The cities of Berkeley, San Francisco, and San Diego have banned the use of algorithmic software to set rents. Critics argue the software is inflating prices. In an open letter sent Tuesday, California professors and civil rights leaders urged lawmakers to reconsider the bans.
The software in question is used by Texas company RealPage. The Biden administration filed an antitrust lawsuit against the company in August. The lawsuit claims the software’s algorithm allows landlords to see other listed rent prices and adjust their own to match, potentially reducing competition and increasing prices.
RealPage attorney Michael Semko told the San Diego City Council that the company offers users an analysis of the rental market with a price suggestion. However, it doesn’t control their rent-price decisions. The evidence shows rent-pricing software is ‘a technique for adjusting to market changes more rapidly,'” said Gary Galles, professor of economics at Pepperdine University and a signer of the letter.
“It is not a collusive device.”
Galles said politicians claim rent-pricing software increases housing prices to avoid taking accountability for their policies. “Instead of taking blame as a politician, what do you do?” asked Galles.
California cities ban rent software
“You look for a scapegoat.”
Hermant Bhargava, professor of technology at the University of California, Davis, also signed the letter. He said banning the software is part of a general tendency to blame technology rather than addressing the real issues. In almost all those cases, it’s not the technology that is causing the harm, it is those business strategies that produce the lack of innovation,” Bhargava said.
He also stated there is no correlation between the use of rent-pricing software and the rise and fall of rent prices. The software better reflects the state of the economy by decreasing response time to market changes. Signers of the letter argued that instead of blaming rent-pricing software for high housing prices, lawmakers should focus on adopting pro-growth policies.
They cited measures such as zoning reform, streamlining building approvals, expanding by-right housing construction, and investing in infrastructure to support new development. Both Galles and Bhargava emphasized the need to build more homes to meet high demand. They noted that more housing is required to lower rents.
“It takes a long time to build new housing because there are huge regulations and permissions needed in some states, and that slows down construction and then prices go up,” Bhargava said. One way to solve the problem is to enable more housing supply.
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