San Francisco seeks ban on software that critics say is used to artificially inflate rents (2024)

San Francisco this week moved to ban the use of property management software that critics allege is used to artificially raise rents and discourage competition.

Supporters say the ban would be the first of its kind targeting software that has allegedly played an outsized role in increasing the cost of housing — not just in notoriously expensive San Francisco, but in markets across the country.

“In the old days, collusion between competitors happened in a smoke-filled back room,” said Aaron Peskin, president of the San Francisco Board of Supervisors, who proposed the ban. “Nowadays, by using this software, real estate owners share nonpublic competitor data into a common data pool, which is then used to set rents and occupancy terms.”

During the board’s meeting Tuesday, Peskin said he hoped the move would be replicated in other cities and counties.

“Banning algorithmic price-gouging is pro-housing policy,” he said.

The decision would affect companies such as RealPage, which provides property management software. The Texas-based company is known for using an algorithm that gives real estate owners 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, Chief Executive Dana Jones said that the company’s software helps both landlords and renters, and that the root causes of rising rents are the lack of affordable housing, increasing demand and 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 it characterized as “false and misleading claims” about it and its software.

“RealPage is proud of the role our customers play in providing safe and 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 rents, as well as discouraging landlords from negotiating prices individually with renters.

Some employees told the nonprofit news outlet that landlords are, in some cases, encouraged to keep units vacant to justify raising rents.

According to the ordinance advanced by supervisors Tuesday, as many as 70% of landlords in San Francisco are using some sort of similar software to set rent rates.

“The software has contributed to double-digit rent increases, higher vacancy rates and higher rates of eviction,” a staff report stated.

In its statement, RealPage said landlords are free to reject any rent recommendations made by the software. The company also denied allegations that it advises withholding vacant units from 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 filings.

The company has faced allegations of price-fixing elsewhere. In November, the District of Columbia’s attorney general filed suit against RealPage and 14 large landlords, referring to them as a “District-wide housing cartel.”

RealPage’s algorithm, the attorney general’s office alleged in a statement announcing the suit, helped artificially inflate prices, costing renters millions of dollars.

Arizona Atty. Gen. Kris Mayes also filed suit against the company and nine major apartment landlords in February.

“In the last two years, residential rents in Phoenix and Tucson have risen by at least 30% in large part because of this conspiracy that stifled fair competition and essentially established a rental monopoly in our state’s two largest metro areas,” Mayes said.

Both lawsuits are pending.

San Francisco’s ordinance is scheduled for final board approval Sept. 3. It would then go to Mayor London Breed, who would decide whether or not to sign it.