths of Unhoused Skyrocket at Same Time RealPage Achieves “Critical Mass” 

US homelessness was already a national disgrace, but  the numbers in recent years as speculative investment took over housing and began using collusion software have become even more devastating.

A report from the University of California, San Francisco released last year — the largest representative study of homelessness in the state in thirty years — found that economic factors were the main driver of homelessness, including low wages, a sudden unaffordable expense, and the rising cost of housing.

A recent UCLA survey shows that 4 in 10 renters in LA County worry about becoming homeless. The lawsuits against RealPage and Yardi show why.

It’s not just that those companies have helped drive up rent. As Arizona Attorney General Kris Mayes says in his state’s lawsuit against RealPage, its algorithm often advises landlords to deliberately keep units vacant, restricting the housing supply. The lawsuits against RealPage and statements by the company’s founder indicate that RealPage played a role in undersupply by advising property companies to leave more units vacant in order to create an artificial scarcity of rentals. They found this helped their bottom line because they could charge more for rented units, and they could do this because property managers know that their “competitors” are also using RealPage’s system and will not undercut them.

The 2021 report by Strategic Actions for a Just Economy also shows that the same mega landlords using collusion software are the main culprits behind more frequent use of the Ellis Act to mass evict tenants.

Indeed, according to one of the lawsuits, the CEO of Camden Property Trust, Ric Campo, bragged about using RealPage and “pushing people out” of leases they could no longer afford.

Covid-19 protections for renters were allowed to expire last year on April 1, and evictions have come roaring back since, rising well above pre-pandemic levels. Despite all the whining about tenants living rent-free, data shows that the majority of evictions are for a median amount owed of $2,678.84, which is only a little more than the average price of a month’s rent in LA. Unsurprisingly, the county’s homeless population quickly grew by 10 percent after pandemic protections expired.

If someone doesn’t have either financial means or a strong support system, an eviction can often mean becoming homeless. While most believe it will only be temporary, it often is not. And the numbers in recent years as speculative investment took over housing and began using collusion software are absolutely devastating.

LA residents continue to fall into homelessness faster than people on the streets are moved into housing. The county now has more than 75,500 unhoused people — a 61 percent jump since 2016. This happens to coincide with the takeoff of collusion software from the likes of RealPage and Yardi.

Also since 2016, national homelessness began to reverse its downward trend in a big way. From PBS:

Homelessness in general has been back on the rise since 2016, according to HUD data. Between 2007 and 2016, the number of people reported in point-in-time counts as experiencing homelessness dropped from around 647,000 to just under 550,000. Since then, homelessness slowly but steadily increased year over year, until 2023 saw a sharp jump from around 582,000 to more than 653,000.

The number of Americans dying on the streets has also skyrocketed in that time.

A study last year from The Guardian and the University of Washington found that across 73 US cities and counties there were at least 18,000 deaths of people experiencing homelessness over the 2016 to 2020 time period with the number increasing 77 percent over that five-year period. (The federal government makes no effort to count the number of homeless deaths, and many believe the number to be much higher.)

In LA, the increases have been particularly devastating. According to the Los Angeles County Department of Public Health the mortality rate among people experiencing homelessness increased 56 percent from 2019 to 2021. It has since plateaued and at an alarmingly high rate. In 2023, 2,033 people died, a staggering 291% increase from the 519 cases recorded in 2014.

The data is almost surely an undercount as the medical examiner only has jurisdiction over deaths considered violent, sudden or unusual, or where the deceased has not recently seen a doctor.

Overdoses played a major role in the deaths studied, accounting for a third of the deaths.

Brett Feldman, the director of USC street medicine and who also treats unhoused patients said, “Nobody wants to be addicted to fentanyl. They’re usually trying to escape their reality and the suffering on the street, and many started using drugs to deaden the pain of homelessness.”

Homeless people are dying at increased rates of other things that might be avoided if they had a home or regular access to preventative medical care, such as heat and cold exposure, traffic injuries, cardiovascular disease and diabetes.

Even minor infections can become life-threatening as homeless individuals rarely seek treatment due to concerns over costs and the fact they’re preoccupied with where they’ll sleep and what they’ll eat.

One of the biggest reasons more homeless people are dying is simply the increase in the number of homeless. And that’s especially true of older Americans.

The number of Californians 55 and older who sought homelessness services soared 84 percent between 2017 and 2021, according to the state’s Homeless Data Integration System. That’s compared to a 43 percent increase across all age groups.

A February study published in the health policy research journal Health Affairs which found the death rate more than tripled between 2011 and 2020, concluded that “the most effective form of mortality prevention is preventing the occurrence of homelessness in the first place.”

