Opinion: California can’t fix housing affordability until it fixes algorithmic collusion

The median rent in California was $747 a month in 2000. Today, it’s over $2,700. Even after adjusting for inflation, rent climbed 44% in real terms, while renter income grew just 11%. The cost of keeping a roof over your head has risen roughly four times faster than renter income.

For millions of Californians, that gap is the affordability crisis.

Algorithms didn’t create it. They arrived inside it, with software promising landlords greater “efficiency” in a housing market already failing too many renters. California needs more housing, but construction cannot relieve the pressure quickly enough for renters today. One thing government can do right now, without outlawing innovation or waiting decades for supply to catch up, is stop allowing software to facilitate coordination among landlords on what renters pay.

Consider RealPage, a company that has controlled roughly 80% of the software market that helps landlords decide what to charge for rent, with its suggested prices reportedly accepted 80-90% of the time. The result gives landlords a shared pricing advantage over renters they should be competing to attract. No ethical landlord calls a competitor to agree on rent. With algorithmic pricing, they don’t have to: Nonpublic pricing data can be pooled into the same system and used to generate pricing recommendations.

We don’t have to agree on every solution to the housing crisis to ask a basic ethical question: Is this how a fair and competitive market should work?

California Attorney General Rob Bonta, alongside the Justice Department and a bipartisan coalition of attorneys general, sued Texas-based RealPage, alleging it used landlords’ nonpublic, competitively sensitive data to align rents. Since then, federal and state regulators have secured settlements with RealPage and several major landlords.

But suing after the harm is done is no substitute for rules designed to prevent it.

California lawmakers tried to respond. What followed was a story of crawling before flying. AB 1776 would modernize existing antitrust law by extending liability to certain anticompetitive conduct by a single firm. It barely cleared the Assembly by a three-vote margin before passing the Senate. Three more ambitious bills — SB 295, SB 52, SB 384 — faltered amid significant business and association opposition. That leaves AB 1776, the narrowest survivor, carrying a much bigger question: Who gets to write the rules for how algorithms determine what Californians pay?

Sacramento’s outcome this session shows just how hard it is to write rules against algorithmic collusion. When the law doesn’t draw the line, businesses that exercise restraint can find themselves competing against those willing to profit from the ambiguity. Others follow an old maxim: Ask forgiveness, not permission, because crossing a line before anyone draws it can be profitable.

Housing is shelter first. The moment software starts treating it purely as an asset class to optimize, extracting the maximum a tenant will tolerate, renters lose ground they don’t get back. It’s why RealPage is now subject to a DOJ consent decree, why major gas station operators now face a private lawsuit alleging the same kind of algorithmic price coordination, and why Instacart’s pricing experiments drew scrutiny from New York’s attorney general.

Legislation has started to crawl, but litigation is still being asked to do the work the law has yet to finish. California lawmakers spent two sessions fighting about “market” rent prices, while opponents invoked the “affordability crisis” as one reason to do nothing, as if inaction carries no real cost of its own for families.

We are at a watershed moment. The same mechanisms are emerging in gas, freight and grocery delivery. Innovation will not wait for government to catch up. Our obligation to treat our neighbors fairly cannot wait either.

Davina Hurt is director of Government Ethics for the Markkula Center for Applied Ethics at Santa Clara University and a former mayor of Belmont.