San Francisco Bans Multifamily Proptech Algorithms

San Francisco has become the first city to ban the sale or use of revenue management software that deploys algorithms to set multifamily rents or management occupancy levels.

The new ordinance, passed unanimously last week by the Board of Supervisors, targets the use by revenue management platforms of data not generally available to the public. It prohibits price-suggesting “algorithmic devices” that advise individual landlords on how to price their rentals based on data collected from landlords across the city.

Introduced by Supervisor Aaron Peskin, the legislation empowers tenants and the city to sue software providers and landlords who use algorithmic revenue management programs to set their rents or to keep units vacant.

Exempted from the ban is software intended to establish rent or income limits for the city’s affordable housing program or products that use trade association reports of anonymous renter data.

In a statement, Peskin compared revenue management software to “automated price-fixing,” alleging that the software “has exacerbated our rent crisis and empowered corporate landlords to intentionally keep units vacant.”

Peskin estimates that up to 70% of the rental housing stock in San Francisco is controlled by companies using revenue management software.

The ordinance would prohibit the use of software including RealPage’s YieldStar, which combines lease transaction data from more than 14M units and uses AI-driven algorithms to “unlock hundreds of basis points of hidden yield through price optimization,” according to the company’s website.

“Housing affordability should be the real focus,” RealPage spokesperson Jennifer Bowcock said, in a statement provided to GlobeSt.com. “While we share the San Francisco Board of Supervisors’ goal of helping renters, this ordinance will do nothing to make housing more affordable in the city, where there is a severe supply shortage of rental units that needs to be addressed.”

The Texas-based firm said it serves only 10% of the rental market in San Francisco with its revenue management software.

“The ordinance’s misplaced focus on nonpublic information is a distraction that will only make San Francisco’s historical problems worse by banning an important component of pricing technology that RealPage uses responsibly and that benefits residents, property managers, and the rental housing ecosystem as a whole,” Bowcock said.

“Our software is purposely built to be legally compliant and can be configured to comply with the new ordinance,” she added.

In June, RealPage posted a statement on its website responding to “false allegations” regarding its revenue management software.

“RealPage customers decide their own rent prices, always have 100% discretion to accept or reject software price recommendations, are never punished for declining recommendations, and accept recommendations at widely varying rates that are far lower than has been falsely alleged,” the company said.

“RealPage revenue management software never recommends that a customer withhold vacant units from the market. In fact, properties using our revenue management products consistently achieve vacancy rates below the national average,” the RealPage statement said.