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.
