New York Bans AI-Enabled Rent Price Fixing (theverge.com) 70
New York Gov. Kathy Hochul has signed into law legislation banning the use of price-fixing software by landlords to set rental rates. From a report: 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 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.
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Of course an individual can do research and do whatever they want. When you tie those individuals together and even automate the work it becomes collusion and amounts to price fixing. Look what has happened to rents in places where RealPage is popular, nothing good for renters.
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To put it in the context it was bad enough that the people doing it didn't really fight it out in courts after they were called out.
That means they knew what they were doing and they knew they couldn't fool a judge and jury.
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I could see landlords in such a case claiming that there was no intent to collude and that the case should be dismissed because the prosecution failed to demonstrate mens rea [wikipedia.org]. If that works, about the only thing the legislature can do is amend the act, making it a strict liability [wikipedia.org] crime.
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Buying the software that does all the decision making is just outsourcing the collusion.
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Isn't that what the AI is doing (researching prices and coming to a conclusion)?
No, the AI was also artificially increasing the rent because a large enough number of landlords were using their tool. If rent should have been $2000 in a competitive market, it might suggest $2100 instead. As long as landlords know most of their competitors are also using the software, they can feel confident that not enough people are going to undercut them on price. That is what caused the rent prices to go up more than the market would have otherwise demanded.
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No, the AI is basing the prices on non-public information, not rates posted in public listings.
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As a landlord, I can look at the newspaper and see what other landlords charge for similar properties and use that information - legal.
I can use my computer to go online and check out my competitors rents - legal
But somehow, having a program running on my computer that checks what other landlords charge is now illegal in New York? Really?
This is just pandering to renters, trying to look like the politicians are doing something to make rent more affordable...
Rent isn't high because of RealPage, it's high bec
Re: Well, that's unfortunate (Score:2)
"having a program running on my computer that checks what other landlords charge is now illegal"
They're not checking public sources of rental rates as you describe. They're using private, internal data collected from all of their customers. They turned pricing into a de facto monopoly. While there are multiple service providers, they're all using the same software to collude on pricing.
You as a landlord call up all the other local landlords and agree to raise prices as a cartel: ILLEGAL.
You can look at advertised prices (Score:3, Insightful)
Several big conglomerates that own apartments were colluding illegally behind software. Sort of like how Uber illegally violated labor law and just threw up their hands and said we're technology company!
I think they would have got away with it but they got a little too greedy and rent prices shot up a little bit too much too fast and it became a major political issue for obvious reasons.
What
And of course as always the solution is more and (Score:1)
More and more antitrust laws since collusion is always always done by big trusts. Whatever the problems in our world the actual solution is antitrust law enforcement so we can go back to having competition. Capitalism without antitrust laws is just billionaires fascism.
Market consolidation and a complete lack of antitrust law enforcement means that if you try to go fast and break things you will either get run out of business or if you're really really lucky a few million bucks tossed your way to go away.
I
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damn right brother
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AI will probably add some interesting twists to this. Will it be illegal to ask ChatGPT "What should I rent my house for?"?
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AI will probably add some interesting twists to this. Will it be illegal to ask ChatGPT "What should I rent my house for?"?
As long as ChatGPT isn't collecting non-public pricing information from landlords, this would be fine. The Act specifically calls out the use of nonpublic competitor data.
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That's "would be legal under this act", but if, say, ChatGPT collected non-public data (I believe it does, but probably not about rents) then iwould it be legal? And if it merely collected "a wide span of data in various formats" it could plausibly have the same practical effect. So some would be inspired to write an additional piece of legislation.
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I think they would have got away with it but they got a little too greedy and rent prices shot up a little bit too much too fast and it became a major political issue for obvious reasons.
"Hubris is one of the great renewable resources."
-- P. J. O'Rourke
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I wonder what NAR's position on this is.
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Price fixing is not market research. It's forming a cooperative pricing policy with competing renters and it's illegal even if a properly licensed realtor is involved. Market research (what you're referring to) is finding what the going rate for a rental is and it's perfectly legal - nobody needs to pay off politicians for that information, it's publicly available in the rental listings
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But they didn't cut out the middle man. They literally are still paying a middle man (the software creator) to tell them what to set rents at.
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The platforms have access to non-public information. If you are on the platform, you tell it the rates of your current tenants. It uses this data to suggest rates to other landlords. Its not just perusing listings for you. The rates it uses in its algorithm are not listed anywhere.
Price fixing? In the USA? (Score:2, Insightful)
Naah, can't be happening.
Next you are going to tell me that supermarkets, ISPs, PC sellers, car dealers.... are colluding to fleece the suckers?
What's next? (Score:2)
Walmart can't use AI to set prices if they are partially based on what other stores in its vicinity are charging?
Sports gambling can't use AI to set odds if the decisions include what other gambling sites are using?
