The streets of San Francisco may be famous for Dirty Harry, movie car chases and the birth of the hippie movement, but they will no longer be associated with rental pricing software. That’s because the Golden Gate City will become the first city in the United States to ban tech tools allegedly linked to landlord pricing.
San Francisco’s Board of Supervisors unanimously approved an ordinance proposed by its supervisor and mayoral candidate Aaron Peskin that would prohibit landlords from using certain software and algorithms to set rents. The measure still needs mayoral approval next month to be implemented.
The most prominent software companies affected by the legislation are RealPage and Yardi, both used by landlords across the country. The companies have sparked controversy, lawsuits and a Justice Department investigation for allegedly fueling rent increases.
According to Peskin’s office, the new legislation prohibits the sale and use of “software that combines non-public competitor data to set, recommend or provide advice on rentals and occupancy rates.” The measure would also allow city attorneys or tenants affected by the software to file lawsuits.
The extent of California’s housing crisis
The housing crisis is most widespread in California, one of the most rent-burdened states in the country, with 44% of households renting. Rent control advocates are involved in a controversial fight to repeal the Costa-Hawkins Rental Housing Act, which was enacted in 1995 and prohibits communities from regulating single-family homes and any housing built after February 1, 1995. Rent control.
Pricing software is widely believed to have driven up rental prices, contributing to the affordability crisis sweeping the country. Peskin called such software “automated pricing” and said the ban would “allow the market to work and lower rents in San Francisco.” He also claimed at a conference that “Wall Street has gotten involved in real estate, and that’s something we’re seeing here.”
Peskin accuses landlord of deliberately leaving units vacant
Peskin continued:
“We want to put more units on the market. Let us be clear: RealPage exacerbates our rental crisis and empowers corporate landlords to intentionally keep units vacant. So we are taking action locally to ensure our working renters Can afford to live here.
Lee Hepner, an attorney with the American Economic Freedom Project, told CBS News’ John Ramos: “What they are doing — their entire business model — is illegal. They are manipulating the market to fix prices. and raising rents and removing real healthy competition from the market that should be responding to competitive pressures and actually lowering rents.
Big rent increases and tenant harassment
RealPage responded in a statement to CBS Bay Area News on July 17, sticking to its oft-used arguments that media reports are misleading and that their software “helps build healthier, more productive communities.” The rental housing ecosystem”.
Lenea Maibaum, a tenant organizer at the Council for Housing Rights and a member of the Veritas Tenants Association, said the most obvious partners for RealPage and Yardi are corporate landlords with dozens to thousands of apartments and using a variety of techniques to increase landlord profits.
Maypole told kqed.org:
“Tenants experienced the effects of RealPage, including rent increases, fees to circumvent rent control, and arbitrary evictions. It was a dangerous tool for resource-rich corporate owners. Since Veritas (later Brookfield) took over Since taking over management of my apartment building and thousands of other rental units in San Francisco, we have noticed significant rent increases for new tenants, as well as new tactics to harass and displace long-term tenants.
How mom-and-pop landlords are using algorithmic pricing to attract more tenants
RealPage software is used to set rental prices on 4.5 million homes in the United States.
Analytics website enlyft.com says 71% of RealPage’s customers are small landlords with fewer than 50 employees. This means the company’s potential reach will reach a wide swath of the U.S. rental market.
Even mom-and-pop landlords with one to four units, who account for nearly 46% of the rental market, are not immune to RealPage’s impact. That’s because when hosts look at nearby rental properties on sites like apartments.com to see what competitors are charging, they may see other hosts using RealPage.
However, many landlords and property management companies represent larger apartment complexes, often offering amenities such as gyms, pools and lounges.
When it comes to my own rentals, I’ve found that many tenants would rather pay less rent than enjoy the amenities. They would rather join a gym of their choice and socialize outside of their living space. This is an advantage for mom and pop landlords like me. By charging less than what the RealPage algorithm dictates, there is a group of tenants who do not want the algorithm to determine their rental prices, but prefer a fairer price with no additional fees.
final thoughts
RealPage and Yardi aren’t the only players in town – there are plenty of options out there. However, in a data-centric world, algorithmic pricing that appears across multiple industries will inevitably seep into real estate as well.
Property management software is a huge business, currently worth over $25 billion and expected to exceed $32 billion by 2028. However, most of these algorithms fail to factor into their complex equations the socioeconomic factors that influence tenants’ search for a place to live, which is becoming increasingly unaffordable.
Assuming you don’t rent to Section 8 tenants, pricing your rent in an escalating market while keeping it in good condition is one way to keep your rent adequate for longer , without experiencing high tenant turnover and ultimately beating the algorithm at its own game.
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