Cities Fight Back Against Corporate Landlords and RealPage
New legislation in San Francisco and San Diego, two of California’s most expensive cities, would target companies accused of colluding to jack up rent.
by Sebastian Ward, More Perfect Union
For years, landlords in the housing industry have been using algorithms to allegedly collude with other “competing” firms to drive up rent prices across the country.
But now, renters and sympathetic politicians are starting to take on these landlords and the private equity-backed firms assisting them. This week, a top San Francisco lawmaker advanced legislation that seeks to fight against the use of algorithms, such as the RealPage software, to set rent prices. And other cities could follow suit.
The proposed ordinance introduced on Tuesday would make the city the first in the country to explicitly ban the sale and use of algorithmic price-fixing tools such as RealPage, and prohibit the disclosure of "non-public competitor data.” It also suggests filing a civil action against parties who have sold or used these tools for “damages, injunctive relief, restitution/return of illegal profits, and/or civil penalties,” which would return tenants up to $1,000 per violation.
Additionally, an ordinance passed in San Diego County on Tuesday opens the door to future legislation and litigation protecting tenants from corporate landlords and algorithmic price-setting.
Darlene Simpson, a member of the Blackrock tenant union in San Diego, told More Perfect Union that she has witnessed countless examples of how increased rent costs displaced her family and community members. Simpson recalled one instance where the Housing Choice Voucher Program, a federal housing assistance program that pays a portion of a tenant's rent, refused to continue assisting her daughter-in-law because rent prices skyrocketed.
As a result, Simpson said, she and her children had no choice but to move. She knows other evictees who were forced to live in hotels, cars, and tents.
“I came to mobilize because I’m really involved in the homelessness crisis,” Simpson told MPU. “All they had to do was tell me that there was a Board of Supervisors meeting, what it was about, and I was in.”
RealPage faces scrutiny
The legislation in San Francisco comes amid increased scrutiny of the housing crisis and the companies profiting off it. The Texas-based software company RealPage is facing lawsuits and investigations from attorneys general in D.C., Arizona, North Carolina, and more, for its role in exacerbating the crisis. The Department of Justice is also preparing to sue the company for rental market collusion, Politico reported earlier this month.
Founded in 1998 and backed by the private equity firm Thoma Bravo, RealPage enables landlords to input data they wouldn't normally share in a competitive market into a single algorithm. This data includes rent prices, lease expiry dates, and special deals offered to renters. RealPage then analyzes this information and "recommends" a listing price for rental properties.
Although many landlords use RealPage, its price-setting algorithm eliminates competition by standardizing prices. Instead of a secret handshake between a few business moguls, RealPage — which promises revenue increases up to 5 percent — effectively allows millions of landlords to agree on rental prices indefinitely.
The company has also been accused of strongarm tactics. Their pricing advisors have told property owners that their price “recommendations” were actually required, and attempts to deviate from them are met with significant resistance from RealPage. They even have “policing agents” to ensure that site owners stay in line, and some property owners who did not comply with the price recommendations were not compensated.
This behavior has led D.C. Attorney General Brian Schwalb, who sued RealPage and D.C.’s 14 biggest corporate landlords last year, to describe the situation as a “housing cartel” and allege that the landlords and RealPage are “colluding with one another to set rents.”
The alleged price-fixing exacerbates an existing crisis that has made affordable stable housing increasingly difficult for poor and working-class people. Rent across the country has increased by 30 percent, and the unhoused population in the United States simultaneously increased by 11 percent last year, leading to a record height of unhoused people since 2007, according to the Department of Housing and Urban Development. (President Joe Biden reportedly will propose a 5 percent annual cap on rent increases as part of a second-term agenda if he is re-elected.)
In response, RealPage released a statement in June calling claims made against them in legal filings and investigations “false and misleading,” and saying that the company “contributes to a healthier and more efficient rental housing ecosystem.”
‘Empty units, homelessness, and yet rents remain high’
Given the slow movement of Congress and the courts, however, organizers in both San Francisco and San Diego are collaborating with local government officials to address the crisis sooner.
