As if renting in the Bay Area wasn't costly enough for a lot of people, some San Francisco landlords were using artificial intelligence software to set rates even higher.
San Francisco supervisors took swift action banning some AI rental software the first time they discussed it Tuesday.
The software in question is RealPage and Yardi. They compile landlord data to determine how high they can set a unit’s rent, or perhaps not rent it at all, by using the rental data of their competitors. The fear is multiple landlords working together to keep prices high.
According to the information in the supervisors had to consider, the use of the software increased rent, vacancy and even eviction rates, and the companies have faced lawsuits in other communities across the country.
While RealPage claims not enough landlords use the software in San Francisco to contribute to alleged collusion, Supervisor Aaron Peskin disagrees.
"Banning algorithmic price gouging is pro-housing policy," Peskin said at a recent board meeting. "Let’s build housing for renters, not for real estate investors."
Earlier this year in U.S. District Court in Tennessee, two large companies that operate multifamily residential properties settled claims that they artificially inflated rental prices using RealPage software, according to a report from Reuters.
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Before preliminarily passing the legislation, members of the board's Land Use and Transportation Committee heard a presentation from Lee Hepner, senior legal counsel for the American Economic Liberties Project.
According to Hepner, RealPage software prices 8% of rental housing units across the U.S. - enough to engender "high levels of market manipulation."
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Hepner also said the AI relies on landlords disclosing data about their units to RealPage. Though it would not normally be in landlords' interests to share such information, they offer it, because they receive the benefits of their competitors' data in return.
According to May 2023 figures from RealPage, 6.1% of rental units in the San Francisco metropolitan statistical area use AI Revenue Management or YieldStar, two of its products. Since that's such a small part of the market, RealPage contends, price-fixing and collusion cannot occur through its devices.
Instead, RealPage claimed the software benefits both landlords and residents. The company also said its products can recommend that rent prices decrease, increase or stay the same, but do not require that users apply those recommendations.
"The truth shows the distorted narratives and lawsuits have no merit," the company said in information presented to the board.
Outlawing the devices still awaits supervisors' final approval upon their return from August recess, a representative of Peskin's office said.
