San Jose may restrict use of AI tools to set rents amid concerns about price manipulation

SReal estate advocates in Jose say corporate landlords are using the latest artificial intelligence technologies to drive up rents, and tenants are feeling the financial pain.

Council member Peter Ortiz has proposed a policy that would restrict the sale and use of “algorithmic devices” to set rents or manage occupancy levels in city homes. The proposal comes after San Francisco adopted a similar rule in light of a Justice Department lawsuit against software provider RealPage for allegedly allowing its landlords to coordinate home prices using private data.

“We know that about 66% of multifamily units are managed by landlords who are using this software, so they’re basically using it to artificially inflate rent,” Ortiz told San José Spotlight. “We shouldn’t be allowing landlords to conspire against their tenants.”

RealPage software undermines the free market in housing by offering landlords artificial intelligence-based tools and data that give them an unprecedented advantage over smaller landlords, U.S. Attorney General Merrick Garland said, potentially driving up rents and home prices.

SV@Home policy director Mathew Reed said local landlords who manage no more than a few properties and can’t afford new technology will be undermined by larger corporations that can now analyze their entire business model with the click of a button.

“Not only are the big players potentially collaborating with each other, but they’re probably cutting out the good players in the market,” he told San José Spotlight. “That’s also hurting smaller and mid-sized landlords and renters.”

“Not only are the big players potentially collaborating with each other, but they’re probably excluding the good players from the market. … That’s also hurting smaller and mid-sized landlords and tenants.”

SV@Home Policy Director Mathew Reed

Private equity firm Thomas Bravo acquired RealPage in 2020 for nearly $10.2 million, just months after the software company announced its controversial AI-powered revenue management tool that “unlocks hidden profits from multifamily assets.”

Ortiz said he became concerned about the potential use of the software in San Jose when law enforcement officials and tenants across the country began accusing RealPage of allowing landlords to collude in setting prices using the software. His proposed policy to limit the use of such software to set rents and occupancy levels is being reviewed by city staff before going to the City Council.

Sacred Heart Policy Director Matt King told council members he supports the proposed legislation.

RealPage did not respond to a request for comment.

No evidence

Anil Babbar, senior vice president of local public relations for the California Apartment Association, told council members there was no evidence such software tools had any impact in San Jose.

“In addition to the lack of data to support the ban, this memo would require additional staff time to enforce the ban — a ban that we don’t know exactly how we’ll enforce because we don’t know whether rent increases or decreases are driven by the utility or by landlords’ decisions,” Babbar said at the Sept. 4 meeting.

A spokesperson for the California Apartment Association told San José Spotlight it had no comment beyond its initial statement to council members.

Huascar Castro, director of housing and transportation at Working Partnerships USA, said the precedent of multiple antitrust complaints and lawsuits should be enough for San Jose to consider the policy. Thousands of renters are at risk of housing price hikes because of the latest property management technology used by large landlords, he said, and that shouldn’t be allowed to happen in San Jose.

“This is an opportunity for San Jose to do its part, given the enormous amount of real estate controlled by corporate real estate,” Castro told San José Spotlight.

Contact Vicente Vera at [email protected] or follow @VicenteJVera on X, formerly known as Twitter.

This article originally appeared on San José Spotlight.