REAL ESTATE NEWS

In May, San Diego joined the ranks of municipalities to pass new laws regulating apartment rental pricing algorithms—Ordinance Number O-21955.

Unlike many other legislative actions, the city accurately titled the law, calling it an ordinance “relating to prohibiting anti-competitive automated rent-fixing.”

Note that the action “prohibits anti-competitive price-fixing,” Donald Davidoff, CEO and co-founder of real estate business analytics (REBA), told GlobeSt.com. “It does not prevent algorithmic rent pricing.”

The high cost of living and housing shortage in San Diego have contributed to the City’s unaffordability. According to a March 2024 Zillow report, a family must earn $275,000 a year to afford a home mortgage.

According to the Times of San Diego, a nonprofit online news publication, the average rental rate for a two-residential dwelling in the city is $2,489, almost 65% higher than the national median.

Landlords’ use of algorithmic devices, which perform calculations on non-public competitor data concerning rental rates, occupancy levels and other information to set rental rates and occupancy levels, has resulted in inflated rates and unfair rent increases, contributing to the unaffordability of housing for families in the city. That's what policymakers at least claim — but Davidoff dispels that notion.

“This is an assertion of facts without evidence,” according to Davidoff. “It’s another example of ‘blaming the messenger’—pricing algorithms don’t raise rents; they just efficiently respond to demand and supply.”

In response to the use of algorithmic devices to set rental rates and occupancy levels, in August 2024, the United States Department of Justice (DOJ) filed a lawsuit against RealPage. Eight prosecutors, including California Attorney General Rob Bonta, joined the DOJ’s lawsuit. The DOJ amended the lawsuit in January 2025 to add two Attorney Generals and name landlords as defendants.

While the litigation is pending, software companies such as RealPage continue providing algorithmic devices to landlords in the city.

“The San Diego ordinance seemingly offered some stress relief around algorithmic pricing legislation by allowing the use of public data, but the ordinance will become Overcome by Events (OBE) on Jan. 1, 2026, when the new California state law goes into effect,” Davidoff said.

“The state law prohibits the use of both public and non-public data. Now more than ever, owners and operators must ensure that the pricing software they use does not rely on prohibited data. They should also contract only with vendors who will indemnify them should the vendor violate the regulations.”

With California passing a more restrictive state law, any change to this would need to occur at the state level, and that can be a time-consuming and challenging undertaking, Davidoff said.

He added that it's still too early to understand the actual financial impact of pricing legislation because it hasn't been in effect long enough.

“However, I would argue that it is more beneficial to reframe these legislative initiatives as guidelines and not restrictions,” he said. “They aren't saying commercial pricing algorithms can't be used; they are defining what kinds can be purchased.”

Davidoff contends that it’s not bad for the industry that it can’t use comp data “because we shouldn’t have been using it in the first place," and that “pricing shouldn't be constrained by comps, especially when that comp data is often unreliable and inaccurate."

“Realistically, owners and operators should be relying on data they can trust, and that’s internal data, and those operators who only leverage internal rental data to set pricing will not see a significant impact on performance.”

Source: GlobeSt/ALM