City Council
Report
City Council Meeting: May 27, 2025
Agenda Item: 4.G
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To: Mayor and City Council
From: Douglas Sloan, City Attorney, City Attorney's Office, Administration Subject: Introduction and First Reading of an Ordinance Prohibiting Sale and Use of Algorithmic Devices to Set Residential Rental Prices
Recommended Action:
Staff recommends that the City Council
1. Adopt a finding of no possibility of significant effect pursuant to Section 15061(b)(3) (Common Sense Exemption) of the California Environmental Quality Act (CEQA) Guidelines; and
2. Introduce for first reading the attached Ordinance amending the text of the Santa Monica Municipal Code by adding Chapter 4.58 Algorithmic Rental Price Fixing.
Executive Summary
Algorithmic rental pricing software, that uses nonpublic rental data to recommend to competing landlords whether to rent a unit and how much to rent it for in order to maximize revenue, has drawn public scrutiny for facilitating price coordination, decreasing competition, and causing rents to increase. Numerous antitrust lawsuits have been filed challenging these practices, including a lawsuit brought by the U.S.
Department of Justice and a bipartisan coalition of attorneys general from eight states against the largest algorithmic rental pricing software provider RealPage and six of the country’s largest property management companies that use RealPage’s software, three of which manage multifamily properties in Santa Monica. Since 2024, several cities in California and across the country have moved to ban the sale use of these programs.
On March 11, 2025, the City Council directed the City Attorney’s Office to return with a draft ordinance to do the same, now being proposed for adoption. 2 of 6
Background
Santa Monica faces a housing affordability crisis. The City’s 6th Cycle Housing Element (2021-2029) found that renters needed to earn $61.66 per hour (or an annual income of $128,000), to afford the then-average monthly asking median rent of $3,200 for a twobedroom apartment. According to HUD CHAS 2017-2021 data, approximately 41.5 percent of Santa Monica families are rent burdened—paying more than 30 percent of their income toward rent—and 20.6 percent of households were extremely rent burdened—paying more than 50 percent of their income toward rent. And according to the Rent Control Board, following a couple of years of downward trends during the pandemic, initial median rents for rent controlled units have resumed increasing each year since 2022. The January 2025 regional fires have only increased the demand for rental housing in Santa Monica.
Some of the nation’s largest landlords, including those that manage units in Santa Monica, use algorithmic rental pricing software to set initial and renewal rental rates. In October 2022, ProPublica published an article detailing how YieldStar, a product of RealPage, works to do this, and how it is designed to maximize revenue even at the expense of lowering occupancy rates.1 As described by ProPublica and alleged by the Department of Justice,2rental pricing software programs that are anticompetitive use nonpublic competitively sensitive data submitted by their landlord customers—including data about actual rental prices and lease terms—to recommend to competing landlords what rent and occupancy levels can be achieved for their properties, based on what has been achieved at others. According to the reporting, one of the developers of YieldStar said that one of the greatest threats to landlords’ profit was other landlords setting prices too low at neighboring properties, and said that there was “way too much empathy” when real people instead of algorithms made rental pricing decisions.
A December 2024 analysis from the White House Council of Economic Advisors found that such algorithmic rental pricing software cost renters in units that used the software 1 Rent Going Up? One Company’s Algorithm Could Be Why (October 15, 2022). Vogell, Heather; ProPublica https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent 2 Justice Department Sues RealPage for Algorithmic Pricing Scheme that Harms Millions of American Renters (August 23, 2024). U.S. Department of Justice https://www.justice.gov/archives/opa/pr/justicedepartment-sues-realpage-algorithmic-pricing-scheme-harms-millions-american-renters 3 of 6
$70 per month on average nationally, and $34 per month or $408 per year on average in the Los Angeles metropolitan area.3 The White House report noted that even landlords that do not use algorithmic rental pricing software in markets where other landlords do are likely to increase rents because those landlords will face higher demand for their lower priced units and find it optimal to raise their prices to meet that demand.
Algorithmic rental pricing software programs have also been alleged to lead to higher rates of eviction. According to one landlord, after implementing YieldStar, turnover rates increased by 15 percentage points, as tenants could not sustain rent increases and turnover was more profitable for the landlord. The landlord stated that “the net effect of driving revenue and pushing people out was $10 million in income” and that this showed that “keeping the heads in the beds above all else is not necessarily always the best strategy.”4
ProPublica’s reporting spurred nationwide scrutiny of algorithmic rental pricing software. and how such pricing algorithms impact rental markets. Numerous antitrust lawsuits by have been filed against software companies including RealPage and Yardi Systems, Inc., including over 35 class actions against RealPage and landlord customers. Public prosecutors have also taken action. In the District of Columbia Attorney General, and Arizona Attorney General both sued RealPage and customer landlords in their respective state courts, and in August 2024, the U.S. Department of Justice and eight state attorneys general also sued RealPage in federal court alleging anti-trust violations.
