By Wendy Fry, CalMatters

If you’ve hunted for apartments recently and felt like all the rents were equally high, you’re not crazy: Many landlords now use a single company’s software — which uses an algorithm based on proprietary lease information — to help set rent prices.

Federal prosecutors say the practice amounts to “an unlawful information-sharing scheme” and some lawmakers throughout California are moving to curb it. San Diego’s City Council president is the latest to do so, proposing to prevent local apartment owners from using the pricing software, which he maintains is driving up housing costs.

San Diego’s proposed ordinance, now being drafted by the city attorney, comes after San Francisco supervisors in July enacted a similar, first-in-the-nation ban on “the sale or use of algorithmic devices to set rents or manage occupancy levels” for residences. San Jose is considering a similar approach.

And California and seven other states have also joined the federal prosecutors’ antitrust suit, which targets the leading rent-pricing platform, Texas-based RealPage. The complaint alleges that “RealPage is an algorithmic intermediary that collects, combines, and exploits landlords’ competitively sensitive information. And in so doing, it enriches itself and compliant landlords at the expense of renters who pay inflated prices…”

But state lawmakers this year failed to advance legislation by Bakersfield Democratic Sen. Melissa Hurtado that would have banned the use of any pricing algorithms based on nonpublic data provided by competing companies. She said she plans to bring the bill back during the next legislative session because of what she described as ongoing harms from such algorithms.

“We’ve got to make sure the economy is fair and … that every individual who wants a shot at creating a business has a shot without being destroyed along the way, and that we’re also protecting consumers because it is hurting the pocketbooks of everybody in one way or another,” said Hurtado.

RealPage has been a major impetus for all of the actions. The company counts as its customers landlords with thousands of apartment units across California. Some officials accuse the company of thwarting competition that would otherwise drive rents down, exacerbating the state’s housing shortage and driving up rents in the process.

“Every day, millions of Californians worry about keeping a roof over their head and RealPage has directly made it more difficult to do so,” said California Attorney General Rob Bonta in a written statement.

A RealPage spokesperson, Jennifer Bowcock, told CalMatters that a lack of housing supply, not the company’s technology, is the real problem — and that its technology benefits residents, property managers, and others associated with the rental market. The spokesperson later wrote that a “misplaced focus on nonpublic information is a distraction… that will only make San Francisco and San Diego’s historical problems worse.”

As for the federal lawsuit, the company called the claims in it “devoid of merit” and said it plans to “vigorously defend ourselves against these accusations.”

“We are disappointed that, after multiple years of education and cooperation on the antitrust matters concerning RealPage, the (Justice Department) has chosen this moment to pursue a lawsuit that seeks to scapegoat pro-competitive technology that has been used responsibly for years,” the company’s statement read in part. “RealPage’s revenue management software is purposely built to be legally compliant, and we have a long history of working constructively with the (department) to show that.””

The company’s challenges will only grow if pricing software becomes another instance in which California lawmakers lead the nation. Following San Francisco’s ban, the Philadelphia City Council passed a ban on algorithmic rental price-fixing with a veto-proof vote last month. New Jersey has been considering its own ban.

Is It Price-fixing — or Coaching Landlords?

According to federal prosecutors, RealPage controls 80% of the market for commercial revenue management software. Its product is called YieldStar, and its successor is AI Revenue Management, which uses much of the same codebase as YieldStar, but has more precise forecasting. RealPage told CalMatters it serves only 10% of the rental markets in both San Francisco and San Diego, across its three revenue management software products.

Here’s how it works:

In order to use YieldStar and AIRM, landlords have historically provided RealPage with their own private data from their rental applications, rent prices, executed new leases, renewal offers and acceptances, and estimates of future occupancy, although a recent change allows landlords to choose to share only public data.

This information from all participating landlords in an area is then pooled and run through mathematical forecasting to generate pricing recommendations for the landlords and for their competitors.

San Diego City Council President Sean Elo-Rivera, explained it like this:

“In the simplest terms, what this platform is doing is providing what we think of as that dark, smoky room for big companies to get together and set prices,” he said. “The technology is being used as a way of keeping an arm’s length from one big company to the other. But that’s an illusion.”

In the company’s own words, from company documents included in the lawsuit, RealPage “ensures that (landlords) are driving every possible opportunity to increase price even in the most downward trending or unexpected conditions.” The company also said in the documents that it “helps curb (landlords’) instincts to respond to down-market conditions by either dramatically lowering price or by holding price.”

Providing rent guidance isn’t the only service RealPage has offered landlords. In 2020, a Markup and New York Times investigation found that RealPage, alongside other companies, used faulty computer algorithms to do automated background checks on tenants. As a result, tenants were associated with criminal charges they never faced, and denied homes.

Impact on Tenants

The attorneys general of eight states, including California, joined the Justice Department’s antitrust suit, filed in U.S. District Court for the Middle District of North Carolina.

The California Justice Department contends RealPage artificially inflated prices to keep them above a certain minimum level, said department spokesperson Elissa Perez. This was particularly harmful given the high cost of housing in the state, she added. “The illegally maintained profits that result from these price alignment schemes come out of the pockets of the people that can least afford it.”

Renters make up a larger share of households in California than in the rest of the country —  44% here compared to 35% nationwide. The Golden State also has a higher percentage of renters than any state other than New York, according to the latest U.S. Census data.

The recent ranks of California legislators, however, have included few renters: As of 2019, CalMatters could find only one state lawmaker who did not own a home — and found that more than a quarter of legislators at the time were landlords.

