The usage of artificial intelligence has exploded across all industries, but in the Golden State, several cities have worked to curb the use of AI to determine rent prices.
Sweeping AI policy has struggled to be approved at both the state and federal levels as the new technology takes hold across various industries. One area where California has taken a lead in regulating AI is regarding rent prices, according to a report from CalMatters, with some officials claiming the landlord-led practice is hurting housing affordability.
Rent prices and the high cost of housing have been a problem in California for several years, as many are fleeing the increasingly expensive state, which is home to the largest homeless population in the country.
San Francisco passed an ordinance earlier this year, which they claimed was the first ban on using “algorithmic devices” for pricing rental units, as the usage of software, such as RealPage, has spread throughout the housing industry.
San Jose and San Diego are looking at similar measures to ban the software for rent price setting, with San Jose councilman Peter Ortiz claiming that AI software helps “bad actors distort the market and squeeze every last penny out of San Jose renters.”
The state legislature in the Golden State could also take action on the matter, with CalMatters reporting that Democratic state Sen. Melissa Hurtado plans to reintroduce a bill to ban pricing algorithms based on nonpublic data from being used in the state.
RealPage, the company at the center of software misuse allegations, is facing a lawsuit from the Justice Department and several states, including California, alleging the company is violating antitrust laws with an “unlawful scheme to decrease competition among landlords in apartment pricing and to monopolize the market for commercial revenue management software that landlords use to price apartments.”
RealPage has responded to claims made by lawmakers and officials about its service, with the company’s CEO Dana Jones saying in a statement earlier this year that they seek to address “a number of false claims about RealPage’s revenue management software, and how rental housing providers operate when setting rent prices.”
“Housing affordability should be the real focus. RealPage is proud of the role our customers play in providing safe and affordable housing to millions of people. Despite the noise, we will continue to innovate with confidence and make sure our solutions continue to benefit residents and housing providers alike,” Jones said in the June statement.
The company has claimed that housing affordability is the real problem, arguing landlords always set the prices and that their software is only a recommendation, which can be rejected with no punishment. They also claimed that the software “serves a much smaller portion of the rental market than has been falsely alleged.”
Housing affordability has been a constant issue in California, with some activists touting a proposition that would have expanded the ability for cities and local governments in the state to impose rent control on more properties. The measure, Proposition 33, failed last month, with opponents arguing it would have disincentivized new housing from being built and ultimately not improved housing availability.
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AI regulation broadly has been slower than the product spread throughout various industries. At the state level, Gov. Gavin Newsom (D-CA) vetoed a sweeping AI bill earlier this year, which he called “well-intentioned” but not the best way to combat potential abuses of the emerging technology.
Newsom said in his veto that he hoped to work with lawmakers in the coming year on crafting comprehensive AI regulations.