The ordinance presented in San Francisco by Aaron Peskin, the chair of the city Board of Supervisors, would explicitly tackle algorithmic price fixing.
“Everywhere you look in San Francisco you see empty units, homelessness, and yet rents remain high,” Peskin said in a statement to MPU. “These algorithms are an obstacle to bringing rents down and increasing housing supply. I view this first in the nation rental price-fixing ban as a pro-housing policy, as part of our broader effort to create affordable housing at all income levels.”
The aforementioned lawsuits prompted its creation, as there was a consensus among staffers and tenant organizers that it was unviable to wait for higher courts to take action.
Much of the language in the proposal presented in San Diego was crafted by the Alliance of Californians for Community Empowerment (ACCE), a community-led advocacy group that also works in housing justice. The legislation was introduced by Terra Lawson-Remer, the vice chair of San Diego County’s Board of Supervisors.
The San Diego ordinance pointed out that the private equity firm Blackstone, the largest residential landlord in the United States, bought dozens of buildings comprising 5,800 rental units in San Diego in 2021. Since then, rent prices have increased by 200 percent in these apartment buildings, along with complaints of tenant harassment, price fixing, and price gouging. The ordinance passed Tuesday by a 3-1 vote will also authorize a countywide study on the prevalence of institutional investors and its impact on the housing market.
Remer-Lawson said the vote showed the county is “taking action to safeguard housing for renters, first-time homebuyers and working families.” Blackstone said in a statement to a local TV outlet that allegations made at the board meeting “rely on cherry-picked data and are not based on any facts whatsoever.”
“When I found out that [Blackstone] were not renting out the apartments just to keep the rents artificially high, this really angered me,” Simpson told MPU. “There's a lot of people who are homeless, and [corporate landlords] are enjoying their greed, owning the building and not renting the apartment out to families who really need it.”
‘The elephant in the room’
Corporate landlord giants are just as culpable as RealPage for the ongoing crisis, organizers say. Rental giants in Florida and other massive firms like Blackstone and Veritas are knowingly buying up property to make as much money as possible, and real estate executive at Blackstone even said in one employee video call that tenant evictions are a “cash flow growth possibility.”
“Corporate landlords are rent gouging tenants because they have an obligation to their shareholders to maximize profits,” Anya Svanoe, an ACCE organizer, told MPU. “So that looks like rent gouging, that looks like fee gouging, that looks like unjust evictions, that looks like refusing to do maintenance and keep up the properties. It includes a whole host of issues.”
Both politicians and organizers in these two cities acknowledged that their current actions are only the first step, and that greater systemic issues need to be addressed to truly resolve the multitude of problems that tenants face.
Particularly, many Californians rallying for tenant rights want to repeal the 1995 Costa-Hawkins Rental Housing Act. The act limits rent control policies that municipalities can pass, such as banning rent control for all housing built after 1995 and allowing landlords to reset rent prices to market rates when a tenant vacates or is evicted.
“We really need to tackle the elephant in the room, which is Costa Hawkins,” Svanoe told MPU. “Even though San Francisco has rent control, as soon as those units become empty, they go up to market price. That's a massive loophole that causes the housing market value to continue to go up, and it puts a target on the back of tenants who have rent control, because landlords feel they can be making way more money.”
Organizers also want to see federal action.
“I want the federal government to acknowledge that there is a crisis,” Simpson told MPU. “And I think that there needs to be laws or some intervention to stop corporations from using homes and real estate as an investment. Everybody should be able to live in a house that's in a safe environment and not worry about being severely burdened by rent.”
But in the meantime, organizers say, ordinances like those in San Francisco and San Diego can provide some much-needed reinforcement for tenants’ rights.
“These issues will continue to be true until our elected leaders take seriously the threat that corporate landlords are posing to this country and to the state of California, and introduce the legislation that we see [in San Francisco and San Diego],” Svanoe told MPU. “I think that's great news that they're finally starting to do something.”