San Francisco moved this week to ban property management software that critics say is used to artificially raise rents and stifle competition.
Supporters say the ban would be the first of its kind targeting software that is said to play a huge role in increasing housing costs — not just in notoriously expensive San Francisco, but in markets across the country.
“In the past, collusion among competitors took place in smoke-filled back rooms,” said San Francisco Board of Supervisors Chairman Aaron Peskin, who proposed the ban. “Now, through the use of this software, real estate Owners share non-public competitor data into a public data pool, which is then used to set rent and occupancy terms.”
At Tuesday’s board meeting, Peskin said he hopes the initiative can be replicated in other cities and counties.
“Banning algorithmic price gouging is pro-housing policy,” he said.
The decision will affect companies such as RealPage that provide property management software. The Texas-based company is known for its use of algorithms that provide rental recommendations to property owners.
Representatives for RealPage did not immediately respond to a request for comment Thursday.
But CEO Dana Jones said in a statement on June 18 that the company’s software is helpful to both landlords and tenants, and that the root causes of rising rents are a lack of affordable housing, increased demand, and rising housing construction and insurance costs.
“Housing affordability should be the real focus,” Jones said in the statement, which the company issued to address what it called “false and misleading claims” about it and its software.
“RealPage is proud of the role our clients play in providing safe and affordable housing to millions of people.”
RealPage and its software called YieldStar are used by property management companies in several states. In 2022, ProPublica reported that RealPage was using private profiles to recommend rentals and preventing landlords from individually negotiating prices with tenants.
In some cases, landlords are being encouraged to keep units vacant to justify raising rents, some employees told the nonprofit news outlet.
As many as 70% of landlords in San Francisco are using some kind of similar software to set rents, according to an order proposed by regulators on Tuesday.
“The software resulted in double-digit rent increases, higher vacancy rates and higher eviction rates,” a staff report said.
RealPage said in a statement that landlords are free to reject any rental suggestions made by its software. The company also denied accusations that it recommended withholding vacant units from the market and said its software was used by a smaller proportion of the residential rental market than claimed in media reports and legal filings.
The company has faced accusations of price-fixing elsewhere. In November, the District of Columbia attorney general filed a lawsuit against RealPage and 14 major landlords, calling them a “district-wide housing cartel.”
The attorney general’s office said in a statement announcing the lawsuit that RealPage’s algorithm artificially inflated prices, causing tenants to lose millions of dollars.
Arizona Attorney. Gen. Kris Mayes also filed a lawsuit against the company and nine major apartment owners in February.
“Residential rents have increased by at least 30 percent in Phoenix and Tucson over the past two years, in large part because of this conspiracy that stifled fair competition and essentially established a system in our state’s two largest metropolitan areas,” Mays said. established a rental monopoly.
Both lawsuits are pending.
San Francisco’s ordinance is scheduled for final approval by the board on Sept. 3.
