Washington D.C. — Amidst widespread outrage and intense debate over rising housing costs,  CoStar Group — the commercial real estate giant behind Apartments.com, Homes.com, and other sales platforms — announced its acquisition of homebuilding data and analytics firm Zonda, further concentrating ownership of real estate data under a single company. In response, the American Economic Liberties Project released the following statement:

“CoStar’s deal with Zonda underscores an unprecedented potential for market coordination that will push homeownership further out of reach for many Americans,” said Laurel Kilgour, Research Manager at the American Economic Liberties Project. “Through this acquisition, they are now the lead holders of critical land and development data, giving them far-reaching influence not only over the commercial and rental markets via LoopNet and Apartments.com, but also over the pace and supply of residential homebuilding. By locking up data from across the real estate life cycle, they can call the shots like a cartel ringleader.”

“This deal will deepen the national divide between big, publicly-traded homebuilders sitting on vast land holdings and the smaller, regional builders struggling to access capital and compete,” Kilgour continued. “If we want more homes and lower prices for ordinary families, we need policies that change the underlying incentives in homebuilding: a tax on land hoarding and revolving loan funds that give smaller builders a fighting chance to compete.”

BACKGROUND:

Over the last 20 years, CoStar has become a ubiquitous real estate gatekeeper capable of charging excessive prices for key data, through a series of acquisitions — including top real estate platforms like Apartments.com, Homes.com, LoopNet, STR, Matterport, and Australia’s Domain.

But CoStar’s $800 million cash acquisition of Zonda from MidOcean Partners represents new territory for the company: homebuilding. Indeed, CoStar has noted that “the annual value of new residential construction in the U.S.… [is] materially larger than the annual rent rolls of the institutional apartment and office sectors that CoStar Group has so successfully monetized.”

Zonda offers CoStar unprecedented access to unique property-level data and software that homebuilders use to guide development, investment, and sales decisions. The same way CoStar has allegedly raised rental prices via their accumulation of sales platforms, they may now have the opportunity to do with homebuilding by similarly controlling the data and access points. CoStar stands to gain a chokehold on the entirety of the real estate business — from construction to sales — that would not only threaten to squeeze out small- and mid-sized builders, but significantly raise housing costs for everyday Americans.

This acquisition occurs as CoStar faces a growing wave of antitrust scrutiny, including multiple class-action lawsuits accusing CoStar of using its market power to entrench its dominance in commercial real estate (CRE) data and listings, including by coercing the largest three CRE brokerages into noncompete agreements that limit the information they can share with competitors. It also faces an ongoing antitrust case from rival CREXi alleging CoStar locks CRE brokers into its platforms while restricting competitors’ access to critical digital infrastructure.

As the American Economic Liberties Project highlighted in our “Capital Crunch” report last fall, digital analytics and market intelligence tools can make it easier for large homebuilders to align around “inventory discipline” strategies that prioritize higher prices over greater housing production. These tools can reinforce housing shortages by reducing competitive pressure to build enough homes to lower prices for families. In the past, algorithmic price-fixing software, offered by companies like RealPage, has similarly weaponized real estate data to help big landlords collude on rent-setting and push rents above competitive levels — even at lower occupancy rates — raising marginal profits for corporate landlords while fueling affordability crises across the country.

To restore competition and boost housing supply, policymakers need to expand financing for local builders, discourage land hoarding through tax policy, and strengthen scrutiny of mergers and acquisitions across the housing industry, among other solutions.

Read the report, Capital Crunch: How the Fall of Local Finance and the Rise of Shareholder Primacy Warped Single-Family Homebuilding in America—And What to Do About It, here.

Learn more about Economic Liberties here.