On January 7, 2025, the U.S. Department of Justice lawsuit was expanded to name six property management companies that use RealPage’s software and to allege claims under state law, including Californias Unfair Business Practices Law, Business and Professions Code Section 17200.
3 The Cost of Anticompetitive Pricing Algorithms in Rental Housing (December 17, 2024). White House https://bidenwhitehouse.archives.gov/cea/written-materials/2024/12/17/the-cost-of-anticompetitivepricing-algorithms-in-rental-housing/ 4 Revenue Revolution: Pushing Rents Becomes the Norm (February 13, 2008). Joe Bousquin, Multifamily Executive https://www.multifamilyexecutive.com/property-management/revenue-revolution-pushing-rentsbecomes-the-norm 4 of 6
Locally, three of the six landlord defendants in the Department of Justice lawsuit against RealPage—Greystar, Equity Residential, and Cushman & Wakefield—manage multifamily units in Santa Monica.
While litigation works its way through the federal courts, which may take months or years, many cities have acted to ban the sale and use of algorithmic rental pricing software that use nonpublic rental data to recommend rent rates and occupancy levels, including San Francisco, Berkeley, San Diego, Philadelphia, and Minneapolis. On March 11, 2025, the City Council directed the City Attorney to draft an ordinance banning the use of algorithmic rental price-fixing software in Santa Monica and which includes enforceable penalties for noncompliance.
Proposed Ordinance
The proposed ordinance would ban the sale and use of “algorithmic device,” meaning a software product that uses or incorporates one or more algorithms to perform calculations of nonpublic competitor data concerning local or statewide rental prices or occupancy levels to advise a landlord on, or recommend to a landlord, rent to charge for a rental housing unit, or whether to leave a rental housing unit vacant. The definition would exclude software programs used to generate or produce reports using aggregated data that do not recommend prices or occupancy levels for future tenancies, and programs used to establish rental rates and income limits necessary to comply with affordable housing programs.
The ordinance would include the remedies for enforcement that are currently available and used to enforce other tenant protection laws, including the Housing AntiDiscrimination Code (SMMC Chapter 4.28) the Tenant Harassment Code (SMMC Chapter 4.56). Specifically, any person aggrieved by a violation of the prohibition on selling or using unlawful algorithmic rental pricing software, including the City, could bring a civil action and seek an injunction as well as either actual damages or civil penalties of up to $1,000 per violation. The proposed ordinance provides that each separate month that a landlord charges rent unlawfully set is a separate violation, as is each rental housing unit for which the rent is unlawfully set. If a plaintiff (including the City) prevails in any enforcement action, the plaintiff would be entitled to attorneys’ fees, 5 of 6
and the ordinance specifies that any lease that purports to limit a tenant’s right to recover attorneys’ fees for such an action is not enforceable for claims arising under this section. Finally, the ordinance would also provide an affirmative defense to unlawful detainer if a tenant were to establish the landlord set the tenant’s rent unlawfully in violation of the ordinance.
Environmental Review
The proposed addition of Chapter 4.58 to the Santa Monica Municipal Code is categorically exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15061(b)(3) of the CEQA guidelines. Section 15061(b)(3) states the CEQA applies only to projects that have the potential for causing a significant effect on the environment. Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA. In this case, the proposed ordinance will prohibit companies and landlords from selling and using software to set rental prices anticompetitively.
Financial Impacts and Budget Actions
There is no immediate financial impact or budget action necessary as a result of the recommended action. Staff will return to Council if specific budget actions are required in the future.
Prepared By: Romy Ganschow, Chief Deputy City Attorney
Approved Forwarded to Council
Attachments:
A. Chapter 4.58 Ordinance
B. 16 Item re Algorithmic Rental Pricing Software
C. Rent Going Up? One Company’s Algorithm Could Be Why (October 15, 2022).
Vogell, Heather; ProPublica
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D. Justice Department Sues RealPage for Algorithmic Pricing Scheme that Harms Millions of American Renters (August 23, 2024). U.S. Department of Justice E. The Cost of Anticompetitive Pricing Algorithms in Rental Housing (December 17, 2024). White House
F. Revenue Revolution: Pushing Rents Becomes the Norm (February 13, 2008).
Joe Bousquin, Multifamily Executive