SAN DIEGO (CNS) - Landlords and property owners in San Diego will no longer be able to use artificial intelligence-driven software utilizing private data to set rental housing prices starting Wednesday.
This comes after the San Diego City Council's decision Tuesday to ban the software involved in numerous complaints as a "modern-day price-fixing service that directly and indirectly inflates rent prices, harming millions of Americans," according to a statement from Councilman Sean Elo-Rivera's office.
Describing the software as "digital collusion" using data that's not publicly available, Elo-Rivera decried what he called the artificially raised prices it causes as the opposite of a free market.
The ordinance bans the sale, license and use of automated rent-setting software that advises or recommends rental rates or occupancy levels.
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In 2022, nonprofit investigative journalism organization ProPublica explained how a Texas company called RealPage use its YieldStar software as follows: "To arrive at a recommended rent, the software deploys an algorithm -- a set of mathematical rules -- to analyze a trove of data RealPage gathers from clients, including private information on what nearby competitors charge."
ProPublica found that RealPage actively discourages bargaining with renters and recommends landlords accept a lower occupancy rate rather than take rent less than that which the AI finds "optimal."
A representative from RealPage spoke at Tuesday's council meeting to try to cool the rhetoric.
"Most of the time, around 60% of the time, users of the software accept a suggested price," they said. "Banning software like this will not increase the available housing and will cause more harm than good."
The vast majority of speakers at the meeting praised the ordinance, citing the sky-high cost of living in the region.
In 2024, the median income for a family of four in San Diego County was $119,500, according to the San Diego Housing Commission. The salary required for a mortgage is even higher, at $275,000. Meanwhile, the current average rent in San Diego for all bedroom and property types is $3,000 a month.
However, others, including Melanie Woods, vice president of local public affairs for the California Apartment Association, said the city's approach could impact appraisals and negatively impact the housing market. She urged the council to pause and wait for Senate Bill 52 to pass through the statehouse.
That bill would "make it unlawful for any person to sell, license, or otherwise provide to a landlord an algorithmic device, as defined, that advises on rental rates or occupancy levels for residential dwelling units, and would also make it unlawful for a landlord to use an algorithmic device to set rental rates or occupancy levels for residential dwelling units."
Councilman Raul Campillo, the sole no vote on the ordinance, was worried the language was not precise enough and would sweep up law-abiding landlords and property owners. He and Councilman Stephen Whitburn proposed an amendment to the language that was voted down 5-4.
Elo-Rivera alleged AI price-fixing software, along with other factors such as limited housing supply and private investment, is artificially inflating the cost of housing, hurting working San Diegans.
In December 2024, the White House Council of Economic Advisers released a report detailing the impacts of algorithmic price-fixing software. The Department of Justice and California Attorney General Rob Bonta joined other attorneys general to sue RealPage last year.
The analysis "indicates that if price coordination was eliminated, there would be an economically meaningful decrease in price mark-ups for rental units using pricing algorithms." Additionally, it found that use of the software and others like it account for $99 per month in over-market valuation.
RealPage has dismissed the claims, saying landlords do not coordinate to set rents higher.
The ordinance does not ban the use of software that publishes reports regarding rental rates or occupancy levels from information available to the general public, or software used to establish rental rates or income limits in accordance with local, state or federal affordable housing program guidelines.
The San Francisco Board of Supervisors adopted a similar ban in September 2024 and the Philadelphia City Council did so in October 2024.
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