Re:What's next? (Score:4, Interesting)
Housing is a human right, and the pricing is relatively inelastic (particularly right now) even before landlords collude to price fix. So it's a pretty different situation than Walmart figuring out what the optimal price for tomato paste is.
But also, this is just straight-up price fixing, and we don't let gas stations do it either.
Re: What's next? (Score:2)
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So housing is a human right and food isn't?
Housing isn't a right. You can't be homeless, demand a home, and then be given one free of charge. Same as you can't walk up to any grocery store, demand food, then be given free food. Hell, they'll even set the police after you if you take food out of their dumpster. Unlike residential trash where once you put it out anyone can grab your trash and do whatever they want it, business trash gets protections your trash doesn't have. Food and housing are very much
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Yes, housing is a right. If the government can't provide it, it shouldn't be allowed to stop you from providing your own. So if you buy a tent and pitch it somewhere so you don't die, that is a fundamental human right. People need shelter to not die.
IF your government is in the business of protecting human rights, it should provide housing, but at the very least, it cannot deny housing if you can provide it yourself.
I'm not in favour of these weird dumpster-diving rules either. Food that could be used to fe
Houston (Score:2)
Houston has the most stable housing prices of any city in the US. Houston does not have any zoning restrictions. If housing prices go up, developers tear down strip malls and build apartments. If commercial prices go up, they tear down low density housing or commercial property and build high-density commercial property. That is a functioning market.
People like to rag on Houston as not a nice place to live, but you can, at least, afford to live there.
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"Housing is a human right". No.
You should have a right to build your own house or grow your own food. But anything that requires the labor of others can not be a human right.
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I didn't say that it requires the labour of others, just that it's a right. If your government doesn't provide it, it should at least not stop you from providing it for yourself.
But I do believe that societies that are moral should provide housing for people that need it. That's basically what society exists for. If we can't provide for the least of us with such abundance, why are we even here?
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Housing is a human right,
Housing only exists because someone else created it (used their labor).
Saying "Housing is a human right" is the same as saying "I have a right to the result of your labor". This is slavery by another name.
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Housing is a human right is an acknowledgment that humans need shelter to survive, and as a society we should attempt to provide the requirements for life at a basic level. I'm not asking for a lot here: I think governments SHOULD provide basic housing—nobody's trying to take anyone else's private property here, I don't know why you jumped to that conclusion—but if they don't, they shouldn't be tearing down encampments where people have built their own basic housing. Nobody's labour was appropri
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What's next? Walmart can't use AI to set prices if they are partially based on what other stores in its vicinity are charging?
Sports gambling can't use AI to set odds if the decisions include what other gambling sites are using?
The bill only calls out the use of nonpublic competitor data in setting prices. It is basically just saying that you cannot collude with competitors (already illegal) just because you are doing it indirectly through a 3rd party. If Walmart and Target both paid a consultant who received nonpublic supplier pricing data from both companies and then did supplier pricing negotiations for both companies, that would already be illegal. But the pricing they give to customers is public information, so that's not ill
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Why would a store enter its price data into this system? Why would a store pay for the ability to tell walmart its prices? Think about it.
Lets be Clear (Score:2, Interesting)
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Those cant really be separated. AI is just a roundabout way for saying "algorithm to decide price" and there is no difference if that algorithm is decided in a shady backroom during a meeting of representatives or by some high tech company that collects all the data. If multiple parties use same algorithm to decide price they will arrive to same conclusion, resulting in fixed pricing.
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If the other landlords are also using the software, and all are working off the same information, then the software can determine the prices the other landlords would choose as well. In the limit, if every landlord is using the same software, they can can all act as-if they were colluding even though there is no communication between them.
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1. Algorithm designers collects all the data. At present they have (almost) perfect data as they get actual transactional prices from their customers. This alone gives them huge information advantage against renters. With public information you generally only see offer prices and how long the place is listed (often even with some missing location details)
2. Algorithm ensures consistent interpretation of data and factors that affect pricing. When its human interpreting data you will have inconsistencies, eg
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This would mean a landlord wouldn't be allowed to own multiple buildings either because they would be setting the same price in the same method in multiple buildings. The only problem is when the are colluding to fix the price with a MAJORITY of the market, essentially holding a monopoly. Price fixing doesn't work without a majority.
It absolutely does not mean that. An INDIVIDUAL (such as a single landlord owning multiple properties in your example) by definition cannot collude alone. The definition of collusion when it comes to legal matters is when two or more parties secretly agree to defraud a third-party of their rights or accomplish an illegal purpose. It does require at least 2 parties to be involved, but does not require a majority.
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No. The AI is a red herring. It has nothing to do with this. What these systems are doing is using actual rent amounts that tenants pay to determine what to charge. That rent information is not publicly available. That's the problem. If these systems stuck to the rents sought in publicly posted advertisements, it'd be no problem. Using that non-public information to set rents is already illegal; it's a form of price-fixing. What this law does is makes it clear that it's illegal to do even if the information
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It's not outrageous at all. Just because there's a third party involved (the software), who is telling the main parties (landlords/property managers) what to charge doesn't make it NOT collusion.
