A hot potato: Corporate landlords can no longer gouge unsuspecting tenants in the Bay Area using automated rent-setting software. “Rental collusion” has driven rental rates sky-high in the already expensive US coastal region. So, San Francisco authorities have banned the sketchy practice that many consider illegal.
A recent ordinance set by the San Francisco Board of Supervisors will stop the “automated rent-setting” practices managed by large landlord ventures. The Board unanimously approved the proposal, led by supervisor and 2024 mayoral candidate Aaron Peskin. Peskin looks to unseat current San Francisco Mayor London Breed in the November 2024 election.
The new rule prohibits the sale and use of “algorithmic devices” designed to autonomously set rent prices or manage occupancy levels for residential units in San Francisco. The Board of Supervisors is targeting software developers such as RealPage and Yardi, which were collecting rental data from landlords to suggest new pricing recommendations.
Officials in Peskin’s office said these software companies were combining rent data sets unavailable to the public and using the information to develop price and occupancy strategies that could maximize profit. Peskin described the activity as an “automated price-fixing” scheme, with large landlord organizations colluding in a blatant effort to bleed tenants dry.
Peskin noted that RealPage has exacerbated the San Francisco rent crisis and empowered corporate landlords to keep units vacant intentionally. According to attorney Lee Hepner, a member of the American Economic Liberties Project, the entire business model of these companies is essentially illegal.
“What they’re doing, their entire business model is illegal,” Hepner told CBS News. “They are manipulating the market to fix prices and hike rents and remove really healthy competition from markets that should be responding to that competitive pressure and actually bring rents down.”
Hepner contends that RealPage software provides a convenient way to manipulate the rental market, damaging competition. In a healthy household market, competitive pressure should decrease rents, not vice versa. The Board of Supervisors wants to lower rental rates while putting more housing units on the market.
RealPage faces several lawsuits accusing it of promoting landlord cartels against tenants’ interests. RealPage idenies any wrongdoing. The company stated that its software contributes to a healthier and more efficient rental housing ecosystem and that media reports or lawsuits are false and misleading. Now that the city has banned price-fixing software, City Attorneys and affected tenants have a firm legal foundation for filing future lawsuits against the app developers.
