FEDERAL LEVEL UPDATES
RealPage Lawsuit Update and Preemptive Local Action
RealPage Lawsuit Recap
The federal lawsuit against RealPage, a rental software firm accused of price-fixing and antitrust violations, continues to make waves in the rental housing industry.
The Justice Department, joined by eight state attorneys general, alleges that RealPage’s rent-pricing software uses confidential data from approximately three million apartments to help landlords coordinate rent increases, resulting in inflated rental prices.
RealPage has denied these claims, arguing that its software only offers recommendations and isn’t the cause of rising rents.
While this lawsuit could take years to resolve, its implications are significant. A verdict against RealPage could reshape how rental data and algorithmic pricing are used nationwide, potentially introducing stricter regulations on such practices.
San Francisco and San Diego Take Independent Action
Recognizing the slow pace of federal litigation, cities like San Francisco and San Diego are moving ahead with their own regulatory efforts.
San Francisco recently passed legislation banning the use of algorithmic rent-pricing tools in residential properties. Meanwhile, San Diego and other jurisdictions, including New Jersey and Chicago, are exploring similar measures.
This local push for reform highlights the growing scrutiny of how technology influences rental markets. Cities argue that regulating these algorithms is essential to protect tenants from unfair rent hikes and to promote housing affordability in competitive markets.
San Francisco’s Legislative Action
On October 14, 2024, San Francisco enacted legislation prohibiting the sale or use of algorithmic devices for setting rents or managing occupancy levels in residential units.
This law defines an “algorithmic device” as a tool that utilizes algorithms to process non-public competitor data—such as actual rent prices and occupancy rates—to provide landlords with rent or occupancy recommendations. The legislation aims to prevent potential price collusion and protect tenants from inflated rents.
San Diego’s Proposed Measures
In October 2024, San Diego City Council President Sean Elo-Rivera proposed a ban on software that assists landlords in setting rental prices, targeting companies like RealPage.
This proposal seeks to address concerns that such software may facilitate price fixing and contribute to rising housing costs. The City Council’s Rules Committee approved the proposal, directing the City Attorney’s Office to draft the ordinance for further consideration.
How this impacts you
The momentum against algorithmic rent-pricing software adds a new layer of potential complexity to your operations. While tools like RealPage’s software are designed to optimize revenue, local ordinances or state legislation could soon limit their use.
- Operational Considerations: Landlords should prepare for potential shifts in compliance requirements, including mandatory disclosures about rent-pricing practices.
- Eviction Considerations: There could be potential blowback on evictions related to prices set algorithmically should such practices be banned in your area. There’s been no discussion of this so far, but connections may be considered if the measures gain traction or are adopted state-wide.
U.S. Supreme Court Declines to Hear Challenge to New York Rent Stabilization Laws
Overview of the Decision
On November 12, 2024, the U.S. Supreme Court declined to review a challenge to New York City’s rent stabilization laws, leaving in place a Second Circuit decision that upheld these regulations.
This refusal to hear the appeal effectively reinforces the Rent Stabilization Act, which caps rent increases and provides robust protections against evictions for tenants in nearly one million apartments across the city.
The plaintiffs, landlord groups, and property management entities argued that the laws violated the Fifth Amendment’s “takings clause” by restricting landlords’ ability to withdraw properties from the rental market or use them for personal purposes.
However, lower courts dismissed the cases, reasoning that the restrictions were neither unconstitutional nor universally detrimental to landlords.
Justice Neil Gorsuch was the sole justice to dissent publicly, expressing his willingness to hear the case, but no other justices joined him in granting review.
Potential Impacts on California Property Managers
While this decision specifically addresses New York, it has broader implications for property managers and landlords nationwide, including in California:
- Strengthened Tenant Protections Nationwide: The Supreme Court’s stance could embolden tenant advocates and lawmakers in California to pursue similar measures, potentially reinforcing rent stabilization ordinances or introducing stricter eviction controls.
- Legal Precedents: By upholding rent stabilization laws, the courts have sent a signal that such regulations are not inherently unconstitutional, making it harder for property owners in California to challenge similar laws like those under AB 1482.
- Eviction Implications: California landlords may need to adjust expectations and operational strategies, as legal challenges to tenant protections like rent control or just-cause eviction requirements could face greater scrutiny and resistance.
For example, the recent rejection of Proposition 33—a measure that sought to expand local governments’ authority to enact rent control—reflects the state’s ongoing debate over rent regulation. The Supreme Court’s stance may embolden California municipalities to pursue or strengthen their own rent control policies, knowing that such measures have withstood constitutional scrutiny at the federal level.
Federal Bill Proposed for Tenant’s Right to Organize
Overview of the Proposed Legislation
On Thursday, Connecticut Senator Richard Blumenthal introduced the Tenants’ Right to Organize Act, a federal bill aimed at empowering renters to form and sustain tenant unions. The legislation, announced during a press conference alongside members of Connecticut’s Blake Street Tenants Union, seeks to strengthen tenant protections and encourage collective bargaining between renters and landlords.
This bill reflects a growing recognition of tenants’ rights as central to addressing housing affordability and ensuring fair treatment in the rental market.
Key Provisions of the Tenants’ Right to Organize Act
The proposed bill includes several mechanisms designed to support tenant unions and promote housing stability:
Anti-Retaliation Protections
The bill would make it illegal for landlords to retaliate against tenants for participating in or attempting to form unions
Federal Funding for Tenant Organizing
Resources would be allocated to support tenant unions, including:
- At least $1 million annually for outreach and training programs.
