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San Francisco Board of Supervisors President Aaron Peskin is looking to bar the city's landlords from using rent-setting software that housing advocates allege has contributed to skyrocketing rental prices across the country.

Peskin announced legislation on Tuesday that would prohibit San Francisco property owners from using services provided by third-party revenue management companies such as Real Page and Yardi, which collect proprietary data on rents from participating landlords, and then suggest rates using algorithms — a controversial practice that has drawn legal scrutiny and calls for regulation in other parts of the country in light of a 2022 expose by ProPublica.

If adopted, San Francisco would become the first local jurisdiction to ban rent price-setting algorithms. The proposed ordinance would make it illegal to sell, license or provide an "algorithmic device" — such as a software program — to set or suggest rents or occupancy levels that landlords may obtain from tenants in San Francisco.

It would allow the city attorney's office, as well as tenants, to pursue legal action for violations, including penalties of up to $1,000.

Peskin described the proposal as a "sign" to other cities that "they can take these matters into their own hands."

"The United States Department of Justice and attorney generals in numerous states are realizing that RealPage and similar price-fixing algorithms are extremely deleterious to our housing market in cities around the country," he told the Chronicle. "We're taking action locally to ensure our working renters can afford to live here."

President Joe Biden's 2024 State of the Union Address identified "fighting rent gouging by corporate landlords" as a policy priority.

Last week, the Justice Department announced that it will be filing a lawsuit against RealPage, challenging what it described as "collusive conduct" in the housing market, according to reporting by Politico. The complaint could also focus on usage of the software as a tool to match vacancy rates in competing buildings, a practice that allegedly allows landlords to restrict supply.

State and district attorney generals in Arizona and Washington, D.C., have sued RealPage and more than a dozen of its landlord customers, and more than 20 lawsuits, primarily brought by renters in cities across the country, were consolidated in a Nashville federal court last year.

Some of the property owners named in the consolidated lawsuit own large apartment portfolios in San Francisco, like Brookfield Properties, which became the city's largest multifamily landlord after acquiring two apartment portfolios from Veritas Investments at the start of the year.

Brookfield declined to comment on the proposed ban when contacted Tuesday.

The consolidated complaint provides potential insight into the prevalence of landlords and property managers using RealPage's rent-setting software in San Francisco: it alleges that they account for about 70% of the city's multifamily units, resulting in "San Francisco renters paying 12% more in rent today than they paid in 2016."

The complaint also alleges that the San Francisco Apartment Association, which advocates for landlords, serves as a "conduit" for rent setting between RealPage and property owners. The SFAA did not respond to inquiries seeking comment on Peskin's proposal.

San Francisco has seen its rental market soften in the years after the pandemic, causing new housing construction to grind to a halt. Developers are increasingly saying that the dipping rents and high interest rates are making new construction unfeasible — even as the city has provided concessions such as rolling back affordable housing requirements in market rate projects and reducing fees.

How the ban on rent-setting algorithms would impact the situation is not clear. However, the ordinance would not regulate the actual amount of rents.

"If your desire is to create more housing in a place like San Francisco so that rents will come down, you should absolutely want to stem the harm being caused by RealPage," said Lee Hepner, an antitrust lawyer at the American Economic Liberties Project. "Housing markets function at their best when they produce lower rents for people in search of housing. New housing construction is not going to bring rents down if it is built into a cartelized marketplace."

Peskin said that he is confident that the ban would "return units to the market that are being held off."

"It is going to actually help return this to a real, capitalistic marketplace that is not being manipulated by large market actors," he said.