If you’ve recently searched for rental apartments, you may have noticed a consistent trend in high prices. This perception is not unfounded; many landlords are increasingly relying on a single company’s software—operating through a proprietary algorithm that utilizes lease data—to determine their rental rates.

Federal prosecutors have labeled this behavior as an “unlawful information-sharing scheme,” prompting California lawmakers to take action against it. The president of the San Diego city council is spearheading a proposal aimed at banning local property owners from employing this pricing software, which he claims contributes to soaring housing costs.

The move in San Diego coincides with a similar ordinance recently passed by the San Francisco supervisors, making it the first city in the nation to prohibit “the sale or use of algorithmic devices to establish rents or control occupancy levels” in residential properties. Additionally, San Jose is deliberating over a comparable ban.

Alongside the federal prosecutors, California and seven other states have joined a lawsuit targeting the leading rental pricing service, RealPage, based in Texas. This lawsuit accuses RealPage of acting as an “algorithmic intermediary” that collects and manipulates sensitive information from landlords, thereby enriching itself and participating landlords at the expense of renters by inflating prices.

A bill introduced by Senator Melissa Hurtado of Bakersfield aimed to outlaw the use of pricing algorithms grounded in confidential data from competing firms. However, this legislation did not progress this year. Hurtado plans to reintroduce the bill in the upcoming legislative session, emphasizing the ongoing damage inflicted by these algorithms on consumers.

“We must ensure the economy operates fairly and that everyone has a chance to succeed in business without being undermined, especially when it incurs expenses for consumers in general,” Hurtado stated.

RealPage’s influence has been a catalyst for these developments, as its clientele includes landlords with extensive rental holdings throughout California. Critics argue that the company’s practices suppress competition that could lower rents, worsening the state’s housing crisis.

California Attorney General Rob Bonta highlighted the struggles faced by millions of residents attempting to secure housing, attributing part of the challenge to RealPage’s methods.

In defense, RealPage’s spokesperson claimed that the core issue is a lack of rental housing, insisting that their technological solutions benefit the entire rental ecosystem. They further suggested that concerns regarding nonpublic information are misdirected and may only exacerbate existing challenges in places like San Francisco and San Diego.

Concerning the pending federal lawsuit, RealPage asserted that the allegations lack merit, expressing dissatisfaction that the Justice Department has chosen to pursue legal action at this time, despite years of compliance.

Recent developments indicate a potential escalation in regulation regarding pricing software in California. Following San Francisco’s lead, Philadelphia recently enacted a ban on algorithmic-based rental price manipulation. New Jersey is also exploring similar legislative measures.

Federal prosecutors have indicated that RealPage has a dominant grip on the market for commercial revenue management software, with their YieldStar product being the most widely used in this domain. RealPage has stated that they only serve about 10% of the rental market in both San Francisco and San Diego with their three software solutions.

The operational mechanism of RealPage involves landlords supplying private data, which is then analyzed collectively to produce pricing suggestions for competitive properties. San Diego council president Sean Elo-Rivera articulated that the platform resembles a “smoky room” where large companies collaborate to set prices, creating an illusion of independence while fundamentally coordinating rental strategies.

Internal company documentation mentioned in the lawsuit illustrates RealPage’s commitment to maximizing rent, even in adverse market conditions. The company also acknowledges having previously developed faulty algorithms for tenant background checks, which led to erroneous associations with criminal activities, impacting renters unfairly.

In the San Diego area, one Navy veteran, Alan Pickens, reported that he and his wife are forced to relocate annually due to rising rents that exceed their budget, finding new listings in their current area priced between $2,995 and $3,215 for two-bedroom apartments.

The U.S. Justice Department highlighted that price-sharing agreements facilitated by RealPage have adversely affected renters in specific regions, including parts of San Diego where residents like Pickens reside. The lawsuit outlines these regions where rents have become artificially inflated, identifying a clear pattern in the price escalation.

RealPage’s influence is underscored by recent statistics showing that average rents in San Diego County spiked 26% over three years, with further increases reported more recently. The inflated rental prices significantly exceed the national average, impacting a substantial portion of California’s population, which consists of renters making up 44% of households—the highest in the nation aside from New York.

As financial pressures increase, many California residents, especially those from low-income backgrounds, are feeling the strain from rising rent costs. A comparative analysis has shown that the costs of renting increasingly burden those without college degrees. Meanwhile, a disproportionate number of California legislators are homeowners, which may influence housing reform discussions.

As a significant player in the rental market, RealPage finds itself in a growing legal and regulatory battle—its pricing technologies are facing scrutiny as California lawmakers pursue measures aimed at combating perceived injustices in the rental sector. The company faces pressure as local initiatives gain momentum, calling into question whether technology is working in favor of fair housing or reinforcing existing inequalities.

With mounting financial strains, the Pickens family has made difficult lifestyle adjustments to afford their current living situation. Despite working in stable jobs—a legal profession and in a tech company—maintaining a home in San Diego is increasingly challenging, raising troubling questions about affordability and economic equity in one of America’s most expensive housing markets.