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Apartment owners unfairly drove up the price of rent over the past several years by using a product offered by property management software company Yardi, according to a lawsuit filed in federal court in Seattle on Friday.
McKenna Duffy, a renter, alleged Yardi illegally drove up rental rates for thousands of apartment units through its product called RENTmaximizer.
The new suit is only the latest class action lawsuit filed by a renter who is alleging that a rent-setting algorithm helped illegally drive rent growth to unprecedented levels during the pandemic.
“RENTmaximizer effectively outsources the management of rental pricing from a landlord to Yardi itself, which then implements higher prices collectively across a group of landlords,” the lawsuit alleged. “Defendants who agree to use RENTmaximizer understand that its purpose is to foil the operation of the competitive market.”
The lawsuit said Yardi customers — who are typically competitors — were asked to provide rental and occupancy rates, data that would then be fed into the algorithm and lead to pricing recommendations.
“Other lessors have been even more frank, acknowledging that with RENTmaximizer, they can ‘aggressively’ raise rents in a way that would have previously been impossible,” the complaint states.
Yardi explicitly marketed RENTmaximizer as a way for its customers — apartment owners and property managers — to drive up rental income by more than 6 percent. The lawsuit said RENTmaximizer is now called Revenue IQ.
The suit alleges that RENTmaximizer has provided apartment owners with an unfair workaround for rent-setting, which is typically a competitive process based on supply and demand.
Property managers historically set rents based on market conditions. When demand is strong and supply is low, property owners typically have more freedom to raise the rent. When demand falls, the suit alleges, property managers must compete for renters either by offering concessions on rent or by lowering the monthly rent price.
“Yardi, together with the Operator Defendants, has unlawfully solved this problem with a product called ‘RENTmaximizer,'” the lawsuit said.
The allegations largely track details from a case in Tennessee, in which a group of renters accused rental tech firm RealPage of organizing a “cartel” involving some of the country’s biggest landlords.
That lawsuit alleges that RealPage clients were unfairly driving up the cost of rent, violating federal antitrust laws.
RealPage has yet to respond to the lawsuit in court. The firm has denied wrongdoing.
“RealPage is aware of the lawsuit,” the statement continued. “We strongly deny the allegations and will vigorously defend against the lawsuit. Beyond that, we do not comment on pending litigation.”
Yardi representatives didn’t immediately respond to a request for comment on the lawsuit, which was filed on the final day of the company’s annual North America conference.
The rate of rent growth has fallen back toward historical norms after nearly two years of historically high growth, fueled by strong demand and renters’ reactions to the COVID-19 pandemic.
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