NJ wants to block fancy algorithms that tell landlords to raise prices
⚫ Housing advocates say landlords are colluding to reduce competition
⚫ Lawsuits have been filed against third-party companies for their algorithms
⚫ The company RealPage says it's not breaking the law
A landlord needs to be working independently, with their own research, to determine what they should be charging tenants — not teaming up with other buildings to rely on third-party software that essentially sets rent prices for all, according to a bill moving through the New Jersey Legislature.
Lawmakers and industry observers are going after what they consider to be one of the latest culprits in the rental housing crisis: algorithms that facilitate pricing coordination among landlords and property managers.
Housing advocates say the practice is contributing to rising rents in the Garden State; critics of the measure want New Jersey to wait to see how the issue is handled at the national level.
"Collusion" vs. market research
"I hope we can all agree that collusion by any means is not only wrong, but illegal," said Assemblywoman Yvonne Lopez, D-Middlesex, a sponsor of the measure and chair of the Assembly Housing Committee. "We need to do everything we can to ensure fairness in our rental housing market, and I believe banning these schemes is critical to that goal."
If the proposed law were to receive full legislative approval and Gov. Murphy's signature, New Jersey could become the first state in the nation to ban the coordination of prices among landlords using third-party rent-setting algorithms.
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"This doesn't prevent market research," said Pat Garofalo, director of state and local policy for the American Economic Liberties Project. "What this prevents is someone synthesizing data to come up with a revenue maximizing number that is then shared with multiple participants in the market."
Through the use of this partnership, Garofalo said, property managers know competitors won't be undercutting them. The software goes as far as recommending that landlords hold units off the market, "to create artificial scarcity," he said.
Legal battle
In August, the U..S Justice Department and several Attorneys General filed a civil antitrust lawsuit against the property management software company RealPage, for its "unlawful scheme to decrease competition among landlords."
RealPage and dozens of the largest landlords in the country are the target of a class-action lawsuit that was filed in April 2023.
Mike Semko, associate general counsel for RealPage, told the Assembly Housing Committee on Thursday that some claims being made by critics are categorically false.
"We are ready to get into court and defend ourselves because we're very confident that we're not violating the law," Semko said.
Under Lopez's bill, these agreements among rental property owners would be considered a violation of the New Jersey Antitrust Act.
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Lopez's committee advanced the bill by a vote of 4-2.
"Since this is a national issue with multiple lawsuits, I feel we should wait," said Assemblyman Robert Clifton, R-Monmouth, who voted against the bill. "If there truly is an issue here, this should be a national solution to deal with it, instead of a state-by-state solution."
A Senate version of the bill has been referred to the Senate Community and Urban Affairs Committee.
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