San Francisco wants to ban software that critics say is used to artificially inflate rents

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

Supporters of the ban say it would be the first of its kind targeting software that has allegedly played a disproportionate role in driving up housing costs — not only in notoriously expensive San Francisco but in markets across the country.

“In the past, collusion between competitors happened in a smoke-filled back room,” said Aaron Peskin, chairman of the San Francisco Board of Supervisors, which proposed the ban. “Now, with this software, landlords are sharing competitors’ nonpublic data in a common dataset that is then used to set rents and occupancy conditions.”

During Tuesday’s board meeting, Peskin said he hopes a similar measure will be replicated in other cities and counties.

“The ban on algorithmic price increases is beneficial for housing policy,” he said.

The decision would impact companies like RealPage, which provides property management software. The Texas-based company is known for using an algorithm that gives landlords suggestions on how much to charge for rent.

RealPage representatives did not immediately respond to a request for comment made Thursday.

However, in a June 18 statement, CEO Dana Jones said the company’s software helps both landlords and tenants, and the primary reasons for rising rents are the lack of affordable housing, rising demand and inflationary construction and insurance costs.

“The number one goal should be affordable housing,” Jones said in a statement the company released to respond to “false and misleading claims” about his company and its software.

“RealPage is proud of the role our customers 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 used private data to recommend rents and also discouraged landlords from negotiating prices with tenants individually.

Some workers told the nonprofit news agency that in some cases, landlords are being encouraged to keep units empty to justify rent increases.

As many as 70% of San Francisco landlords use similar software to set rent rates, according to an ordinance unveiled by supervisors Tuesday.

“Software has contributed to double-digit rent increases, higher vacancy rates and higher evictions,” the report said.

In its statement, RealPage said landlords have the right to reject any rent recommendations made by its software. The company also denied allegations that it recommends keeping vacant units off the market and said its software is used by a smaller portion of the rental market than has been claimed in media reports and legal documents.

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

RealPage’s algorithm helped artificially inflate prices, costing tenants millions of dollars, the attorney general’s office said in a statement announcing the lawsuit.

Arizona Attorney General Kris Mayes also filed a lawsuit against the company and nine major condo owners in February.

“Over the last two years, apartment rents in Phoenix and Tucson have gone up at least 30%, in large part because of this conspiracy that has stifled fair competition and essentially established a rental monopoly in the two largest metropolitan areas of our state,” Mayes said.

Both lawsuits are pending.

Final approval of the San Francisco resolution is scheduled for Sept. 3. It will then go to Mayor London Breed, who will decide whether to sign it or reject it.