The State Has Invested in RealPage

Private equity giant Thoma Bravo acquired RealPage in January 2021 through two funds that have hundreds of millions of dollars in investments from California public pension funds, including the California Public Employees’ Retirement System, the California State Teachers’ Retirement System, the Regents of the University of California and the Los Angeles police and fire pension funds, according to Private Equity Stakeholder Project.

“They’re invested in things that are directly hurting their pensioners,” said K Agbebiyi, a senior housing campaign coordinator with the Private Equity Stakeholder Project, a nonprofit private equity watchdog that produced a report about corporate landlords’ impact on rental hikes in San Diego.

RealPage argues that landlords are free to reject the price recommendations generated by its software.

RealPage argues that landlords are free to reject the price recommendations generated by its software. But the U.S. Justice Department alleges that trying to do so requires a series of steps, including a conversation with a RealPage pricing adviser. The advisers try to “stop property managers from acting on emotions,” according to the department’s lawsuit.

If a property manager disagrees with the price the algorithm suggests and wants to decrease rent rather than increase it, a pricing advisor will “escalate the dispute to the manager’s superior,” prosecutors allege in the suit.

Oakland Post

Posts by Oakland Post

By Antonio‌ ‌Ray‌ ‌Harvey‌, California‌ ‌Black‌ ‌Media‌

The California Commission on Aging (CCoA) has published a Housing Policy Brief  that offers recommendations for reducing housing insecurity and homelessness among older adults in California.

The brief summarizes a more in-depth report titled “Housing Those Hardest Hit: Addressing Older Adult Homelessness.” It also includes seven actionable recommendations to mitigate older adult homelessness in three settings: permanent housing, independent housing, and assisted living.

“Expanding housing capacity across all settings in the older adult continuum of care is critical as our state confronts the pressing issues of housing insecurity and homelessness among older adults,” stated CCoA Executive Director Karol Swartzlander.

“The need is urgent, and the time to act is now,” she emphasized.

The CCoA serves as the principal advocating body for older Californians, and it administers programs that support and celebrate Californians as they age. In addition, the CCoA advises the Governor and Legislature, along with state, federal, and local agencies on programs and services that affect older adults in the state.

From 2017 to 2022, the number of adults aged 55-64 who accessed homelessness services across California increased by over 90%, while the number of adults over 65 in the state, overall, increased by over 166% – exceeding any other age group, according to the report.

According to CCoa, the commission blends housing solutions within a comprehensive continuum of care, presenting policymakers with targeted strategies that accommodate the diverse housing and supportive service needs of older adults.

Efforts to address homelessness is now one of CCoA’s top priorities, says Swartzlander.

“The need is urgent, and the time to act is now,” she added.

In 1990, 11% of the homeless population was over the age of 50 while in 2023 older adults represented nearly half of the state’s homeless population.  Among this population, 41% first experienced homelessness after the age of 50.

According to the U.S. Department of Housing and Urban Development’s annual Point-in-Time Count, 38,028 adults aged 55 and older experienced homelessness in California in 2023. Furthermore, the report stated that 41% first experienced homelessness after the age of 50.

Former Assemblymember Cheryl Brown (D-San Bernardino), who just completed a six-year term as chairperson of the CCoA, said there must be policies in place to “remedy the problem” of older adults becoming homeless in the state.

The lack of accessible and available housing, health-related behaviors, medical problems, social isolation, and limited resources are some of the root causes of homelessness and poverty among aging Californians. Speaking on own her behalf — not representing CCoA — Brown said more alternatives for affordable housing and services would provide a much-needed safety net for older adults in the state.

“We need to go back to square one and come up with some policies that would help older adults have options,” Brown said. “It’s a tragedy that these people have paid into the system (taxes, social security), and did it the right way, and they still need these services.”

In the policy brief, the CCoA presents seven recommendations to mitigate aging adult homelessness. They are exploring a statewide subsidy for older adults at-risk of homelessness; developing a state homeshare program; expanding ministerial approval for smaller assisted living facilities; reforming housing laws; expanding assisted living waivers; and funding community care suggestions.

Editorial Note: California Black Media will follow up this article with more investigations into the lived experiences of older adults impacted by the of homelessness and housing insecurity crisis in the state.

Oakland Post

Posts by Oakland Post

The Richmond Standard

Richmond Neighborhood Housing Services, Inc. (RNHS) was one of two Bay Area nonprofits awarded a $200,000 grant over two years from Bank of America’s Neighborhood Builders program.

RNHS has provided housing services to Richmond residents since 1981. The organization develops, acquires, and/or rehabilitates single-family homes and housing developments in blighted or vacant lots in order to make them available as affordable homes for rent or purchase to low-income families.

The nonprofit also serves residents through education programs involving financial literacy programs, home loans, foreclosure prevention, and affordable rental counseling.

RNHS plans to use the $200,000 Bank of America grant to hire leadership staff, and to expand its Emerging Developers Program and Restoring Neighborhoods Program.

Through this grant program, RNHS will also benefit from comprehensive leadership training for its executive director and an emerging leader.

Since the Neighborhood Builders program’s inception in 2004, 59 nonprofits have been selected in San Francisco and the East Bay, with the bank investing nearly $12 million in philanthropic capital into these local organizations.

Along with RNHS, San Francisco-based mental health nonprofit RAMS also won a $200,000 grant this year.

“We’re proud to include RAMS and RNHS as the 2024 Neighborhood Builders,” said Gioia McCarthy, president of Bank of America San Francisco-East Bay. “Countless individuals, families and neighborhoods have felt the profound impact that these 59 Neighborhood Builder nonprofits have had in our area over the past two decades.”

Trending

Oakland Post: August 11th – August 17th, 2021

Oakland Post

Posts by Oakland Post