San Diego has become the latest city to ban revenue management software that uses algorithms to advise landlords on pricing their rentals based on private data collected and avoid competition with other multifamily owners and operators.
The ban targets RealPage, as the Texas-based software firm was also hit with a federal antitrust lawsuit by the U.S. Department of Justice in August, accusing it of illegally allowing landlords to align their prices and avoid competition that would otherwise keep rents down.
In an 8-1 vote of the City Council on Tuesday, San Diego joined other cities that have banned the rent-setting software, including San Francisco, Minneapolis and Berkeley.
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San Diego’s ordinance does not specifically mention RealPage, rather “algorithmic devices” used for rental rates. But a city staff report on the ordinance cites RealPage several times as a justification for the new law, the San Diego Union-Tribune reported.
The ordinance says that if a tenant finds out their landlord is using rental algorithm software, they may seek damages of up to $1,000.
RealPage, which is fighting the federal antitrust lawsuit, earlier this month filed a lawsuit against Berkeley in the U.S. District Court for the Northern District of California, calling the city’s ordinance a “sweeping and unconstitutional ban on lawful speech specifically intended to outlaw software products.”
Sean Elo-Rivera, the council member who introduced San Diego’s ban, said he worked closely with the city attorney to craft an ordinance not as broad as the Berkeley law, which didn’t expressly define the difference between private competitor data and public sources of housing data, the Union-Tribune reported.
At a press conference before the vote at Tuesday’s meeting, Elo-Rivera said San Diego’s ban is aimed at rent-setting software that “weaponizes private data, from what should be competing landlords, to figure out just how high they can push prices.”
RealPage attorney Michael Semko told the council the company simply offers analysis of the rental market with a pricing suggestion, adding that less than 40% of the time do its clients go with the suggestion.
“We don’t set rents,” he said. “The only way to lower rents is to build more housing. I think the ordinance is overly broad, it’s vague and invites scrutiny.”
According to RealPage, the company’s YieldStar software 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.”
The U.S. DOJ’s civil antitrust lawsuit against RealPage, which was filed in North Carolina and joined by 10 states, accuses RealPage of “an unlawful scheme to decrease competition among landlords in apartment pricing and to monopolize the market for commercial revenue management software that landlords use to price apartments.”
The DOJ’s complaint alleges that the property management firm contracts with competing landlords who agree to share with RealPage nonpublic, competitively sensitive information about their apartment rental rates and other lease terms to train and run its algorithmic pricing software.
“RealPage’s alleged conduct deprives renters of the benefits of competition on apartment leasing terms and harms millions of Americans,” the DOJ lawsuit stated.
In December, lawyers for RealPage asked the U.S. District Court for the Middle District of North Carolina to dismiss the DOJ’s antitrust lawsuit. The company said in its filing that the “DOJ has not been able, despite conclusions and labels, to articulate a theory of facts that shows anticompetitive effects, such as higher prices than a competitive market would sustain.”
The court in North Carolina has yet to rule on the motion to dismiss the case. Last month, Arizona Attorney General Kris Mayes sent a letter to U.S. Attorney General Pam Bondi urging her to continue the DOJ’s antitrust lawsuit against RealPage.
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