City Council members advanced a bill that would ban landlords from using software that allows them to coordinate rent prices

Many Philadelphians struggle to afford market-rate rents. And now city officials and tenant advocates are alleging that price-fixing among large corporate landlords could be artificially inflating those rents above the prices the market would set.

City Council is considering a bill that would ban landlords from agreeing not to compete with each other and coordinating to set rental prices and other lease terms. The ban would include prohibiting rental property owners and managers from using software that coordinates rent prices using private leasing data.

Councilmember Nicolas O’Rourke said he introduced the bill last month as a preemptive move for Philadelphia based on the prevalence of the use of software for price coordination among corporate landlords nationwide. On Wednesday, Council’s housing committee voted to advance the legislation. Eleven Council members out of 17 have joined O’Rourke in sponsoring the bill — a veto-proof majority when the time comes for a full Council vote.

O’Rourke said Wednesday that banning rental price-setting software is essential “before it becomes a massive issue” in Philadelphia. As apartment buildings that were approved before the weakening of the property tax abatement lease up, “now is the right time to make this intervention in multifamily housing.”

He said the bill would “demonstrate the value of local government getting ahead of Big Tech’s tendency to scale first and then ask questions later.”

Last month, San Francisco’s mayor signed into law similar legislation — the first in the country — that bans landlords from using algorithmic software to set rents.

One of the national companies selling commercial revenue management software to landlords is RealPage, which San Francisco and Philadelphia lawmakers cited in their pushes for legislation. The company faces several lawsuits around the country accusing it of anticompetitive practices.

In August, the U.S. Department of Justice and the attorneys general of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee, and Washington sued RealPage, saying the company’s pricing algorithm violates antitrust laws. The lawsuit alleges that RealPage works with competing landlords to train and run its algorithmic pricing software, which then recommends rental prices.

“We allege that RealPage’s pricing algorithm enables landlords to share confidential, competitively sensitive information and align their rents,” U.S. Attorney General Merrick B. Garland said in a statement.

The lawsuit says the company, an industry leader, “replaces competition with coordination” and “enriches itself and compliant landlords at the expense of renters who pay inflated prices and honest businesses that would otherwise compete.”

RealPage did not respond to The Inquirer’s requests for comment by deadline for publication, but in a statement provided to 6abc last month, the company said: “We are disappointed that, after multiple years of education and cooperation on the antitrust matters concerning RealPage, the DOJ has chosen this moment to pursue a lawsuit that seeks to scapegoat pro-competitive technology that has been used responsibly for years.”

The company said that its revenue management software “is purposely built to be legally compliant” and that “we intend to vigorously defend ourselves against these accusations.”

Philadelphia’s legislation would, in general, ban price coordination. The bill defines that as the act of collecting information that is not available to the wider public — such as amounts that tenants are paying, rental supply levels, occupancy rates, and lease terms — from landlords and then suggesting rental prices and terms to landlords based on that information.

At Wednesday’s Council hearing, Madison Gray, a staff attorney at the Philadelphia-based Public Interest Law Center, said the organization supports the bill “because we know that renters in Philadelphia flat-out cannot afford for their rent to go up.”

She said only 2% of Philadelphia landlords have more than 25 units, “but as a group, these large landlords, who only amount to about 1,000 landlords, own more than half of the city’s nearly 300,000 rental units.”

“This small group of landlords has an outsized influence over the city’s rental market,” she said. “Together, they set the norms and conditions for renters across the city. In fact, if they came up with a scheme to increase rents at their properties, they could drive up rents all across the city. To be clear, a scheme like that would likely violate federal antitrust law. But in recent years, we have seen landlords adopting new rent-setting algorithms that have the same effect.”

Mayor Cherelle L. Parker’s administration supports the legislation.

“Mayor Parker has committed to increasing and retaining affordable housing within the city, which is why we support the intent of this bill — keeping housing affordable,” said John Mondlak, interim director of the city’s Department of Planning and Development.

“As we face this housing affordability crisis, it’s vital to take proactive measures to prevent predatory practices that disproportionately harm low-income residents,” he said.

In written testimony, the Pennsylvania Apartment Association, which represents 49 property management companies and more than 38,000 units in Philadelphia, noted that “every industry relies on internal and external data analyses and responsive pricing technology” and that algorithm-based technologies improve operational efficiency, which “directly benefit[s] residents and rental communities.”

Algorithmic software “encourages pricing competition within the marketplace through greater transparency” and “allows housing providers to respond more effectively to changing market conditions,” Steven Chintaman, vice president of government affairs, said in the statement.

The system “often recommends lowering rents,” he said. “The purpose of revenue management software is to optimize occupancy and lower vacancy rates, not to maximize rent price.”

OnePA Renters United Philadelphia, a coalition of renters unions and advocates, is one of the groups that support the legislation. At Wednesday’s hearing, members who rent homes in the city told Council members about their struggles to keep up with rent increases and the challenges they face in trying to live in quality, affordable homes.

If the bill becomes law and rental property owners or managers violate its terms, tenants could sue in civil court. And the bill would allow the city to also sue.

The legislation would take effect 90 days after Parker signs it.