Arizona landlord lawsuit reveals dangers of price-fixing

Arizona Attorney General, Kris Mayes, has filed a lawsuit accusing nine prominent landlords and a software company of participating in a price-fixing scheme.

Mayes alleges that this operation led to significant rent hikes in Arizona’s largest metro areas. The lawsuit targets RealPage, Inc., a Texas-based software company that assists landlords in collecting rental market data and setting prices, along with several multi-family landlords, claiming they colluded to inflate costs.

According to Mayes, these actions directly worsened Arizona’s affordable housing crisis. Notably, in 2021, metro Phoenix witnessed a 30% increase in rents, the highest in the nation. Many tenants faced steep hikes when attempting to renew leases in 2022, though rates have slightly decreased this year.

Mark Stapp, Director of ASU’s Center for Real Estate Theory and Practice, joined Arizona Horizon to discuss his thoughts on the case.

“It’s obviously a concern when we have the affordability issues that we do, with rents that have gone up so quickly. We’ve talked about this a lot, and I think it’s something that should be investigated,” said Stapp.

“I think, however, it’s going to be difficult to parse out what is normal market-effect and what the effect of RealPage’s algorithm is on causing rent increases,” continued Stapp.

While Stapp did say price-fixing markets are a concern, he also admitted the problem of affordable housing as a convoluted issue that has affected not only Arizona but many other parts of the country as well.

The good news? There is more available housing and a higher rate of unoccupied units thanks to a surplus of new apartments recently being opened which has slightly lessened rent inflation in the state, and according to Stapp, makes price-fixing less feasible for landlords.

“This was well understood that we had a significant increase in the number of new apartments being built in a time period between 2018 till very recently. You start these projects; it takes you two plus years to be able to come in the market. We had a big push, a lot of apartments into the marketplace. And what we’re seeing now is the effect of those, where the occupancies are decreasing slightly because you have more inventory. You see rents being softened because you have higher vacancy with these complexes,” said Stapp.

“You have a competitive marketplace and people want to rent their apartments, so they have the ability to say, ‘I’ll keep my prices lower because I want you to rent my apartment.’ So, I think it’s going to be an interesting process to determine the real effect that RealPage had on overall market prices,” concluded Stapp.