A new federal class-action lawsuit blames a fresh culprit for the record-high rents plaguing New York City tenants: the nation’s largest real estate brokerage.
Two Tribeca tenants have accused the rental giant Compass of becoming “a living, breathing real estate leviathan” that distorted the market and forced them to pay a higher price for their apartment. Plaintiffs Peter Castaneda and Haley Gelfand say the giant brokerage is monopolizing 80% of Manhattan rentals and “hiding listings” from public-facing platforms like StreetEasy.
“New York City’s rental market was already on the verge of being broken, and Compass decided, to its own benefit, to shatter it,” they charge in a lawsuit filed Wednesday in Manhattan federal court.
The complaint accuses Compass of “a conspiracy to monopolize and harm hardworking New Yorkers in the New York City metro area.”
The renters say they are paying $5,270 a month for one-bedroom apartments they leased earlier this month – an amount they claim was inflated by Compass’ decision to pull listings from StreetEasy in July.
Compass did not immediately respond to multiple requests for comment.
Castaneda declined to comment on the lawsuit. Gelfand did not respond to a phone call seeking comment.
Their attorney Blake Yagman said Compass’ practices created a “supply shock” that has led to bidding wars for a dwindling number of units.
“People looking on publicly available sources like Zillow aren’t able to access all of the supply that is available to them,” he said.
The median rent in Manhattan reached a record-high $5,000 last month, according to an analysis by The Real Deal.
The latest spike traces a yearslong surge in prices amid increased demand for a limited number of units. Just 1.4% of all apartments are empty and available to rent, according to the city’s more recent housing survey. The rate is under 1% for units priced below $2,400 a month.
The city’s housing agency unveiled its own blueprint for building 700,000 new units to solve the shortage on Wednesday.
But the new antitrust complaint says Compass' actions and control over the rental market are worsening the current crisis.
It is the latest front in a series of ongoing legal, regulatory and public relations battles Compass is facing over claims it has distorted the rental market in New York City.
The company is the subject of an investigation by New York Attorney General Letitia James following its $1.6 billion acquisition earlier this year of its former rival firm Anywhere Real Estate — an umbrella company for other brokerages like Corcoran Group and Sotheby’s.
Earlier this month, U.S. Sen. Elizabeth Warren launched a congressional probe over concerns that Compass’ industry consolidation will “harm consumers by driving up housing costs and worsening inequalities in the housing market” nationwide.
The firm was also locked in yearlong litigation against Zillow, the parent company of StreetEasy, over Zillow’s rules barring listings that Compass had initially placed on its own exclusive service. Compass dropped the lawsuit after Zillow made changes to its rules, but the two industry giants have remained at odds.
The new lawsuit brought by tenants claims Compass explicitly instructed agents to pull listings off StreetEasy last month, leading to a significant decrease in the number of apartments available on the platform. Following the directive, listings dropped 7% in the first week of August and 11% in the second week, The Real Deal reported.
Compass encouraged its brokers to instead list units on a separate platform maintained by the Real Estate Board of New York, thus “depriving consumers of free-to-access portals to find rental units,” including units without broker fees, according to the complaint.
Yagman, the attorney for the tenants, said Zillow and its subsidiary StreetEasy are not involved in the lawsuit.
But the company nevertheless cheered the complaint.
"When listings are deliberately hidden from public platforms, real consumers pay the price,” said StreetEasy spokesperson Matt Kreamer in a written statement.
