Legislators Target Algorithms in Rental Housing

Perceived impact on competition in housing markets draws legislative scrutiny.

By Joe Riter |

| Updated

5 minute read

With recent federal efforts to reform competition policy in rental housing through the courts, federal and state legislators are turning their attention to algorithm-driven revenue management tools and the perceived effect they have on competition in housing markets.

Federal Proposals

Two bills were introduced in this session of Congress, which represent the most significant federal legislative efforts to date to regulate the rental housing industry’s use of revenue management tools.

Senator Klobuchar’s S.3686: Preventing Algorithmic Collusion Act of 2024 aims to expand federal anti-trust laws and close a perceived loophole in current law that allows businesses to lawfully utilize algorithm-based technologies. The bill presumes a price-fixing agreement exists when “direct competitors share competitively sensitive information through a pricing algorithm to raise prices”. This bill also proposes new disclosures for businesses and audit requirements of the technologies in question, and directs the Federal Trade Commission (FTC) to study pricing algorithms’ impact on competition.

Senator Wyden’s S. 3692: Preventing the Algorithmic Facilitation of Rental Housing Cartels Act of 2024 makes it unlawful for housing providers to contract for revenue management services and designates such arrangements a per se violation of federal anti-trust laws. Additionally, it would bar price coordination between multiple owners and block mergers where the joining of coordinating parties reduces competition. The legislation reduces hurdles like pre-dispute joint action waivers that would prevent plaintiffs from bringing a suit under this act, clearing the way for future litigation.

The National Apartment Association’s (NAA) Outlook

With a split Congress this year - Democrats maintain control of the U.S. Senate and Republicans the House of Representatives - it is unlikely that these bills will become law. However, it is important to monitor the legislation as it will most likely be introduced in a future Congress, regardless of which party controls either Chamber.

Also noteworthy is Congresswoman Maxine Waters’ (D-Calif.) request to the Government Accountability Office (GAO) expressing concerns about instances in which the use of artificial intelligence and other housing and property technology, such as resident screening companies and revenue management providers, “lead to increased housing costs, discrimination and other barriers to fair and affordable housing.” Rep. Waters called upon the GAO to provide policy recommendations for relevant Federal agencies and Congress to consider in addressing these effects or any gaps in federal regulation of the rental housing industry.

NAA met with the GAO and educated staff on the many uses of proptech and technologies that touch all parts of the business of owning and managing rental housing. These efficiencies, which include fraud prevention, benefit residents and rental communities. The results of the GAO’s report could be influential if the Democrats retake control of the House and Rep. Waters again becomes the Chair of the influential House Financial Services Committee. Housing providers should consider any policy recommendations that come out of the report as they may indicate the direction of federal policymaking in 2025 and beyond.

State Proposals

In Colorado (HB 24-1057) and more recently New York (A. 9473), there have been bills that would ban housing providers from using or relying on “algorithmic devices” for revenue management purposes and makes violations of these bans an “unfair and deceptive trade practice” under state consumer protection laws. Notably, these proposals appear to support third-party pricing products that do not “use, incorporate, or train with” “nonpublic competitor data,” indicating specific targets in legislative bearing. Colorado’s legislation has passed out of the House and has been assigned to the Senate Committee on Local Government and Housing. The New York proposal was introduced and has been referred to the Committee on Housing.

Another approach to competition policy is embodied in New Hampshire (HB 1368). Instead of targeting revenue management tools using algorithms specifically, it disincentivized their use by establishing a prima facie presumption that an eviction action against a resident is unlawful on the sole basis that the housing provider engaged in illegal price fixing and required the eviction case to be dismissed. Thanks to the tireless advocacy of the Apartment Association of New Hampshire, the State’s House Judiciary Committee voted 20-0 to designate this bill as “Inexpedient to Legislate” (ITL), effectively killing this measure’s chances of passage. The bill will be on the full House’s Consent Calendar on March 21 with the ITL directive.

Another recent state-level proposal in California (AB-2230) identifies as rationale the emergence of “supercompetitors” bolstered by “pools of investment capital, cutting edge technology and linked market data,” but does not establish new law specifically targeting revenue management tools or algorithmic-decision-making processes. Instead, California proposes legislation that would expand consumer protections and anti-trust laws with specific effect in rental housing.  Following introduction, the Assembly referred this proposal to the Judiciary Committee.

What’s Next?

The proposed legislation introduced at both the federal and state levels signals a misunderstanding within policymaking spheres of how revenue management tools are used in rent pricing decisions.

Adding another element to this situation, President Biden remains focused on lowering Americans’ housing costs and has identified price transparency as a priority for his Administration. Specifically, his Administration is focused on “fight[ing] rent gouging by corporate landlords” and eliminating perceived “rental junk fees”. The White House recently announced the President’s Strike Force on Unfair and Illegal Pricing co-chaired by the Department of Justice (DOJ) and the FTC.

NAA continues to support its affiliate partners’ advocacy efforts to defeat adverse housing policies at the state level. NAA will continue to be the leading voice of the industry in D.C. and oppose federal efforts that would upend operations and ultimately worsen housing affordability and availability nationally.

To learn more about technology policy, please contact Joe Riter, NAA’s Senior Manager, Public Policy.