Getty Photos | Terraxplorer
San Francisco’s Board of Supervisors this week accepted a ban on software program that’s allegedly utilized by landlords to collude on lease costs. Board of Supervisors President Aaron Peskin just lately proposed what his workplace referred to as “the primary native ordinance within the nation banning the sale or use of software program which allows value collusion amongst massive company landlords for the aim of rent-gouging.”
The ordinance was accepted on a primary studying by a 10-0 vote by the board on Tuesday. It nonetheless must cross a last vote scheduled for September 3, Bloomberg wrote.
The ban targets software program corporations RealPage and Yardi. “RealPage has exacerbated our lease disaster and empowered company landlords to deliberately preserve models vacant. So we’re taking motion regionally to make sure our working renters can afford to stay right here,” Peskin mentioned.
RealPage and Yardi “acquire and mix proprietary massive landlord information and make pricing and occupancy suggestions,” Peskin’s workplace mentioned. “These suggestions then successfully turn out to be the lay of the land, with a number of investigations discovering they quantity to unlawful price-fixing. RealPage’s personal executives have informed buyers that its software program has pushed double-digit will increase in rents, elevated ‘turnover’ of models, and elevated emptiness charges.”
A March 2024 White Home assertion criticized the usage of algorithms to set lease costs. “In a latest submitting, the Division of Justice (DOJ) made clear its place that inflated rents brought on by algorithmic use of delicate nonpublic pricing and provide info violate antitrust legal guidelines,” the White Home assertion mentioned. “Earlier this month, the Federal Commerce Fee and DOJ filed a joint transient additional arguing that it’s unlawful for landlords and property managers to collude on pricing to inflate rents—together with when utilizing algorithms to take action.”
The FTC/DOJ transient was filed in a class-action case in opposition to Yardi and property homeowners in US District Court docket for the Western District of Washington. There have been additionally quite a few lawsuits in opposition to RealPage and property homeowners, and people circumstances had been consolidated into one case in a Tennessee federal courtroom. The District of Columbia’s legal professional common sued RealPage and landlords as properly.
RealPage says its software program helps renters
In June, RealPage issued a assertion addressing what it referred to as “false and deceptive claims about RealPage and its income administration software program.” RealPage mentioned its software program “advantages each housing suppliers and residents.”
“RealPage income administration software program makes value suggestions in all instructions—up, down, or no change—to align with property-specific targets of the housing suppliers utilizing the software program,” the corporate mentioned. RealPage mentioned its property-owning prospects can settle for or reject the software program’s value suggestions, and that the “income administration software program by no means recommends {that a} buyer withhold vacant models from the market.”
The consolidated class motion criticism alleged that emptiness charges rose as a result of property homeowners “might (and did) permit a bigger share of their models to stay vacant, thereby artificially proscribing provide, whereas sustaining increased rental costs throughout their properties. This habits is simply rational if Defendants know that their opponents are setting rental costs utilizing RealPage’s RMS [revenue management software] and thus wouldn’t try to undercut them.”
We requested RealPage and Yardi whether or not they plan to problem the San Francisco ordinance in courtroom and can replace this text if we get any remark.
“Whereas we share the San Francisco Board of Supervisors’ purpose of serving to renters, this ordinance will do nothing to make housing extra reasonably priced within the metropolis, the place there’s a extreme provide scarcity of rental models that must be addressed,” a RealPage spokesperson informed KRON4 after the vote.
RealPage informed KRON4 that its “software program is purposely constructed to be legally compliant and could be configured to adjust to the brand new ordinance ought to it cross a last vote.” It additionally criticized the San Francisco board for what it referred to as a “misplaced deal with nonpublic info.”
Ban on “algorithmic gadgets”
The San Francisco proposal mentioned the software program “applications allow landlords to not directly coordinate with each other via the sharing of nonpublic competitively delicate information, with a view to artificially inflate rents and emptiness charges for rental housing. Collaborating landlords present huge quantities of proprietary information to the applications, which in flip don’t simply summarize statistical information, but additionally carry out calculations with the info to then set or present suggestions for lease and occupancy ranges.”
The ordinance “would prohibit the sale or use of ‘algorithmic gadgets’ to set, suggest, or advise on rents or occupancy ranges for residential rental models in San Francisco.” It defines “algorithmic gadget” as together with income administration software program “that makes use of algorithms to investigate nonpublic competitor rental information for the needs of offering a landlord suggestions on whether or not to go away their unit vacant or on what lease to cost.”
“An entity that bought such a tool to be used on residential rental models in San Francisco, or a San Francisco landlord that used such a tool, might face a civil motion and be ordered to pay damages, restitution, civil penalties of as much as $1,000 per violation, and/or attorneys’ charges,” the proposal mentioned.
