The FBI’s recent raid of Atlanta-based property management company Cortland Management has once again put the spotlight on the city’s corporate landlords and the high price of rent.
Last week, Cortland officials told The Atlanta Journal-Constitution that neither the company nor its employees are “targets” of the Justice Department’s antitrust probe into the multifamily rental markets in the U.S. The company had its Atlanta headquarters raided in May.
All the same, Cortland and more than 25 other property management companies operating in Atlanta still face federal civil antitrust allegations in an ongoing lawsuit in Nashville, Tennessee. That lawsuit consolidates dozens of others across the country, and centers on the Texas-based tech company RealPage and its property management software.
RealPage is accused of colluding with management companies and landlords through price-setting software called YieldStar to artificially inflate the price of rents. The software allowed owner-operators to dismiss concerns about market conditions and occupancy rates and instead focus on driving up how much they can charge for units, according to the filing.
The complaint says landlords’ reliance on the software algorithm “allowed them to price their units according to their collective goal of securing revenue lifts by increasing rents without regard for the typical market forces that drive supply and demand in a competitive environment.”
Tricia Herzfeld, the attorney representing tenants in the class action, declined to comment. But Gibson Dunn attorney Stephen Weissman, who represents RealPage, said the claims against the company and its software are unfounded.
“The real culprit is the supply shortage in the country for multifamily housing,” he said. “To point the blame at some software company that is following the law and has designed its product to be compliant with long-standing rules of antitrust is politically opportunistic and frankly unfair.”
Last week, RealPage spokeswoman Jennifer Bowcock declined to comment on the search of Cortland’s office. She said RealPage is cooperating with government authorities.
Rebecca Haw Allensworth, a professor at Vanderbilt Law School specializing in antitrust, said there are several hurdles tenants will face in the class action. She said that plaintiffs have to prove that landlords knowingly colluded to inflate the rents.
“The other big hurdle is proving that the price increases were a result of the conspiracy, and the extent to which the price increases were the result of the conspiracy,” she said, noting there other factors the defense could use to explain higher rents.
Headquartered in Atlanta, Cortland has a portfolio of 80,000 units and has offices in Charlotte, Dallas, Denver, Greenwich, Houston, Orlando, and Phoenix, according to information on its website.
When the AJC visited Cortland Decatur East last week, the FBI raid was news to some residents.
But Ivette del Pino, a forensic accountant living at the complex, said she had heard about the civil litigation against the company over price fixing. She has been living at Cortland for almost two years after moving from Miami. She pays $2,525 a month for a two-bedroom apartment, and said that feels a little high, even though rents are more reasonable than in Miami.
“There’s a lot of things that I feel that could be done better,” she said.
Her husband is an officer with the DeKalb County Police Department. She said together they earn more than six-figures and are planning to buy a home.
Credit: Matt Reynolds
Credit: Matt Reynolds
On the other hand, Masika Nyaku, who was walking her dog Moochie, called the rent at the complex “ridiculous.”
She had received a renewal notice for her $2,200-a-month two bedroom which would push her rent up to about $2,500 a month. She had recently lost her job but said at least three quarters of her income was going toward rent. Nyaku said she complained to management about the proposed rent hike and they offered a $75 discount.
Nyaku said she plans to move to a state where rents are cheaper after her 14-year-old daughter graduates high school. Meanwhile, she’s planning a move to a one-bedroom at the complex that is priced at about $1,500 a month.
“It’s a beautiful community. People are really friendly,” she said. “I’ve been here for a while but I’ve had to make adjustments because I can’t afford to pay.”
Cortland isn’t the only company demanding steep increases, Nyaku said.
“They’re all doing it. They’re all raising rents up to three, four or five hundred dollars once you renew,” she said.
The median rent in Atlanta is $2,147, according to Zillow.
Michael Lucas, executive director of the Atlanta Volunteer Lawyers Foundation, said that high rents are not just impacting low-income people, but middle class Atlantans too.
“We see more evictions now across the economic spectrum and it trickles down across the whole market too,” he said, making it more likely that tenants will end up in substandard apartments if they are priced out of ones they can no longer afford.
In addition to Cortland, the federal class action complaint names several property managers and owner-operators in Atlanta, including AIR, AMC, Avenue5, Bell Partners, BH, Bozzuto, Camden, Carter-Haston, CONAM, CWS, Dayrise, ECI, Equity, First Communities, FPI Management, Greystar, Highmark, IRT, Lincoln, MAA, Mission Rock, Morgan, Pinnacle, RPM, Simpson, Related, Trammell Crow, Windsor, and ZRS.
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