Under the bill, using certain algorithmic systems to set rent prices would be a violation of the New Jersey Antitrust Act. (Getty Images)
Algorithmic tools used by landlords to set rent and keep housing supply off the market would be prohibited under newly proposed legislation.
The lawmakers sponsoring the bill — Sens. Brian Stack (D-Hudson) and Teresa Ruiz (D-Essex) — say their concerns lie with the supply of affordable housing, skyrocketing rent prices, and landlords using software to “collude” and raise prices across the state.
“Landlords engaging with the software supply real-time prices and additional lease information to companies managing the software, who proceed to use algorithms to fix rental prices. As a result, competition decreases and typically rental prices increase,” they wrote in the measure.
The bill comes as one company, RealPage, faces scrutiny for its use of a proprietary algorithm that helps property managers set rents. A ProPublica series found that its pricing software is driving up rent prices nationwide.
The company is also the focus of a Department of Justice antitrust lawsuit, and a watchdog organization in July urged the state Attorney General’s Office to join nearly a dozen across the country investigating RealPage. The company has denied wrongdoing.
Local housing advocates said the New Jersey bill is one of the many avenues lawmakers should take to begin addressing the lack of affordable housing. Matthew Hersch of the Housing and Community Development Network of New Jersey said putting limits to these algorithms would be a way to tackle a new problem in the housing industry.
“When we talk about controlling rents, rent stabilization, housing control — this is one of the many ingredients that go into a fair housing market,” he said.
Pat Garofalo, director of state and local policy at the American Economic Liberties Project, said the bill would cut off the sharing of data between several landlords, which he also called “collusion behavior.”
“If landlords were all getting together in a back room of a restaurant and putting all their prices on the table and agreeing to what rent would be, everyone would agree that’s illegal, classic price fixing,” he said.
RealPage’s software gathers confidential real estate information from participating landlords, who pay to use the software and share information about rents and occupancy rates that would otherwise be private. The company’s algorithm then provides suggestions for rental prices, suggestions that critics say are often higher than they would be in a market that is truly competitive.
The programs barred under the New Jersey bill would include systems that collect historical data on price, supply levels, lease or rental contract termination, and renewal dates from two or more rental property owners. These systems that would be prohibited also analyze that information to train an algorithm and recommend rental prices, lease terms, or ideal occupancy levels to rental property owners.
Under the bill, using these algorithmic systems would be a violation of the New Jersey Antitrust Act.
While the legislation does not name any companies, the bill points to one property management software company’s executive publicly suggesting the software could lead to rent increases of up to 14.5%. ProPublica in a 2022 report cited a RealPage vice president saying the company’s services had helped boost rental prices by that amount.
A spokesperson for RealPage did not respond to a request for comment. On its website, the company says “false and misleading claims” about it have been reported to the media and in legal filings, and says housing affordability, exacerbated by political and economic forces, is the true problem. It also says that the pricing set forth by algorithms are merely suggestions, and landlords can deny them.
“In fact, RealPage’s revenue management software contributes to a healthier and more efficient rental housing ecosystem,” the statement says.
Garofalo agrees there is a housing supply issue. But he said RealPage and other corporations are aggravating the problem.
“It’s not going to matter how much you build because it’s going to be the same set of players naming those prices,” he said.