Bay Area corporate landlords can no longer exploit unsuspecting tenants with software that automatically sets rents. A "rent collusion" has sent rents skyrocketing along America's already expensive coast. As a result, San Francisco authorities banned the sketchy practice, considered illegal by many.
A recent ordinance enacted by the San Francisco Board of Supervisors would put an end to the practice of "automatic rent setting" managed by large corporate landlords. Led by Counselor and 2024 mayoral candidate Aaron Peskin, the committee unanimously approved the proposal. Peskin hopes to defeat current San Francisco Mayor London Breed in the November 2024 election.
The new rules ban the sale and use of "algorithmic devices" designed to autonomously set rental prices or manage occupancy rates for residential units in San Francisco. The supervisory board is targeting software developers such as RealPage and Yardi that are collecting rent data from landlords to make new pricing recommendations.
Officials in Peskin's office said the software companies are assembling rental data sets not available to the public and using the information to develop pricing and occupancy strategies to maximize profits. Peskin described the activity as a "automatic pricing" scheme in which large landlord groups collude with each other to blatantly fleece tenants.
Peskin noted that RealPage exacerbated San Francisco's rent crisis and gave corporate landlords the ability to intentionally keep units vacant. Attorney Lee Hepner, a member of the American Economic Liberties Project, believes that 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're manipulating the market, fixing prices, jacking up rents, and eliminating really healthy competition in the market that should be responding to that competitive pressure by actually lowering rents."
Heppner believes that RealPage software provides convenience for manipulating the rental market and undermining competition. In a healthy home market, competitive pressure should lower rents, not the other way around. The Board of Supervisors hopes to bring more housing units to the market while lowering rents.
RealPage faces multiple lawsuits accusing it of promoting a landlord cartel to the detriment of tenants. RealPage denies any wrongdoing. The company says its software helps build a healthier, more efficient rental ecosystem and that media reports or lawsuits are false and misleading. Now that the city has banned price-fixing software, the city attorney and affected tenants have a solid legal basis for future lawsuits against app developers.