- A stipend of $40 per unit per year for tenant resident councils in qualifying housing.
Expanded Tenant Coverage
Protections would extend to renters in “government-supported housing,” covering a broad spectrum, including public housing, Section 8 recipients, and properties financed by Freddie Mac or Fannie Mae. This category accounts for roughly 25% of all rental housing in the U.S.
The Potential Impact
The Tenants’ Right to Organize Act could dramatically shift the power dynamics between landlords and tenants, particularly in federally supported housing. By providing financial and legal support, the bill aims to:
- Enhance tenant advocacy and collective bargaining capacity.
- Curb abusive practices by landlords, especially in subsidized housing markets.
- Foster a more collaborative approach to resolving disputes over rent increases, maintenance, and lease conditions.
The Broader Context
The introduction of this bill aligns with a national trend toward reinforcing tenant protections in response to rising rents and housing insecurity. Tenant unions, which advocate for renters’ collective interests, have gained momentum in recent years as a tool to address systemic housing inequities.
While the proposed legislation is in its early stages, its passage could set a significant precedent for renters’ rights nationwide.
STATE LEVEL UPDATES
New Funding Allocated for Legal Aid Services to Assist Tenants Facing Eviction in California
Overview of the New Funding Initiative
In a significant move to address housing instability, the California legislature recently approved additional funding to expand legal aid services for tenants facing eviction. This funding aims to enhance access to legal representation and resources for tenants at risk of losing their homes.
By increasing financial support for legal aid organizations, the state seeks to level the playing field for tenants in the eviction process. This move is part of a broader effort to reduce homelessness and promote housing security, as many are grappling with high housing costs and widespread displacement.
Key Details of the Initiative
The newly allocated funds will be directed toward:
- Expanding Legal Representation: More tenants will have access to attorneys who can advocate on their behalf in eviction proceedings.
- Increasing Outreach: Legal aid groups will use the funding to reach more vulnerable populations like low-income renters and those in underserved areas.
- Providing Education and Resources: Tenants will receive more guidance on their rights and options to assist with housing disputes.
Implications for the Rental Market
For property managers and landlords, this development underscores the need for compliance with California’s tenant protection laws. With more tenants likely to have access to legal representation, there will be greater scrutiny on every eviction attempt.
L.A. City Council advances tenant anti-harassment ordinance
On September 25, 2024, the Los Angeles City Council adopted amendments to strengthen the Tenant Anti-Harassment Ordinance (TAHO), initially enacted in 2021 to protect tenants from landlord harassment. The recent amendments aim to enhance tenant protections and address ongoing harassment issues.
Key Amendments to the Ordinance:
- Expanded Definition of Harassment: The amendments clarify and broaden what constitutes tenant harassment, ensuring a more comprehensive understanding of prohibited landlord behaviors.
- Mandatory Acceptance of Rental Assistance: Landlords are now required to accept rental assistance payments made by the city, preventing refusals that could jeopardize tenants’ housing stability.
- Guaranteed Compensatory Damages: The ordinance now mandates that tenants who prevail in harassment cases receive compensatory damages, incentivizing legal representation and deterring landlord misconduct.
Rent Control Updates in California
In recent developments across California, rent control measures have seen varied outcomes, reflecting the state’s ongoing debate over housing affordability and tenant protections.
Marin County Voters Reject Rent Control Measures
On November 5, 2024, voters in Marin County decisively rejected rent control initiatives in three municipalities: Larkspur, San Anselmo, and Fairfax. These measures aimed to limit annual rent increases and implement stricter eviction protections. The rejection indicates a preference among residents to avoid additional rent regulations, possibly due to concerns about potential impacts on housing supply and property values.
Los Angeles Considers Stricter Rent Control Proposals
Concurrently, the City of Los Angeles is evaluating potential adjustments to its Rent Stabilization Ordinance. A recent report from the Los Angeles Housing Department recommends reducing the annual allowable rent increase for rent-controlled units to 2%, down from the current 4%. This proposal protects tenants from significant rent hikes while ensuring landlords receive a fair investment return.
Implications for Property Managers and Landlords
These developments underscore the importance for property managers and landlords to stay informed about local rent control policies, as regulations can vary significantly across jurisdictions.
As California grapples with housing affordability, property managers should anticipate potential changes. Among preparations are retaining legal counsel and adapting policies and practices.
L.A. County cooling ordinance raises concerns for property owners
Los Angeles County is considering an ordinance requiring rental property owners to maintain indoor temperatures in habitable rooms at or below 82°F. This initiative aims to protect tenants from extreme heat, which poses significant health risks.
Key Aspects of the Proposed Ordinance
- Temperature Threshold: Landlords would be responsible for ensuring that indoor temperatures do not exceed 82°F in habitable spaces.
- Cooling Readiness: Properties must be equipped to allow tenants to install air conditioning units safely, even if the landlord does not provide such units.
Concerns Raised by Property Owners
- Financial Impact: Landlords express concerns about the costs of upgrading electrical systems and installing air conditioning units, especially in older buildings.
- Operational Challenges: Ensuring compliance may require significant modifications to existing structures, posing logistical challenges for property owners.
Implications for Property Managers
Compliance Requirements: Property managers must assess their buildings’ current capabilities and plan for necessary upgrades to meet the proposed standards.