Ongoing war against algorithms in rental housing

Landlords face increased liability by using technology to do their homework on comparable units, as San Francisco doubles down on enforcing its ban on rent-setting software and state legislators look to rein in alleged collusion between housing providers. 

Algorithms are designed to optimize just about everything, and whether you see it or not, they are intertwined in every aspect of life and business. All online searching is accomplished through them. Emails know their destination, thanks to algorithms. Online dating and travel sites would be naught without them. When someone gets from point A to point B using GPS mapping systems, they are relying on them. The majority of financial transactions today are made through the use of algorithms. Without them, there would be no storytelling in video games. The content people see through social media is driven by algorithms. The list is endless, but you get the point.

For the better part of a decade, it is alleged that software companies have artificially inflated rents by helping landlords coordinate rent increases, potentially violating antitrust laws. Many states have joined the bandwagon by taking the fight to court with claims that daily pricing suggestions based on the non-public, private information of competing landlords are illegal and aggravate the dearth of affordable housing.

A recent lawsuit alleges it goes a step further with landlords being monitored for compliance with these real-time pricing recommendations.

As the birthplace of tenant protections, it’s no surprise that San Francisco has led the charge to ban alleged price-fixing software. Now, it adds new teeth to this prohibition.

As reported by the San Francisco Examiner, it wasn’t enough to give the City Attorney’s office and aggrieved tenants the authority to sue landlords for using the rogue software. The Board of Supervisors recently voted to allow tenant organizations to file lawsuits to enforce the ban on algorithmic devices to set rents or manage occupancy levels for residential dwelling units located in San Francisco.

In response, the company RealPage says that even before the initial ban, which took effect in October, the company did not use proprietary rental information in the City.

San Francisco’s ban has not been challenged yet, but if Berkeley is any indication, there may be a fight.

In March of 2025, Berkeley passed a law prohibiting landlords from using software or algorithms to set rental prices that could potentially drive up the cost of renting. RealPage responded with a federal lawsuit, arguing that the ordinance violates its First Amendment rights by banning what the company called “lawful speech.” It said that its capability provides data-based advice, even when relying on publicly available information.

Facing mounting legal pressure and a $27 million shortfall in Berkeley’s budget, Berkeley lawmakers paused by voting to postpone the ban’s enforcement until 2026, buying some time to negotiate or resolve the litigation.

State lawmakers are dialed in and are brewing up their own solutions.

Overlapping bills have been proposed to address algorithmic collusion. SB 295 (Hurtado) and SB 384 (Wahab), in similar ways, seek to prohibit the distribution and use of algorithmic price-fixing tools that process nonpublic competitor data. Whereas SB 295 and SB 384 apply to a broader array of categories, SB 52 focuses specifically on rental housing. Here's the Readers Digest version of the bill being floated:

The author of the bill, Senator Sasha Renee Perez, concedes that “pricing algorithms are commonly used to help set prices that are responsive to market conditions, which may increase market efficiency in competitive markets,” but qualifies this with the statement that they “can also facilitate price-fixing, thereby decreasing market efficiency and hampering competition."

Landlord advocates object to the bill. 

Naturally, organizations representing housing providers are in unison in opposing the proposed legislation, including the California Apartment Association (CAA). They made the following arguments:

• The bill holds users of rental pricing algorithms liable simply because they should have known that another person uses the same product – a standard that would always be met for a commercially available product – even if the user did not know, and had no reason to know, that the rental pricing algorithm ran afoul of the law. This holds landlords to a much higher standard than users of other pricing algorithms under existing law and as proposed to be regulated under AB 325. Further, the liability standards in subdivisions (b) and (c) conflict, thereby creating confusion about the applicable standard.

• The definition of nonpublic competitor data remains too narrow for two key reasons. First, it fails to exclude internet listing services. Second, the exclusion of aggregated data applies only to the extent that it is derived from sources that themselves are not nonpublic competitor data – thereby making the exclusion largely meaningless.

• The way penalties are determined is excessive, as it makes each month in which a rental pricing algorithm is used, and for each premises for which it is used, to be considered a separate violation. This means that a single decision by a landlord to use an algorithm will result in numerous violations, each of which carries a separate penalty. This is particularly concerning given the low standard of liability.

Krista Gulbransen, the Executive Director of the Berkeley Property Owner Association, has recently visited Denver to lobby for moderate and balanced changes to the law. She notes that antitrust and price collusion laws on the state level have been on the books for a long time, and they should be modified as technology evolves, but politicians should not attempt to regulate a whole industry like rental housing.

In this exercise called democracy, we are pleased that some concessions have been made, but we are awaiting the final iteration of legislation as lawmakers return from summer recess.

Some of our takeaways and parting remarks

We can’t help but draw a parallel between the legal dustups of RealPage and a new dawn for short-term rentals as lawmakers cracked down on the modern-day iteration of the temporary flop. When Airbnb was born on our home turf of San Francisco and property owners blatantly ignored the rules of the road, we predicted that the law would catch up to technology. That is what we are seeing now in the debate over the use of pricing algorithms in rental housing.

In a bygone era, we normally associated price fixing going on in smoke-filled backrooms or a hotel. Yet the handshakes have given way to new technology, and lawmakers are hellbent on modifying antitrust laws to bridge the gap in the new frontier of algorithms. We think the use of AI-backed rent-suggesting tools is good business intelligence, not collusion between competing housing providers.

Every business puts a finger on what their competitors are charging, but the rental housing community seems to be singled out. Just like landlords were asked to provide free housing during COVID. We are unaware of any other industry during the pandemic that was asked to provide a service for no compensation. Housing is essential, yes, but so are groceries. Imagine walking into a Safeway, filling up a shopping bag, and telling the clerk you will pay them later.

Moreover, we never understood the fear perpetuated by tenant advocates that rents can be raised above and beyond “market rate.” Consumers dictate what the market rate is, not an algorithm. It’s impossible for any provider of goods or services to get more money than what someone else is willing to pay for it. If someone has an old, rusted Ford Escort with 200,000 miles on it, the owner can charge $50K, but will anyone buy it? Can the owner of a lollipop gem sell it for as much as they can get selling a diamond?

As for San Francisco’s doubling down on its ban on software that recommends rents, we have to urge caution. The ordinance creates a new “watchdog” by empowering tenant groups to help enforce the ban. As if landlords are not already vilified, as if landlords are not already prone to being sued, now they have another target on their backs. These tenant groups - and we know them well - are tenacious and can wreak havoc on landlords.

Given all of the potential pitfalls of landlords, it is prudent for housing providers to tether themselves to proper legal counsel.