FBI raids Atlanta corporate landlord in probe of rental market price fixing

Cortland officials say the company is not a target of the antitrust probe

The federal government’s antitrust investigation into price fixing in the rental market appears to have found a fulcrum in Atlanta after a surprise FBI raid of multifamily property developer Cortland Management.

The May 22 search comes as the Biden administration’s Justice Department has reportedly deepened its price-fixing probe into Texas-based tech company RealPage over its rental pricing software and whether it colluded with landlords to raise rents.

In a statement to The Atlanta Journal-Constitution, Cortland Management said that the FBI had executed a limited search warrant at the company’s Atlanta office as part of the Justice Department’s investigation “into potential antitrust violations in the multifamily housing industry.”

“We are cooperating fully with that investigation, and we understand that neither Cortland nor any of our employees are ‘targets’ of that investigation. Due to the ongoing litigation, we cannot comment further at this time,” the company said in the emailed statement.

The Justice Department’s Antitrust Division declined to comment.

LexisNexis’s MLex, an industry publication covering regulatory and antitrust matters, first reported news of the search last week.

Founded in 2005 in Atlanta, Cortland owns tens of thousands of units and manages apartment complexes across the US, with offices in Charlotte, Dallas, Denver, Greenwich, Houston, Orlando, and Phoenix, according to information on its website. It also operates a management and development platform in the UK.

Cortland is one of several corporate landlords facing civil litigation for their alleged role in a purported nationwide conspiracy to fix and inflate rental prices for multifamily homes.

A 2022 ProPublica investigation into how RealPage’s technology could be artificially inflating rents sparked dozens of class action lawsuits across the country. The government opened an antitrust investigation into RealPage in November 2022. In March, Politico reported that the DOJ had opened a criminal investigation. The news outlet relied on four unnamed sources with knowledge of the matter.

RealPage spokeswoman Jennifer Bowcock declined to comment on the search of Cortland’s office. She said the company is cooperating with government authorities but that the civil claims against the company are meritless and the company’s tech “is purposely built to be legally compliant.”

“Our revenue management solutions use proven and accurate data to find fair pricing for both residents and property managers,” Bowcock wrote in an email.

The civil litigation centers on how RealPage’s tech taps into a database of rental prices and makes recommendation to landlords on what they should charge their tenants.

With an emphasis on outsourcing pricing decisions to RealPage’s algorithm, the knock-on effect for American consumers are ballooning rents, according to a federal class action lawsuit in Nashville, Tennessee, which consolidated the complaints.

In court documents filed this past September, tenants said there are about 484,000 multifamily rental units in the Atlanta, Sandy Springs and Alpharetta markets. More than 53% of owners, managers and owner-operators used RealPage’s software in those markets, including Cortland and the property management company Pinnacle, according to the complaint.

“Widespread adoption of defendant RealPage’s (revenue management software) has caused rent to increase explosively in recent years, with Atlanta renters paying approximately 56% more in rent today than they paid in 2016,” the 302-page document states.

The complaint accuses trade associations Atlanta Apartment Association, Georgia Apartment Association, and Southeast Regional Advisory Council for Apartment Life as “acting as conduits for the cartel.”

Bowcock said allegations about “the number of rental units associated with properties that use RealPage’s revenue management software are false.”

In November, the Justice Department’s Antitrust Division filed a statement of interest in the case.

With housing prices and rents besetting U.S. households, housing policy has become one of President Joseph Biden’s priorities as he seeks reelection. In his State of the Union address in March, he dedicated part of his speech to corporate landlords.

“For millions of renters, we’re cracking down on big landlords who use antitrust laws — who break antitrust laws by price-fixing and driving up rents,” he said.