San Francisco has made history as the first U.S. city to outlaw automated rent-fixing software. The new law, championed by Board of Supervisors President Aaron Peskin, aims to address the city’s skyrocketing rents and boost the availability of rental units.
“This ban on automated price-fixing will let the market function more fairly and reduce rent costs,” Peskin explained. The decision follows a series of legal actions, including several class-action lawsuits, investigations by State Attorneys General, and a federal inquiry.
The Problem with Rent-Fixing Software
The ordinance targets revenue management software used by around 70% of multifamily rental landlords in San Francisco. The Board of Supervisors argues that this software facilitates price collusion among large landlords, leading to inflated rents. By analyzing extensive data, the technology helps landlords set higher rents based on local market trends.
Tenant advocate Lenea Maibaum from the Housing Rights Committee described the negative effects of this technology. “We’ve seen significant rent hikes for new tenants and new methods to displace long-term renters,” Maibaum said, pointing out that these long-term residents are often targeted because their homes are considered underpriced by investors.
Legal Battles and Corporate Reactions
RealPage, a major Texas-based provider of such software, has faced considerable legal challenges. In recent years, renters and state attorneys general from various locations, including Washington, D.C., and Arizona, have sued the company. The lawsuits claim that RealPage’s AI Revenue Management software enables landlords to indirectly coordinate and fix prices.
Court filings reveal that RealPage boasts its software can help clients achieve a 3% to 7% increase in market performance. Despite being invited to speak at a committee meeting, RealPage did not attend, opting instead to issue a statement denying the allegations.
Industry Response and Market Impact
RealPage, along with competitors like Yardi, argues that their software improves transparency and efficiency in the real estate market. Jennifer Bowcock, RealPage’s spokesperson, defended the software, stating it merely advises landlords on potential rent adjustments and does not set rent prices. She criticized the ordinance, suggesting it would do little to address San Francisco’s severe rental shortage.
Major San Francisco landlords, including Brookfield Properties, Greystar, Equity Residential, and UDR, use RealPage’s technology. The Board of Supervisors has accused RealPage of promoting its software’s role in driving “double-digit rent increases, higher turnover rates, and increased vacancy rates” to investors.
Support and Criticism
Antitrust lawyer Lee Hepner from the American Economic Liberties Project supported the ban, saying, “RealPage’s software has contributed to significant rent increases, higher eviction rates, and artificial housing shortages. This ban is a step toward ensuring new housing development leads to lower rents.”
Peskin echoed this sentiment, stating, “RealPage has worsened our rent crisis and allowed corporate landlords to keep units empty. We’re taking local action to make housing affordable for our working residents.”
Details of the New Ordinance
The new law prohibits the use and sale of software that combines non-public competitor data to determine, suggest, or advise on rents and occupancy levels, targeting companies like RealPage and Yardi. It also allows for local enforcement through civil actions and provides tenants harmed by this technology with the right to sue.
Jennifer Bowcock of RealPage responded, arguing that their software complies with the law and can be adjusted to meet the new requirements. She criticized the focus on non-public data as a distraction that could exacerbate San Francisco’s housing issues by eliminating useful pricing technology.
Wider Implications
The Housing Rights Committee has been pushing for this ban for over two years. This local ordinance aligns with national concerns about housing affordability. President Biden, in his 2024 State of the Union Address, identified algorithmic price-fixing as a serious threat to affordable housing and a key issue in the fight against corporate rent increases.
