Perspective: Algorithms artificially escalating rental costs demand halt
In an effort to promote fairness and transparency in the rental housing market, New York state is poised to become the first state in the nation to outlaw price-fixing algorithms in real estate management software. The bill, S.7882/A.1417, is currently being sponsored in the state Legislature.
The software, developed by companies like RealPage, is designed to maximize profits for landlords by analyzing market data and recommending rent prices. However, critics argue that by sharing sensitive pricing information between competing landlords, the software effectively facilitates price-fixing and rent inflation.
If passed, the bill would update New York's antitrust laws by prohibiting landlords and property managers from setting rents or determining changes to rents based on algorithm-driven recommendations that consider private pricing information. This could potentially prevent landlords from colluding to set rental prices, which could inflate the value of their properties.
The impact on rent prices has been significant. A 2023 White House study estimated that such rent-setting software contributed to nearly $4 billion in additional rent costs for tenants nationwide in that year alone. In response, cities like Hoboken have banned landlords from using this software and set penalties to deter algorithm-driven rent manipulation.
Tenants in New York City have reported notable increases in their rents and abnormally long apartment vacancy periods due to the use of this software. The bill aims to make clear that rent price-fixing via artificial intelligence is against the law and set clear boundaries against behaviors that lead to anticompetitive practices and price fixing.
The bill would also prohibit companies from knowingly operating platforms that facilitate collusive algorithmic rent-setting, or from doing so with reckless disregard. This could set a precedent for other states to follow suit and enact similar legislation to protect renters from unfair rent hikes.
The legislation is part of a broader movement to address the issue of price-fixing algorithms in the rental housing market. U.S. Sen. Amy Klobuchar has introduced federal legislation to tackle this issue, and U.S. Sen. Elizabeth Warren has expressed concerns about how the new federal budget bill could shield companies that use these algorithms. Colorado recently passed a bill to ban this software statewide, but it was vetoed by Gov. Jared Polis.
In summary, the widespread use of price-fixing algorithms in real estate management software has artificially increased rents in many U.S. cities, prompting bans and legal challenges to restore competitive and transparent housing markets. The bill in New York state aims to address this issue and protect renters from unfair rent hikes.
- The bill in New York state, if passed, will update the state's antitrust laws to prohibit landlords from setting rents or determining changes based on artificial-intelligence driven recommendations that consider private pricing information, aiming to prevent collusion to set rental prices.
- In response to the impact of rent-setting software on tenants, cities like Hoboken have enacted policies and legislation to ban landlords from using such software, setting penalties to deter algorithm-driven rent manipulation.
- The legislation in New York could set a precedent, encouraging other states to follow suit and enact similar policies and legislation to protect renters from unfair rent hikes facilitated by technology in the rental housing market.
