A Tuesday evening San Francisco Board of Supervisors meeting saw all members vote “no” to allowing AI software to influence the city’s rental market — a first-of-its-kind ruling in the nation.
Rents in one of the world’s most expensive metros are common conversation; you’re not considered a San Franciscan unless you’ve cornered someone to speak about your rent-controlled apartment (or lack thereof) ad nauseam.
Boom. San Francisco just passed a first-in-nation ban on rent-fixing software like RealPage, which has been used to hike rents, restrict supply, and increase evictions.
“This is pro-housing policy. We aim to be a model for the nation.” pic.twitter.com/VZLS0nims6
— Lee Hepner (@LeeHepner) July 30, 2024
The COVID-19 pandemic saw rents plummet — a first since the early 2000s tech boom. Then as the city recovered, those rents climbed; once too-good-to-be-true lease incentives and having the upper hand in negotiating down renewals all became things of yesteryears. And while rents in San Francisco haven’t submitted to the nose-bleeding prices found in 2015 — a year that saw rents rise 11% to an average across all bedroom styles — they’re still expensive AF.
As of publishing, the average monthly rent for a one-bedroom apartment in SF is $3,287, according to the rental aggregation company RentCafe. It’s a large sum of money … one that measures more than twice the national average rent for a one-bedroom apartment.
For years, the most heinous rental increases were most commonly dealt with by large property management corporations. In San Francisco, RentSFNow and Mossier Companies collectively own thousands of commercial and residential properties across the city. (Though their grip on SF’s rental market is loosening; Mossier announced earlier this year that they intend to sell off twelve properties in San Francisco.)
The bill text of San Francisco’s ban on rent setting algorithms is here: https://t.co/SsXEDMJURU
And Supervisor @AaronPeskin’s full remarks from today’s meeting are below. pic.twitter.com/IJK8fYru4j
— Lee Hepner (@LeeHepner) July 30, 2024
Unlike family-owned proprietary or those that fall into smaller portfolios, large-scale property managers use computer algorithms (and, as of late, the use of artificial intelligence, [AI]) to set rental increases. These computations use projections and assumed rental scarcities or abundances, coupled with mean averages and observed demand, to set arbitrary figures. Rarely are these figures indicative of the actual rental market they’re computing for; they are, however, a sign of rental property companies wanting to eke out as much profit as possible from renters … if that means projecting an untrue, more expensive reality.
Recently, the ethical use of AI tools like RealPage and Yardi, two software companies that compile public landlord data to determine how high they can set a unit’s rent —or perhaps not rent it at all, thus creating market scarcity — have come under fire. Tenants have claimed the use of such tools artificially (pun intended) birthed rental markets that reflected a lack of inventory and made for unfair rental increases.
They were right.
San Francisco, a city synonymous with housing density issues and absurd rents, recently became the first large metro in the nation to ban the use of these algorithmic tools when considering future rent increases and units available.
“Banning algorithmic price gouging is pro-housing policy,” District 3 Supervisor and SF Mayoral Candidate Aaron Peskin said at a Tuesday evening SF Board of Supervisors meeting that saw a unanimous vote to ban the use of such tools — a first in the nation. “Let’s build housing for renters, not for real estate investors.”
According to Reuters, the two large companies that operate multifamily residential properties in Tennessee settled claims earlier this year that they artificially inflated rental prices using RealPage software. As of publishing, RealPage software is used to calculate some 8% of rental housing units across the United States — a sizable portion that could well create bloated levels of market manipulation and unjustified rental increase.
While the bill requires final approval from the board, which is expected to happen without a hiccup once they return from their August recess, San Francisco has surely set a precedent here. And should any San Francisco landlord be caught using these AI-based tools to either artistically raise rents or create market scarcity (or both), they might face a $1,000 fine for each offense.
Good luck having Chat GPT write your way out of that one.
Feature image: Courtesy of Wikimedia Commons
It is a damn shame that S.F. is turning into an elite City with the highest prices in the USA, . I remember the days when I rented an entire Victorian Home directly across from Golden Gate Park for 600 USD and even had friends tell me I was paying too much. I am not sure that these changes will nor interfere with what was once the most diverse City in the USA. From what I have heard, The City will never be what it once was. I have no idea of what the Artists, Musicians and other creative people will do to find affordable housing and will definatly miss The City by the Bay and what it once represented. I wonder if any of these rich autocrats even know the History of the City, Open minds of the people who lived there as well as a City that welcomes all nationalities, the struggling individuals who are involved in the Arts as well as forming the dynamic heart beat of The City. I lived in The City for 25 years. and it was a huge positive in my life in many ways. Due to the expense of living in California, I opted to buy an Ocean Front place in Rosarito Beach, Baja California. It is a definite diversion from the USA yet I have met a lot of ex pats here from all over the world. Thanks for reading this. Peter