Facing Costly Lawsuit, Berkeley Pauses Its Ban on Rent-Setting Algorithms

Updated 12:15 p.m. Wednesday

Berkeley postponed its recent ban on rent-setting algorithms, several months after a leading property management software company sued the city in federal court.

The City Council voted unanimously Tuesday evening to push back the ban — originally intended to go into effect this spring — in an effort to avoid a costly legal battle with RealPage, the Texas-based company that filed suit in April, arguing the ban violates its First Amendment rights.

The deferral, to March 2026, follows a warning from City Attorney Farimah Brown that the pending litigation poses “significant costs for the City,” which already faces a $27 million budget deficit. RealPage has tentatively agreed to suspend its lawsuit if the city repeals the ban or delays enforcement of it, she said.

“The postponement action is intended to give the Council time to facilitate a resolution of the RealPage litigation and to determine a path forward for the ordinance without the time pressure imposed by litigation deadlines,” Brown told KQED in an email. “Council will likely be debating a range of possible next steps in the months to come.”

The ordinance, which the council overwhelmingly approved in March, would bar landlords from using the algorithmic software sold by companies like RealPage that offer pricing and occupancy recommendations based on proprietary rental data. Tenants’ advocates argue the tools allow landlords to collude on pricing decisions, driving up rents and vacancy rates.

“These recommendations allow landlords to manipulate the market and the practice amounts to illegal price-fixing,” the city’s Housing Advisory Commission, which sponsored the ordinance, wrote in its March report to the council.

“The use of algorithmic devices in setting rents and occupancy levels contributes to double-digit rent increases, increased rates of eviction, and artificial housing scarcity.”

Nearly 60% of Berkeley’s residents are renters, over half of whom are considered lower income and pay a significant portion of their income on rent, according to the commission.

“The use of these algorithmic devices is widespread in markets throughout the country and has helped fuel the national housing affordability crisis,” the commission wrote.

Berkeley is the first city to be sued by RealPage over such a prohibition, even though similar bans have recently been adopted in a growing number of cities across the country, including San Francisco, which led the charge last year, followed by Philadelphia, Minneapolis and San Diego.

RealPage did not respond to KQED’s questions about the litigation, and specifically why it sued Berkeley and not other larger, more well-resourced cities.

In its lawsuit, the company contends that Berkeley’s ban is based on “misinformation” and illegally prevents the company from communicating data-driven pricing recommendations to its clients.

On its website, it argues that the “misguided” ordinance could ultimately have a “detrimental” impact on housing in the city.

RealPage’s software is simply intended “to optimize revenue — not to maximize rents,” the company said. “It makes rental price recommendations in all directions: higher, lower, or at the current rent price.”

More than 30 class-action lawsuits have been filed in recent years against RealPage and landlords who use the software, including a 2022 suit accusing nearly 50 trade associations — including the East Bay Rental Housing Association and the Berkeley Property Owners Association — of serving as “conduits of the cartel.”

Six major real estate firms named in lawsuits over the software own over 1,300 apartments in Berkeley, the city’s housing commission reported.

Last year, the Biden administration’s Justice Department — joined by California and seven other states — sued the company “for its unlawful scheme to decrease competition among landlords in apartment pricing,” accusing it of scheming to “monopolize the market.” The suit is moving forward under the Trump administration.

“By feeding sensitive data into a sophisticated algorithm powered by artificial intelligence, RealPage has found a modern way to violate a century-old law through systematic coordination of rental housing prices — undermining competition and fairness for consumers in the process,” former Deputy Attorney General Lisa Monaco said in a statement last August announcing the suit. “Training a machine to break the law is still breaking the law.”