California is currently witnessing intense scrutiny over how landlords are leveraging artificial intelligence software to set rental prices, leading to considerable pushback from various cities. At the heart of the issue is RealPage, a Texas-based company providing pricing software which many landlords utilize to determine lease costs based on proprietary lease information. This practice has raised eyebrows not only among tenants but also among federal prosecutors, who argue it constitutes "an unlawful information-sharing scheme." The growing discontent has prompted several California lawmakers to take action, aiming to regulate the use of such software and curb its impacts on rising housing costs.
Recently, San Diego's city council president has taken the lead on this front, proposing to prohibit local apartment owners from employing RealPage's financial algorithms. This proposal follows San Francisco's trailblazing legislation enacted earlier this year, which became the first of its kind to ban the commercial use of such algorithmic devices for managing rental prices. The San Jose city council has also been considering similar measures as they assess the ramifications of these pricing practices on housing availability.
The federal antitrust lawsuit targeting RealPage has garnered support from California and seven other states, amplifying the urgency of the matter. The lawsuit alleges the software serves as an intermediary to gather and manipulate competitively sensitive information among landlords, amplifying the costs renters face. Notably, California Attorney General Rob Bonta remarked, "Every day, millions of Californians worry about keeping a roof over their head and RealPage has directly made it more difficult to do so." This statement encapsulates the concerns prevalent among local legislators and advocates who are committed to combatting unfair rental practices.
The core argument from critics of RealPage suggests its software gives landlords the means to inflate rents unlawfully, thereby exacerbated the already serious housing crisis affecting the state. A recent report highlights how California's average rent rates have surged dramatically— from approximately $1,926 per month across San Diego County as of mid-2020 to over $2,336 by November 2024, marking a staggering increase of 21%. For many, this means grappling with affordability issues and constant relocation.
RealPage, maintaining its stance, asserts its technology is not to blame for the rising rents. Company spokesperson Jennifer Bowcock comments, "The real problem is the lack of housing supply, not our technology." This counterpoint, framed as deflection by critics, seeks to shift focus from the software's purported role in artificially inflaring prices by calling attention to broader systemic issues within California's housing market.
To understand how RealPage's technology works, it's important to recognize its reliance on data sharing. Landlords typically submit information including rent prices, lease agreements, and future occupancy estimates to RealPage, which then aggregates this information to create pricing recommendations. Critics liken the process to engaging companies to "set prices" without formally colluding, labeling it as unethical market manipulation. San Diego’s council president likened the operation to "that dark, smoky room for big companies to get together and set prices. The technology is being used as a way of keeping an arm’s length from one big company to the other. But that's just an illusion."
Recent tenant accounts reveal the dire consequences of these practices on household budgets. Alan Pickens, a Navy veteran, explained how he and his wife must move almost every year due to unaffordability, often witnessing price tags between $2,995 and $3,215 for two-bedroom rentals. Such figures reflect the pervasive issues renters face and indicate how algorithmic pricing is fundamentally altering California's rental market. With 44% of the state’s households being renters, the stakes are even higher, especially since studies indicate low-income residents are being disproportionately impacted by these steep rent hikes.
The legal and legislative actions being undertaken stem from broader concerns about the future of housing affordability and tenant rights. Advocates like Senator Melissa Hurtado have pushed to advance bills to prohibit pricing algorithms based on private data, battling against what they perceive as detrimental technology misused by landlords. According to Hurtado, "We’ve got to make sure the economy is fair and... every individual who wants to create a business has a shot without being destroyed along the way." This sentiment echoes among many lawmakers who recognize the significant imbalance within California’s rental market.
Despite the pushback, RealPage continues to assert the legality of its operations, with the company characterizing the lawsuit and its underpinning accusations as attacks on innovation. A statement from RealPage expresses disappointment over the department's position, insisting, "The technology has been used responsibly for years.” Nevertheless, its revenue management software has been linked to systematic price inflation and greater barriers for individuals seeking to secure affordable housing.
Idyllic notions of California harboring thriving communities often clash with the realities of rapidly rising housing costs fueled by practices under the guise of technological advancement. Many residents now view these dynamics as emblematic of the broader challenges they face within the housing market. The path forward remains uncertain, but one thing seems evident: California's focus on regulating algorithmic rent increases is set to reshape the rental housing narrative. Advocates and legislators are doubling down on their initiatives, aiming to safeguard renters against what they see as predatory practices aggravated by AI-driven price-setting. With increased collaboration among various cities, advocates hope to pave the way for lasting changes. Meanwhile, the psychological strain of rising costs looms heavily over many, leading to questions on whether these algorithms represent real progress or just another layer of complexity masking the core issues of housing affordability.
