New York Pioneers Ban on AI-Driven Rent Price Fixing

New York bans AI-enabled rent price fixing

On Thursday, New York Gov. Kathy Hochul signed into law legislation banning the use of price-fixing software by landlords to set rental rates. New York is the first state to outlaw algorithmic pricing by landlords, following a number of city-wide bans in Jersey City, Philadelphia, San Francisco, and Seattle. Software companies such as RealPage offer landlords algorithms that can set rental prices. The software can also help determine the ideal number of people to live in a unit or the terms of a lease renewal. RealPage says it can help its clients "optimize rents to achieve the overall highest yield, or combination of rent and occupancy, at each property." But the "private data algorithms" advertised by these software companies, Hochul says, cause the "housing market distortion" that harms renters "during a historic housing supply and affordability crisis." Not only does the law outlaw setting rental terms with the software, it also says that any property owners who use the software will be considered colluding. In other words, two or more rental property owners or managers who set rents with an algorithm are, in practice, choosing to not compete with each other, whether they do so "knowingly or with reckless disregard," the law says. This is a distinct violation from simply using the software itself. The use of this software has cost US tenants around $3.8 billion in 2024, according to Hochul's press release. A 2022 investigation by ProPublica linked RealPage's algorithm with soaring rental prices across the country. Two years later, the US government sued RealPage. The bill protects renters from "algorithmic price collusion," Pat Garofalo, director of state and local policy at the American Economic Liberties Project, said in a press release. One of the bill's sponsors, State Sen. Brad Hoylman-Sigal, said of the bill: "This legislation will update our antitrust laws to make clear that rent price-fixing via artificial intelligence is against the law and ensure there are boundaries against behaviors that the federal government has found lead to anticompetitive practices and price fixing." The law goes into effect in 60 days.

New York becomes first state to ban AI-enabled rent price fixing

Governor Kathy Hochul said the ban addresses "housing market distortion" caused by private data algorithms. New York Governor Kathy Hochul has signed legislation prohibiting landlords from using price-fixing software to establish rental rates. The law, a first for any U.S. state, is designed to counter algorithmic pricing amid a statewide housing crisis. The ban follows similar municipal-level ordinances in cities including Jersey City, Philadelphia, San Francisco, and Seattle. Software from companies like RealPage provides landlords with algorithms to set rental prices, determine ideal occupancy levels, and formulate lease renewal terms. RealPage advertises that its product helps clients "optimize rents to achieve the overall highest yield, or combination of rent and occupancy, at each property." Governor Hochul stated that these "private data algorithms" create "housing market distortion," which negatively affects renters during what she described as a "historic housing supply and affordability crisis." The new legislation not only outlaws the practice of setting rental terms with such software but also legally defines its use by multiple landlords as a form of collusion. The law stipulates that if two or more rental property owners or managers utilize an algorithm to set rents, they are, in effect, choosing not to compete with one another. This applies whether the action is taken "knowingly or with reckless disregard." This creation of a collusive agreement is considered a distinct violation separate from the act of simply using the software itself. According to a press release from Governor Hochul's office, the application of such software has resulted in an estimated cost to U.S. tenants of approximately $3.8 billion in 2024. The issue gained prominence following a 2022 ProPublica investigation that established a link between RealPage's algorithm and rapidly increasing rental prices across the United States. Two years after that report, the U.S. government initiated a lawsuit against RealPage. Supporters of the bill emphasized its role in protecting consumers. Pat Garofalo, the director of state and local policy at the American Economic Liberties Project, said in a press release that the legislation shields renters from "algorithmic price collusion." State Senator Brad Hoylman-Sigal, one of the bill's sponsors, commented on its purpose. "This legislation will update our antitrust laws to make clear that rent price-fixing via artificial intelligence is against the law and ensure there are boundaries against behaviors that the federal government has found lead to anticompetitive practices and price fixing," he said. The law is scheduled to go into effect 60 days after its passage.