Cartel Of 10 Landlords Charge 'Unlivable' Rents, NJ Attorney General Says

NEW JERSEY — Following on the heels of a federal investigation, the state of New Jersey announced on Wednesday a lawsuit against property management software company RealPage and 10 of New Jersey’s largest landlords for allegedly colluding to raise rents.

They said the scheme "violated state and federal antitrust and consumer protection laws and forced tens of thousands of New Jerseyans to overpay for rent month after month."

State Attorney General Matthew Platkin even referred to the group of defendants as a "cartel" who kept tenants struggling to pay "unlivable rents."

Over the last few years, corporate landlords have bought up properties throughout New Jersey and raised rents by amounts such as 20 percent in one year. READ MORE: Are 20-30 Percent Rent Increases 'Unconscionable'? Hoboken Suit Could Set NJ Precedent

Officials across the country have been concerned that some landlords rely on "price-fixing" software, rather than the market, to drive up rents.

If landlords in one area all raise the rents at once, it means that tenants will have nowhere affordable to move to, and will be priced out of a region where they may have set down roots.

In Hoboken and Jersey City, where rents are among the highest in the country, tenants and officials have complained of rents being raised more than $1,000 per month. READ MORE: Rents In Jersey City And Hoboken Are Highest In Country, But Are They Legal?

The state Attorney General's Office said Wednesday, "RealPage and the landlords allegedly agreed to set rents for multifamily housing properties statewide based on RealPage’s algorithmic pricing software and to exchange sensitive, non-public information to align their prices and avoid competition that would otherwise keep rent prices down."

The complaint alleges the defendants engaged in violations of the federal Sherman Act, the New Jersey Antitrust Act, and the New Jersey Consumer Fraud Act.

“The defendants in this case unlawfully lined their pockets at the expense of New Jersey renters who struggled to pay the increasingly unlivable price levels imposed by this cartel,” said Attorney General Platkin.

“Today we’re holding them accountable for unlawful conduct that fueled the state’s affordable housing crisis and deprived New Jerseyans of their fundamental right to shelter.”

Average rents in New Jersey are among the highest in the nation and the state currently has a shortage of over 200,000 affordable rental homes, the state said.

'Activity' In North Jersey

"The situation in North Jersey, where a significant amount of the alleged activity occurred, is particularly dire," said a release from the Attorney General's Office. "Half of low-income renters are cost-burdened–meaning they pay more than 30 percent of their income on rent–as are nearly a quarter of middle-income renters."

“This lawsuit is about putting a stop to corporate greed at its worst,” said Jeremy Hollander, acting director of the Division of Consumer Affairs.

Along with the Texas-based RealPage, the complaint names these landlords:

• Morgan Properties Management Company LLC
• AvalonBay Communities, Inc.
• Kamson Corp.
• LeFrak Estates, L.P. and its subsidiary, Realty Operations Group LLC
• Greystar Management Services, LLC
• Aion Management LLC
• Cammeby’s Management Co. of New Jersey L.P.
• Veris Residential, Inc.
• Russo Property Management, LLC
• Bozzuto Management Company

What About Others?

The complaint references additional New Jersey landlords as unnamed co-conspirators.

"These are landlords owning or managing multifamily rental properties who are believed to have also unlawfully colluded to raise rents by collectively setting rents based on RealPage’s software," the state said.

A Jersey City resident, Kevin Weller, the head of the Portside East Tenants' Association, said he hoped to see more corporate landlords added. "My case against RealPage and over 25 major landlords preceded the Department of Justice's interest in these practices," he noted. "When testifying before the Assembly Housing Committee last October, I explained how these pricing algorithms significantly harm renters in buildings where city officials fail to enforce existing rent control laws."

He said Platkin should also investigate " how local government negligence enables this price-fixing scheme."

Officials Applaud Move

Jersey City Councilman James Solomon said on Wednesday, "Allegedly, RealPage — alongside many of Jersey City’s most prominent developers — directly contributed to our city’s affordable housing crisis by fixing rent prices here so they could profit. This is despicable behavior, and I look forward to swift justice on behalf of our city.”

Hoboken 3rd Ward Councilman Michael Russo, who represents a section of town with low-income housing — and an extensive wait list to go with it — said, "As the lawsuit alleges, RealPage and similar companies—including AvalonBay, [use] algorithms that allow landlords to securely share sensitive rent data, allowing them to hike prices in a coordinated manner. Back when we as Americans used to care about monopoly power and antitrust laws, this was called price collusion....The last few years have been a total disaster for people trying to access decent housing that they can afford, and we do not have room in Hoboken for those who cheat the system."

State Laws On Evictions And Increases

Many tenants are unaware that there are state laws protecting them from certain types of evictions and rent increases —and that these laws apply even to month-to-month rentals.

The state says that a tenant can withhold the amount of a rent increase if it's not "reasonable" or "conscionable," but doesn't specify the amount. A tenant must try to prove the increase is unwarranted when taken to court by the landlord. (Read more about that here.)

New Jersey also has eviction laws that apply to many types of units, saying landlords can only refuse to renew a lease, or try to evict tenants, for certain specific causes. Selling the building isn't always considered a just cause for eviction.

Lawyers and tenant advocates know the law best. Some nonprofits, such as the North Jersey Tenants' Organization, specialize in helping tenants better understand the laws.

Read Patch's recent reporting on these issues:

• Jersey City Takes Aim At Landlords 'Colluding' On Rent Hikes
• Hoboken Takes Aim At 'Unscrupulous' Software Helping Landlords Hike Rents
• 3 Large Landlords Sue Hoboken And Jersey City
• Return Of 'Delivered Vacant' In Hoboken? Longtime Renters Fear Demolition, Displacement
• Hoboken Votes In Landslide To Keep Rent Control