Canadian tenants are pushing for greater scrutiny of an American property management software company that faces a U.S. federal government price-fixing investigation while it continues to be used by landlords in this country.
At issue is a suite of software tools known as “revenue optimization and management” used by corporate landlords to provide recommendations on how much to raise rents. One of the most popular options is known as YieldStar, owned by RealPage Inc., a name that’s familiar to some Canadian renters.
Rents across Canada have been on a rapid march upward for the past five years according to data from Statistics Canada and the Canada Mortgage and Housing Corporation, with some markets outpacing inflation in the rest of the economy. A shortage of housing is often cited as a main cause, but tenant groups have argued insatiable demands for profits are also driving up rents.
After recent news stories about raids by the U.S. Department of Justice on 10 large U.S. landlords using Texas-based RealPage software, Toronto resident Cynthia Black recalled her property management company had mentioned YieldStar during an April, 2023 negotiation between her tenants association and the building’s ownership.
“That was the first I had ever heard of YieldStar. … They said it takes into consideration different features as size, view, number of bedrooms,” Ms. Black recalls.
But according to more than 30 lawsuits filed in U.S. state and federal courts over the past two years against RealPage and competitor Yardi, their software does much more than compare bedroom size. According to allegations first published by ProPublica in 2022, RealPage’s rental software is a form of high-tech collusion because it compares prices and data between competitors, who accept 80 to 90 per cent of its recommended for market rents.
A 2023 ruling in a Tennessee lawsuit found “the most persuasive evidence of a scheme to fix prices is the fact that clients provided RealPage with their proprietary commercial data knowing that RealPage would require the same from their competitors and use all of that data to recommend rental prices,” according to legal analysis by U.S. firm Morris, Manning & Martin.
RealPage Inc. did not respond to a request for comment. The lawsuits contain allegations that have not yet been tested in court.
The company has called news coverage about its rental price software inaccurate and said in a statement released earlier this month that landlords, not RealPage, ultimately decide what to charge tenants. The statement said the software uses “limited aggregated and anonymized nonpublic data where accuracy aids pro-competitive uses.”
RealPage’s practices have gotten the attention of the U.S. Senate, where Democrats are pushing legislation to end so-called algorithmic price-fixing.
“So far we have not heard any indications from either the federal government or the provincial government even flagging this as a potential issue or concern for them,” said Dania Majid, a staff lawyer and director of the tenant duty counsel program at the Advocacy Centre for Tenants – Ontario (ACTO). “This software allows these financialized landlords to collude with one another so there is no competition. It’s not like you can just leave one rental company: They all used the software to set the same rent increases so there is no choice left.”
ACTO says it believes dozens of large Canadian landlords operate YieldStar or products like it.
The Livmore Tenants Association where Ms. Black lives formed in 2022 after two recently built buildings in a rental complex near Toronto’s High Park began sending residents rent increases as high as 7 to 14 per cent. The provincial maximum for rent increases on rent-controlled apartments in 2023 was 2.5 per cent, but the buildings – 50 High Park Ave. and 55 Quebec Ave. – have no limits on rent increases because they were finished after Ontario Premier Doug Ford’s government removed rent controls on any building completed after November, 2018.
Great West Life Realty Advisors Inc.’s Canadian Real Estate Investment Fund owns the entire complex and the tenants met with Todd Spencer, who at the time oversaw40 properties and more than 10,000 rental units as vice-president of national operations for GWLRA. (He has since left the company.)
According to Ms. Black, Mr. Spencer told them that YieldStar’s recommendations were calculated by an algorithm and were much higher than what he was passing on to tenants, because the company had chosen more “manageable” increases. Nevertheless, GWLRA refused to agree to collectively negotiate building-wide rental increases with the association, and Ms. Black said in the last year some tenants have received rental increases as high as 17 per cent.
GWLRA did not respond to a request for comment.
GWLRA provides a breakdown of its net operating income (NOI) per location in its annual reports, and according to its 2023 numbers the Livmore High Park buildings are the most profitable residential sites in its entire $6.6-billion, 120-property portfolio; only a series of industrial properties near Toronto’s Pearson Airport performed better.
Since its first full year of operation in 2021, the revenue growth at the new High Park sites has been dramatic, more than doubling from $2.456-million in NOI to $5.858-million in 2022 before hitting $6.9-million in 2023 for a total of 182 per cent profit growth over three years.
Despite that, the buildings had a higher vacancy rate in 2023 than they did in 2022, jumping from 2.65 per cent to 5.49 per cent, a trend Ms. Black said has continued.
“If they were interested in contributing to solving the housing crisis we wouldn’t have such a high vacancy rate,” said Ms. Black, who has heard from many former tenants that were financially evicted by rental increases.
“That’s the difference between a financialized landlord and the landlords of the past,” said Ms. Majid. “Landlords in the business of actually providing housing would reward a good tenant. They wanted to keep a tenant that paid the rent on time. A financialized landlord’s priority is not that: it is extracting the maximum profit.”
Editor’s note: A previous version of this story incorrectly said Todd Spencer works for Great West Life Realty Advisors Inc. He left the company in 2023. This version has been updated.
