San Francisco Moves to Ban Algorithmic Price Setting in Rental Market

San Francisco has made headlines this week with a groundbreaking decision by the Board of Supervisors to implement a ban on algorithmic price setting within the rental housing market. This ordinance, which passed with notable support, targets real estate management software from major players such as RealPage and Yardi, which have been scrutinized for their role in inflating rental costs, according to The Register.

The measure, introduced on July 16, 2024, by Board of Supervisors President Aaron Peskin, aims to curb what he describes as “price collusion among large corporate landlords,” a practice that critics argue leads to rent-gouging. In a statement, Peskin emphasized that eliminating automated price-setting tools would help create a more competitive market, potentially lowering rents in San Francisco. Notably, Peskin has previously supported down-zoning measures that restrict real estate availability, which have been linked to rising costs.

While the ban addresses one aspect of the complex rental market, it is not a cure-all. The Register points out that other factors, including private equity investments, rising housing and construction costs, also play significant roles in shaping rental prices. The ordinance, seen as the first of its kind in the U.S., is pending final approval by the Board of Supervisors, with a decisive vote scheduled for September 3, 2024.

Lee Hepner, senior legal counsel at the American Economic Liberties Project, praised the ordinance as a forward-thinking initiative to ensure fairer housing markets. Hepner criticized RealPage’s rent-setting software for enabling corporate landlords to exploit rental markets while constraining housing supply across the nation. Per The Register, the ordinance specifically prohibits the sale, licensing, or use of any algorithmic device that determines or advises on rental prices or occupancy rates for residential units in San Francisco.

According to The Register, the ordinance defines an “algorithmic device” as any system utilizing algorithms to analyze nonpublic data on competitor rents or occupancy levels. These devices are designed to guide landlords on decisions such as whether to keep units vacant or set specific rental rates.

Source: The Register