This week, San Francisco decided to ban the use of property management software that critics say is used to artificially increase rents and discourage competition.
Supporters of the ban say it would be the first of its kind targeting software that has allegedly played an outsized role in driving up housing costs, not just in the notoriously expensive city of San Francisco but in markets across the country.
“In the past, collusion between competitors occurred in a smoke-filled back room,” said Aaron Peskin, president of the San Francisco Board of Supervisors, who proposed the ban. “Today, by using this software, property owners share nonpublic data about their competitors in a data pool, which is then used to set rents and occupancy conditions.”
During Tuesday's board meeting, Peskin said he hoped the move would be replicated in other cities and counties.
“Banning algorithmic price speculation is a pro-housing policy,” he said.
The decision would affect companies like RealPage, which offers property management software. The Texas-based company is known for using an algorithm that gives landlords suggestions on how much to charge for rent.
Representatives for RealPage did not immediately respond to a request for comment Thursday.
But in a June 18 statement, CEO Dana Jones said the company’s software helps both landlords and tenants, and that the root causes of rising rents are a lack of affordable housing, rising demand and the inflationary costs of building and insuring housing.
“Housing affordability should be the real focus,” Jones said in the statement, which the company issued to address what she characterized as “false and misleading claims” about it and its software.
“RealPage is proud of the role our clients play in providing safe, affordable housing to millions of people.”
RealPage and its software, known as YieldStar, have been used by property management companies in several states. In 2022, ProPublica reported that RealPage was using private data to recommend rentals, as well as discouraging landlords from negotiating prices individually with tenants.
Some employees told the nonprofit outlet that in some cases landlords are encouraged to keep units empty to justify raising rents.
According to the ordinance introduced by supervisors on Tuesday, as many as 70% of landlords in San Francisco are using some form of similar software to set rental rates.
“The software has contributed to double-digit rent increases, higher vacancy rates and higher eviction rates,” a staff report said.
In its statement, RealPage said landlords are free to reject any rental recommendations the software makes. The company also denied allegations that it advises against offering vacant units to the market and said its software is used by a smaller portion of the residential rental market than has been claimed in media reports and legal documents.
The company has faced price-fixing allegations elsewhere. In November, the District of Columbia attorney general filed a lawsuit against RealPage and 14 large landlords, calling them a “district-wide real estate cartel.”
RealPage’s algorithm, the attorney general’s office alleged in a statement announcing the lawsuit, helped artificially inflate prices, costing renters millions of dollars.
Arizona Attorney General Kris Mayes also filed a lawsuit against the company and nine major apartment owners in February.
“Over the past two years, residential rents in Phoenix and Tucson have increased by at least 30% in large part due to this conspiracy that stifled fair competition and essentially established a rental monopoly in our state’s two largest metropolitan areas,” Mayes said.
Both lawsuits are pending.
The San Francisco ordinance is scheduled to be approved by the final board on Sept. 3. It would then go to Mayor London Breed, who would decide whether to sign it.
