Federal, state, and local authorities have increasingly sought to restrict companies like RealPage and Yardi from selling data and algorithmic tools to multifamily property owners and operators aiming to optimize their pricing and net operating income. Critics argue that such software has played a significant role in the sharp rent increases witnessed during the pandemic.
The House of Representatives recently advanced a sweeping legislative package that includes a notable provision for data companies. As reported by The Wall Street Journal, this provision would block state and local governments from regulating automated decision systems, including rent-setting algorithms, for the next ten years. This move comes as part of a broader federal effort to preempt state-level regulation of artificial intelligence, though the measure still faces significant hurdles in the Senate.
At the federal level, some senators have called on the Department of Justice to investigate RealPage’s rent algorithm and have introduced antitrust legislation targeting algorithmic rent price-fixing. However, with Congress and the White House under Republican control, the prospects for such federal legislation are slim.
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Despite limited federal intervention, local governments have taken matters into their own hands. Cities like San Francisco and San Jose have already taken steps to ban the sale of revenue management software. RealPage responded by suing Berkeley, California, last month over its ordinance prohibiting the sale or use of pricing algorithms to set rents or manage occupancy levels for residential units.
Other cities, including Philadelphia and Providence, Rhode Island, have enacted similar bans. Also, Jersey City, New Jersey, recently became the first in the state to prohibit landlords from using AI-based rent-setting software. Additionally, Colorado is on the verge of enacting a statewide ban.
If enacted, the House provision could override these local and state bans, as Congress holds the authority to preempt such regulations. “We would no longer be able to enforce this ban,” Providence City Council President Rachel Miller told The Wall Street Journal.
In response, local and state authorities may attempt to challenge the federal measure in court, arguing that their lawsuits are grounded in existing protective laws rather than specifically targeting AI, according to the WSJ. The outcome of such legal challenges would depend on the courts and could ultimately reach the Supreme Court. Alternatively, states and localities could pursue rent control policies to counteract the information advantages landlords gain from these algorithms.
Nonetheless, the House bill’s path forward remains uncertain. Moderate Republican senators have raised concerns about certain spending provisions, such as those affecting Medicaid and any contentious section could stall the bill. The Senate may also draft its own version, necessitating negotiations between the two chambers to reach a compromise acceptable to both.
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