US Department of Justice sues rental pricing software RealPage after local ban by SF Supres

Less than a month after the San Francisco Board of Supervisors banned the use of an algorithmic tool to calculate rent prices, the company that makes the tool, RealPage, has just been sued by the U.S. Department of Justice for illegal price fixing.

The San Francisco Board of Supervisors is often derided for being the first in the country to do something. But the board may have been on to something in late July when it banned algorithmic software used to set rent prices, specifically a software tool from a company called RealPage.

“RealPage has exacerbated our rental crisis and given corporate landlords the ability to intentionally leave apartments vacant,” said the measure's author, Supervisor Aaron Peskin, before the panel's unanimous vote to ban the measure. “That's why we're taking action locally to ensure our working renters can afford to live here.”

We think they may have been on to something, because less than three weeks later, the U.S. Department of Justice announced on Friday that it is suing RealPage for price fixing and landlord collusion. The suit was actually filed by the Justice Department, but it also includes eight states among the plaintiffs, including California and Attorney General Rob Bonta.

“Americans should not have to pay more rent just because a company found a new way to collude with landlords and break the law,” said U.S. Attorney General Merrick Garland in a press release. “We allege that RealPage's pricing algorithm allows landlords to share confidential, competitively sensitive information and adjust their rents.”

While the company is called RealPage, the actual software tool is called YieldStar. Landlords pay to use it and it tracks all of their rental rates to suggest the maximum rent that can be charged for an apartment. The Justice Department argues this is collusion and anti-competitive price fixing.

And to top it all off, the Justice Department included a quote from a landlord in its press release, who said, “I've always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and terms. This is classic price fixing.”

Needless to say, Peskin feels very vindicated by the Justice Department's follow-through.

“Once again, San Francisco is a model for the nation,” Peskin said in a statement to SFist. “I applaud the Biden-Harris administration not only cracking down on criminal price fixing, but also announcing that tenant protections will be a central part of an economic recovery plan for America. Rents are too high, and that's why I'm banning the corporate software that enables extortionate renters here in San Francisco.”

The ban on RealPage's software in San Francisco is even harsher than the federal lawsuit filed Friday. Here in San Francisco, it's a complete ban on the products. The federal lawsuit, on the other hand, is a civil suit and would likely result in (at most) a fine or an agreement from RealPage to stop certain practices.

And the ban in San Francisco has not yet come into force. Although the board of directors passed the ban on July 30, the law requires a second reading, which can only take place after the board's summer recess on September 3.

Related: San Francisco regulator bans AI software for setting rent prices, saying the technology is price fixing and collusion [SFist]

Image: SFGovTV