If the 3rd party was a human person, who was contracted to tell the landlords what to charge, then they charged those prices, that would be collusion, and just because they're not directly talking to each other but through an intermediary, doesn't make it any less so.
Just because it's a piece of software and not a h
Mixed feelings (Score:2)
On the one hand, my libertarian side objects to this. On the other, I think such software can pretty much only be used for evil. Which is to say, allowing the landlords to eliminate all the consumer surplus.
While I like the sentiment, it's unenforceable (Score:2)
PS: Mamdani kicked corrupt creepy Cuomo's keister again. Although I don't want to hear anymore about government grocery stores, but I do want to hear about pragmatic funding and incubation of self-sustained, em
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I'm not sure I understand how this is price fixing, though.
If two gas stations are next to each other, and can see each other's prices, and set their prices accordingly, that's not price fixing or collusion. You never need to go much below the other gas station, and if one of the gas stations in a more convenient spot next to, say, an interstate exit, they can afford to ask for a higher price. That's just regular competition, you want to maximize your margin, and you're never going to lower your price much
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While I agree that I don't understand how this is price fixing, I'm not sure your argument is valid. Standard Oil is a pretty well-known example of producers colluding to keep the price up, but they still kept it low enough that people found a ton of ways to make use of oil from transportation to heating to labor productivity. Using the "loss of demand" measurement we would probably have missed it.
I think the issue here isn't collusion per se, but rather that an information disparity exists and disadvantage
Collusion is everywhere now. (Score:2)
Most retail prices are set the same way now, it's a little more elaborate but each store simply automagically sets the same exact price as the other major retailers. Usually each following within a day if one drops the price for a 'sale'.
Good luck enforcing that... (Score:4, Interesting)
Good luck enforcing that. All it takes is some software, likely out of state or offshore that posts "recommended" rents, and all the landlords just move to that.
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Moving pricing source outside the jurisdiction doesn't change anything, since simply using it will be illegal act of collusion and landlords for the obvious reason of property location will remain within it.. You can always hope to remain undetected, but this is likely high risk approach to take - all it takes is a single disgruntled employee sharing that secret source.
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all it takes is a single disgruntled employee sharing that secret source.
Why would your employees know about this? How much time and effort does it take to log in and download the recommended rents? The landlord could easily do it his or herself. No need to have any other staff involved at all.
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Good luck enforcing that. All it takes is some software, likely out of state or offshore that posts "recommended" rents, and all the landlords just move to that.
It wouldn't be that difficult to detect or prosecute. If all the landlords are charging the exact same rent, it's highly unlikely that they all independently came up with the exact same figure. It's not about prosecuting the software manufacturer, so they could be anywhere. If multiple landlords use ANY method whatsoever to agree on non-competitive pricing, that's collusion. It doesn't matter if that method involves direct communication, or communication via a 3rd party human, or communication through a pie
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It wouldn't be that difficult to detect or prosecute. If all the landlords are charging the exact same rent, it's highly unlikely that they all independently came up with the exact same figure.
And for that very reason it's highly unlikely the software would come up with the "exact same figure" for everyone.
Doesn't make sense to me (Score:2)
RealPage provides property management services. As part of those services they have data and algorithms to determine how to best to maximize the revenue at the managed properties. At what point does analyzing the market and trends to determine pricing become illegal? As a homeowner when it comes time to sell I will get a market value analysis to determine what to ask for my property. Is that breaking a law somehow?
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> At what point does analyzing the market and trends to determine pricing become illegal?
It SHOULD become illegal when it uses information that is not easily available to renters.
In this case, the software has access to actual rents that are not widely available (at almost no cost or effort to obtain) to renters.
[pendantic]
As to when it actually becomes illegal? Same as with anything else: When lawmakers declare something is illegal, it's illegal until or unless a court invalidates the law making it ill
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> At what point does analyzing the market and trends to determine pricing become illegal?
It SHOULD become illegal when it uses information that is not easily available to renters.
In this case, the software has access to actual rents that are not widely available (at almost no cost or effort to obtain) to renters.
[pendantic]
As to when it actually becomes illegal? Same as with anything else: When lawmakers declare something is illegal, it's illegal until or unless a court invalidates the law making it illegal.
[/pendantic]
Aren't actual rents readily available on sites like realtor.com?
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>Aren't actual rents readily available on sites like realtor.com?
Not necessarily.
Those may be the offered rents available today before any discounts, but they may not be the rents existing tenants are paying.
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The point was when they contractually required landlords to use the prices they told them to use and then started increasing those 'recommended' prices.
Justly so (Score:2)
Rents are supposed to be decided by a group of slimy slumlords, like god intended.
lies (Score:2)
It's not "price-fixing" software, it's market information software.