Is your rent being set by a computer? What California tenants should know

Across the nation, the use of rent-setting software is under fire — and in California, the fight is heating up. Three cities in the state are taking steps to ban or restrict these tools, which critics say help large landlords coordinate rent hikes and reduce competition in the housing market.

At the center of the controversy is RealPage, a Texas-based company whose software is drawing scrutiny from city councils, tenant groups and federal regulators.

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Rent-setting algorithms rely on software that analyzes extensive data from landlords, including sensitive details about what nearby competitors charge.

These algorithms generate suggested rent prices for landlords, but landlords are not required to follow them, according to previous reporting by ProPublica.

However, a lawsuit from the Washington State Attorney General’s Office alleges that RealPage’s software discourages landlords from negotiating with renters and sometimes recommends accepting lower occupancy rates to push rents higher.

RealPage provides this service and is currently facing bans and legal challenges in five major U.S. cities.

In 2024, the Biden administration also sued the company, accusing its algorithm of enabling landlords to collude on pricing and suppress competition, according to reporting by Marketplace.

The U.S. Department of Justice’s civil lawsuit against RealPage is ongoing, with additional landlords now involved and a potential settlement underway with one of them.

Read more at: https://www.sacbee.com/news/california/article309315520.html#storylink=cpy

Currently, five major U.S. cities have banned or tried to ban the use of rent-setting algorithms in their housing markets. They are:

California has the third highest cost of living in the nation, according to the Missouri Economic Research and Information Center.

With housing and living costs already high in the state, rent-setting algorithms — including those from RealPage — can push apartment costs even higher while helping large landlords maintain fixed revenues across millions of units nationwide.

In the case of RealPage, its software gathers nonpublic data from landlords — including pricing and occupancy rates — and uses that information to calculate rent recommendations.

Because landlords opt into sharing their data, the resulting pricing can resemble a coordinated effort rather than a competitive market, critics argue.

Berkeley city officials, tenant advocates and the Department of Justice have contended the software amounts to algorithmic price-fixing, according to Berkeleyside website.

The Department of Justice’s ongoing antitrust lawsuit against RealPage claims the company’s algorithm combines confidential information from multiple landlords in ways that allow them to align rents and avoid competition that would normally help keep prices in check.

In the Washington lawsuit, RealPage is also accused of discouraging landlord practices like negotiating with renters or offering concessions, instead favoring strategies to maximize rents.

For example, the company trains its clients to use an “auto-accept” feature that automatically approves the software’s suggested prices.

The Washington State Attorney General’s Office said in a news release, “If a landlord doesn’t want to use auto-accept, RealPage advisors are trained to convince them to turn it on.”

RealPage also said in a news release that it facilitates landlord “user groups” that meet regularly to discuss pricing software updates, share sensitive competitive information and develop strategies.

Critics say this further reduces competition in the rental market.

It’s hard to say.

Right now only three cities in California have pursued bans against RealPage and other similar algorithms.

Washington is the only state to file a suit against RealPage, according to Washington State Office of the Attorney General.

If Washington is successful in its suit then it is likely that more bans and suits will appear across the country.

However, it is looking like an uphill battle.

For Berkeley, the city had voted in March to ban software that sets rent prices and the ban was set to begin at the end of April.

Earlier in April, RealPage sued the city stating the ban infringed on the company’s First Amendment rights, according to reporting by KALW.

Since then, the city of Berkeley may be looking to postpone the ban. The city will make a decision to further postpone the ban in June.