And yet the government is a bystander to the carnage: 

This scale of preventable death represents a form of mortal systemic exclusion in which governments have failed to meet the most basic needs of people experiencing homelessness.

Homelessness is usually the result of a confluence of factors, but given that RealPage, Yardi, and real estate management behemoths play such an outsize role in rental prices, vacancy/supply, and evictions, it’s hard to believe they didn’t directly cause individuals to become homeless, some of whom died on the streets when if they had been housed they likely would have lived.

We’ll see what the DOJ comes up with in its criminal case being built against Realpage and company, it sure would be nice if the charges go beyond antitrust violations.

I’m certainly no lawyer (maybe some in the readership can chime in), but if RealPage and company are guilty of price-fixing and cartel behavior that led to unaffordability, increased evictions, and an artificial scarcity, would it be too much of a stretch to charge them with something like involuntary manslaughter for the preventable deaths of homeless individuals who lost shelter due to the RealPage et al criminal price-fixing conspiracy?

Representative of American Neoliberalism

Of course, putting RealPage and private equity-owned real estate managers on trial for such crimes would also be an indictment of today’s economic system and government in America.

Because really the story of RealPage and speculative investment taking over shelter is a story that is representative of the wider economy — such as in other basic necessity industries like the healthcare and food industries. You could transpose the following crude chart I drew up to other industries and the story largely remains the same.

And of course the government has an opportunity to intervene at each stage but has failed to do anything so far. Instead governments are looking to throw homeless people into jail.

As Kamala said in her big economic speech, it’s an “an opportunity economy” — one where “everyone can compete.”

When I read that quote that “everyone can compete” it made me think of a scene that comes at the end of the 2012 film “Killing Them Softly” (based on the 1974 novel “Cogan’s Trade” by George V. Higgins). As an Obama speech that includes lines like  “out of the many we are one” plays in the background on a bar TV, the hitman Cogan provides the real trickle-down social values of the American upper class:

And it’s, of course, bipartisan. Speculative investment by the big financial players went into overdrive during Obama’s foreclosure regime, and government has for decades largely withdrawn from any effort other than minor band-aids to prevent rapacious practices like the one practiced by RealPage and company. Trump picked up where Obama left off. When RealPage acquired its largest competitor in 2017 some DOJ staff reportedly raised concerns about the merger but were overridden by political appointees of former President Donald Trump.

The Biden administration surprisingly did go in the other direction with appointments at the DOJ Antitrust Division and the Federal Trade Commission, which are actually using their powers on behalf of the American people. We’ll have to see what comes out of the DOJs work on this case and if their and the FTC’s welcome efforts are allowed to continue under the next administration.

For now academia, the media, and finance are still eager to work with RealPage’s founder and invest in Thoma Bravo, which acquired RealPage in 2021, according to the Private Equity Stakeholder Project.

Despite the lawsuits against RealPage, more than 30 US public employee pension funds have invested a total of almost $4 billion in Bravo’s Fund XIV, the fund that acquired RealPage. These pension funds include the California Public Employees Retirement System, New York State Common Retirement Fund, and the Washington State Investment Board. The University of Texas Investment Management Company (UTIMCO) has been a large investor in Thoma Bravo, making six separate commitments into the company totaling $425 million. These commitments included a $125 million commitment to Bravo’s Fund XIV, (the fund which acquired RealPage in 2021). The University of Texas at Austin is also collaborating with Steve Winn, the founder of RealPage, to develop $200 million sustainable research facilities. Winn claims that Texas has “a fragile ecosystem that we need to protect,” and states that preserving the “land and the water for future generations of Texans is important.” However, The Real Deal notes that the facilities would be adjacent to Winn’s Mirasol Springs, a 1,400 acre development that has been the subject of concerns about ecological harm. The collaboration appears to be an opportunity for some positive press for the billionaire.

All that wealth and power is built on the broken backs of working people, many of whom were simply discarded when they could no longer keep up.

As Matthew Fowle with the University of Pennsylvania Housing Initiative and co-author of the February study showing the skyrocketing death rate of homeless Americans put it:

“It’s unlike any other mortality trend that we really see in demography. It’s comparable to something like a natural disaster or war.”

That’s probably because it’s a class war, and there’s no shortage of war criminals.

Notes

[1] They include AIR, AMC, Avenue5, Bell, Bozzuto, Brookfield, Camden, CONAM, FPI Management, Greystar, Pinnacle, Related, Sares Regis, Simpson, Trammell Crow, UDR, Windsor, and Winn.