Property owners may no longer be able to use certain software to set apartment rents.
The state legislature this week approved a bill that would bar owners from basing rents and leasing terms on recommendations from a “software, data analytics service or algorithmic device” that coordinates pricing for or between residential property owners. It also prohibits owners from agreeing to not compete with each other — in other words, to keep rents artificially high through the use of those tools, or otherwise.
“Real estate giants are sidestepping the free market, and their tenants, by supplying price fixing software with non-public data to enhance their profits,” Assembly member Linda Rosenthal, one of the bill’s sponsors, said in a statement. “Our antitrust laws must reflect the world around us – modern day robber barons are no longer striking deals to distort the market in smoke-filled backrooms. Instead, they’re training algorithms.”
New York follows other cities in passing such legislation, including Jersey City, San Francisco, Philadelphia, San Francisco, Minneapolis, Berkeley and Providence, but would be the first state to implement such restrictions in the U.S.
This year, Colorado became the first state to pass similar legislation, but Gov. Jared Polis vetoed the measure, noting that pricing collusion is already illegal. He also voiced concern about banning technology that could “identify vacancies and provide consumers with meaningful data.”
The New York bill awaits the signature of Gov. Kathy Hochul, who has previously been supportive of such bans. The governor included a similar measure in her executive budget this year, but it was ultimately scrapped before the spending plan was approved.
Several lawsuits, including one brought by the Department of Justice, have accused companies like RealPage and Yardi of using their software to drive up rents and effectively creating a cartel of multifamily owners.
The Justice Department dropped its criminal antitrust investigation into RealPage in December, but added more landlords to its civil case in January. At the same time, the federal government is looking to pump the brakes on local bans on this software. Congress recently pitched a 10-year ban on localities passing restrictions on algorithmic rent-setting platforms.
The Real Estate Board of New York is pushing for changes to the New York bill (which could happen through chapter amendments) that specify that the ban applies to automating pricing using proprietary data, not publicly available or historical information. Other cities that have passed similar legislation, including San Francisco, have included such differentiations.
“Our approach to all of this has been: People should be able to use public data,” REBNY’s Basha Gerhards said.
The legislature was able to get a few other real estate-related moves across the finish line.
In the final days of the legislative session, lawmakers also renewed the Relocation and Employment Assistance Program, which provides tax credits to businesses that relocate from outside NYC or from below 96th Street in Manhattan to above 96th Street or other boroughs, for three years. It also extended a version of the program that applies to Lower Manhattan, and approved a new program for businesses that move to New York from out of state, dubbed Relocation Assistance Credit Per Employee, or RACE.
The industry managed to fight off a few controversial bills this session. Before leaving Albany, the Senate did not pass a bill that would have made it easier for localities outside New York City to adopt rent stabilization. It also did not vote on a bill that would have expanded prevailing wage mandates on publicly-funded projects, though a couple of other measures involving off-site fabrication and brownfield remediation work are still pending.
A measure that would give shareholders of a ground-lease co-op the first opportunity to buy the ground lease was passed by the Senate, but hasn’t moved forward in the Assembly. The Senate ended its session on Thursday, but the Assembly will continue to meet through Tuesday.
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