As many landlords in the United States rely on a single company's software, which uses algorithms based on proprietary lease information to set rent prices, California cities, including San Diego, are pushing to regulate algorithmic pricing in the rental market.
San Diego's proposed ordinance, modeled after San Francisco's first-in-the-nation ban in July on "algorithmic devices to set rents or manage occupancy levels," is part of a growing movement to address the impact of pricing algorithms. San Jose is also considering similar measures, reported Associated Press.
Federal prosecutors have labeled the use of such algorithms as "an unlawful information-sharing scheme." Along with seven other states, California has joined a federal antitrust lawsuit targeting RealPage, the Texas-based platform used by landlords to set rental prices.
The complaint accuses RealPage of exploiting landlords' sensitive data, benefiting both the company and landlords while driving up rent prices at the expense of renters. Officials argue that the platform stifles competition, prevents market forces from lowering rents, and worsens the state's housing shortage.
In response, RealPage maintains that the housing supply shortage, not its technology, is the real issue. The company dismisses concerns over nonpublic data as a "misplaced focus."
RealPage spokesperson Jennifer Bowcock said that the technology benefits residents, property managers, and others in the rental market. She maintains that concerns over nonpublic data are a "misplaced focus," warning that regulation could worsen existing problems in cities like San Francisco and San Diego.
Although state lawmakers have yet to pass legislation addressing pricing algorithms, Sen. Melissa Hurtado plans to reintroduce a bill aimed at banning algorithms based on nonpublic data provided by competing companies. "We've got to make sure the economy is fair," she said, stressing the need to protect both consumers and businesses.
The company's challenges are only likely to grow if more states follow California's lead in regulating pricing software. After San Francisco's ban, the Philadelphia City Council passed its own veto-proof ban on algorithmic price-fixing. Other states, including New Jersey, are now considering similar actions.
California State's Investment in RealPage
In January 2021, private equity giant Thoma Bravo acquired RealPage through two funds that include hundreds of millions of dollars from California public pension funds, including California Public Employees' Retirement System, the California State Teachers' Retirement System, the Los Angeles police and fire pension funds, according to the Private Equity Stakeholder Project.
"They're invested in things that are directly hurting their pensioners," said K Agbebiyi, a senior housing campaign coordinator at the Private Equity Stakeholder Project, a nonprofit watchdog.
Impact on Renters
For Alan Pickens, a 31-year-old Navy veteran, and his wife, rising rents mean moving nearly every year. "The rent goes up, it gets unaffordable, so we look for a new place to stay," he said. Their new apartment in northeastern San Diego lists two-bedroom units for between $2,995 and $3,215.
The couple lives in an area where the U.S. Justice Department says information-sharing agreements between landlords and RealPage have harmed, or could harm, renters. To stay in the area, the Pickenses, who are expecting their first child, have given up gym memberships and downsized their cars.
"All the extras pretty much have to go," Pickens says, adding, "I mean, we love San Diego, but it's getting hard to live here. My wife is an attorney, and I served in the Navy for 10 years and now work at Qualcomm. Why are we struggling?," he asks.
