In a dramatic turn of events that could have far-reaching implications for renters nationwide, the Federal Bureau of Investigation (FBI) conducted an unannounced raid on Cortland Management’s headquarters in Atlanta on Wednesday, May 22. This action is part of a criminal antitrust investigation by the U.S. Department of Justice (DOJ) into allegations that Cortland has been involved in a conspiracy to artificially inflate apartment rents. This raid is more than just a legal drama; it’s a significant development that could impact millions of renters, including those in Rhode Island, who have been grappling with soaring rental prices.

At the heart of this investigation is RealPage, a software and consulting firm that allegedly orchestrates price-fixing among large corporate landlords. RealPage’s system, which is owned by Thoma Bravo, one of the largest private equity firms in the U.S., provides rental price recommendations to landlords. These recommendations are based on detailed real-time data shared by landlords, including pricing, inventory, and occupancy rates. RealPage’s influence is extensive, affecting rents for 70% of multi-family apartment buildings and 16 million units across the country.

The scheme allegedly works by encouraging landlords to adopt RealPage’s pricing recommendations, which they do 80-90% of the time. This coordinated effort among landlords to follow the software’s suggestions drives up rental prices by reducing the availability of units. As one of RealPage’s architects reportedly stated, the goal is to prevent landlords from undervaluing their properties, thereby ensuring higher rents nationwide.

Cortland Management, which owns 85,000 rental units across thirteen states, is a significant player in this alleged conspiracy. The impact of such practices is starkly evident in Atlanta, where 81% of multifamily rental unit prices are set using software, and rents have skyrocketed by 80% since 2016. This price surge has occurred despite increasing vacancy rates, which would typically lead to lower rents. The adoption of RealPage’s pricing recommendations by numerous landlords between 2015 and 2017, followed by RealPage’s acquisition of its main rival Lease Rent Option in 2017, has given it unparalleled control over rental pricing.

The DOJ’s investigation isn’t limited to Cortland and RealPage. It has expanded to include dozens of property owners and managers across the country. The investigation has escalated from a civil matter to a criminal probe, reflecting the seriousness of the allegations. The DOJ and Federal Trade Commission are key players in this crackdown on anti-competitive behavior.

RealPage and its clients are already facing multiple lawsuits. A class-action lawsuit by renters, as well as lawsuits by attorneys general in Washington, D.C., Arizona, and North Carolina, allege that RealPage and its clients conspired to limit the supply of rental units and raise prices. RealPage denies any wrongdoing, asserting that their software is designed to be legally compliant. However, a federal judge in Tennessee has allowed much of the class-action case to proceed, indicating that the allegations of price-fixing are substantial enough to warrant further examination.

This investigation is particularly relevant to renters in Rhode Island. According to a report by Rent, Providence experienced the highest year-over-year change in rent prices in the U.S., with a 16.18% increase from March 2023 to March 2024. The metro’s median rent price reached $2,618, making Providence the ninth most expensive metro in the study. This sharp increase in rents is part of a broader trend that has seen rental prices in Providence climb from $1,845.50 in February 2019 to $2,743 in February 2024.

The RealPage investigation shines a light on how algorithmic price-fixing can distort rental markets, leading to higher costs for renters. By using sophisticated software to coordinate pricing decisions among landlords, RealPage allegedly undermines the competitive market forces that would typically keep rents in check. This practice not only affects renters’ wallets but also exacerbates the broader issue of housing affordability, which is a critical concern for many Americans.

As the investigation unfolds, it could lead to significant changes in how rental prices are set and regulated. For renters, this could mean relief from the relentless upward pressure on rents. For landlords and property management firms, it could mean increased scrutiny and potential legal consequences for engaging in anti-competitive practices.

The outcome of this investigation could set a precedent for how algorithmic pricing tools are used in the housing market. If the DOJ’s allegations are proven, it could lead to stricter regulations and oversight of software firms like RealPage, ensuring that rental pricing remains fair and competitive. For renters, this could be a crucial step towards more affordable housing and greater transparency in the rental market.

In the meantime, renters in Rhode Island and across the country will be watching closely as the DOJ’s investigation progresses. The raid on Cortland Management is just the beginning of what promises to be a landmark case in the fight against unfair rental practices. As more details emerge, it will become clearer how deeply entrenched these practices are and what measures will be taken to protect renters from exploitative pricing schemes.