San Francisco City Council Targets Free Speech To Cover Up Its Own Housing Failures

Desperate to control soaring rents, the city council bans rental data tools while ignoring its own role in the housing crisis.

The San Francisco city council is smashing the mirror because it doesn't like the face staring back at it. The council just approved a ban on websites that offer data about local rental markets and help landlords set their rents. The council blames these tools for exploding housing costs. It's a classic case of killing the messenger that will do nothing to fix a problem of the city council's own creation—and it violates the First Amendment. 

Landlords often use websites like RealPage and Yardi that suggest rent prices based on local market data. Recently, activists have started blaming such websites for inflating rents, simply because they provide accurate data about rent in a local market. The San Francisco city council has now joined the party with an ordinance that would ban "algorithmic devices [that] perform calculations of non-public competitor data concerning local or statewide rents or occupancy levels, for the purpose of advising a landlord whether to leave their unit vacant or on the amount of rent that the landlord may obtain from a tenant." Under this ordinance, websites cannot offer such devices and landlords cannot use them. 

But these sites offer a valuable service. Prices are signals—they offer crucial information to buyers and sellers that guides commercial decisions, helps businesses and consumers adjust to economic changes, and supports a healthy economy. 

Knowing what competitors are charging helps businesses stay competitive and attract customers. This is just as true in housing as in any other industry. If a landlord charges too much, someone will undercut them and snatch up customers. If they charge too little, they'll see a flood in demand and respond by raising prices. Market information just stimulates this process. 

Yet these websites have sparked cries of price fixing and collusion by landlords. In reality, they merely offer information. The fact that landlords arrive at similar prices after analyzing market data does not indicate collusion or price fixing. This is simply a standard economic practice. 

Businesses routinely analyze competitors' pricing to align their own rates with the prevailing market. For example, bakeries are not fixing prices just because a dozen glazed doughnuts typically costs around $10. Should we start hiding doughnut prices so bakeries have to guess a profitable rate? Not only would such economic blinders fail to lower costs, they might actually increase them by wasting time and effort on price discovery.  

Even if these websites might help landlords to collude or fix prices, that does not justify banning information. Under the First Amendment, the government cannot stifle information because it fears what people might do if they're informed. In the 1976 case Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, Inc., the Supreme Court struck down a law that prohibited pharmacists from advertising prescription drug prices. "It is precisely this kind of choice," the Court said, "between the dangers of suppressing information, and the dangers of its misuse if it is freely available, that the First Amendment makes for us." 

It's a good thing the First Amendment makes that decision for us, because almost any information—however valuable—can be misused and therefore fall within the crosshairs of hasty lawmakers. Public voting records can be used to intimidate people, real estate listings can facilitate property scams, and public online data can be exploited by identity thieves. Of course, all this information also serves valuable purposes, too. In a free society, the government penalizes misconduct rather than restricting access to information. 

In this case, the San Francisco city council is shooting the messenger because it dislikes the message. The fact that housing costs are high in San Francisco did not begin with RealPage or similar sites. The root cause of these high housing costs lies with the city council itself. If the city council is serious about addressing the problem, it should examine its own anti-housing policies: single-family zoning policies that restrict housing supply, rent-control laws that stymie growth, and disastrous permitting processes that block and delay housing projects for years—just to name a few.  

Ironically, the information published by these websites could help the city council better understand why San Francisco remains one of the most expensive cities in the nation. If the city is serious about its housing crisis, maybe it should subscribe to RealPage.