Google has finally confirmed the existence of the huge memory leak bug that is currently affecting Android 5.0.1 users. As the Issue Tracker page confirms that the Nexus 4, Nexus 7 and Nexus 5 are affected as the Android system eating upwards of 1.2GB+ of RAM while the normal usage is just 50% of that around 500MB.
As several users point out and other confirm the memory leak seems to be caused by “system_server” when the screen is turned on/off (frameworks/base/services/core/java/com/android/server/display/ColorFade.java).
But there is hope, the thread has been marked as “Future Release” meaning that in future software updates (this can either be Android 5.0.3, Android 5.1 or Android 6.0 “M”) this issue will be addressed by Google and that there is currently no way of fix Android 5.0.1 Memory Leak. We might also see Google release a quickfix for the issue only on the affected devices in the next couple of days.