Jersey City may be first in NJ to ban landlords from using AI to set rent

Jersey City councilmembers will vote Wednesday on a law that would ban landlords from using sophisticated rent algorithm software that renters’ advocates say uses artificial intelligence to drive up apartment prices. If adopted, the measure would be the first of its kind in the Garden State.

Councilmember James Solomon said he introduced the ordinance in part because a bill for a statewide ban on the use of artificial intelligence has languished in the Legislature for the past eight months.

“We felt we couldn’t wait any longer,” he said.

Rents in Jersey City have grown by 50% since 2015, according to a 2024 report by the nonprofit Regional Plan Association. The average rent for a one-bedroom apartment is $3,110, according to Zumper.com – making Jersey City the third most expensive U.S. city for renters after New York City and San Francisco.

But Solomon’s ordinance has sparked controversy. Some landlords argue the measure fails to address the real problem driving up rents, which they say is a lack of new housing supply. Other property owners worry they could be penalized even if they’re not using the technology because of what they say is overly broad language in the bill.

Proponents of the ordinance acknowledge that the algorithms are not the sole reason that rents have risen so dramatically. But they maintain that the use of the AI technology is akin to price fixing and amounts to illegal collusion among large corporate landlords.

“ Of course housing supply matters. But to say that illegally colluding to set rents higher than the free market would is not a part of the problem is … clearly a talking point that's being used to try to evade accountability,” Solomon said.

The ordinance up for a vote would make it illegal for landlords to use any software service that makes recommendations based on “historical or contemporaneous prices, price changes, supply levels, occupancy rates, or lease or rental contract termination and renewal dates of residential dwelling units” from two or more real estate companies or from public databases.

RealPage spokesperson Jennifer Bowcock told Gothamist that the company is still reviewing Jersey City’s legislation.

It's a machine that's running this business right now.

Andrew James, Avalon Bay tenant in Jersey City

Housing advocates and many state and local officials continue to bemoan New Jersey's housing crisis. Recent expert estimates claim the state is facing a shortage of more than 200,000 affordable apartments for low- and moderate-income people. In Jersey City, 36,000 of the city’s approximately 290,000 residents are considered rent-burdened, meaning that they spend more than 30% of their income on rent, according to the Regional Plan Association.

Assemblymember Yvonne Lopez, a Democrat from Perth Amboy and author of pending legislation that would ban the use of AI in setting rents statewide, said in a statement that the issue of rental algorithms and anti-competitive practices “requires a state-led solution.”

“My office has worked diligently with various stakeholders to carefully craft a bill that protects consumers and will ensure fairness in an already distressed housing market,” she said, adding that she feels confident that the bill will ultimately be signed into law.

In October 2024, the Assembly's housing committee, which Lopez chairs, voted 4-2 to move the bill forward, but it has since stalled in the state Legislature.

Andrew James, a retired health care worker in Jersey City, has lived in the same apartment since 1996, and shares it with his wife and granddaughter. It's in a 500-unit apartment complex owned by the large corporate developer Avalon Bay, one of 10 landlords named in a lawsuit brought by New Jersey Attorney General Matthew Platkin in April, which alleges the property owners colluded to charge higher rates in violation of state antitrust law.

James estimated that his rent has risen between 4%-7% at the end of each lease over the 29 years he’s lived in the complex. But in 2023, he said, Avalon Bay raised his monthly rent 28% to about $5,000.

When James protested the hike, he said the property manager told him he was being charged what the market price should be for his apartment.

“It was kind of a shock,” he said. “And their explanation to me was, ‘It's not us. This is the market. We don't control what we do anymore.’”

James suspects an algorithm is driving the pricing decisions.

“It's a machine that's running this business right now. Whatever it spits out, that's what they got to go with,” he said, adding that he worries he could face another dire rent hike when his lease is up at the end of this year.

“It could be a 50% increase,” he said. “If you can't afford it, [the landlords] find somebody else that can afford it, but it's just not fair.”

Avalon Bay Senior Vice President Ron Ladell declined to comment on the pending ordinance and recent rent increases in Jersey City.

The six largest publicly traded apartment companies brought in $300 million in combined increased profits in the first quarter of 2024 alone.

Tony Carrk, executive director of the research firm Accountable.US

At a press conference announcing the state’s lawsuit, Platkin said the landlords engaged in “deliberate market manipulation.”

“These defendants worked together as a rent-setting cartel, conspiring to make themselves richer while preying on the thousands of New Jerseyans just looking for a safe, affordable place to live,” he said.

New Jersey’s lawsuit is the latest in a series of cases filed around the country against RealPage, Inc. and major corporate landlords using the company’s tool. The lawsuit alleges that landlords uploaded proprietary data about what they were charging renters to RealPage’s software. In turn, the company’s algorithm provided them with not just market-rate prices but also what proponents of the state attorney general’s lawsuit say were prices well above average.

“ The key thing for the courts isn't so much [the landlords] getting the recommendation, it's what they're providing every month — commercially sensitive, nonpublic information,” said Maurice Stucke, a law professor who teaches antitrust at the University of Tennessee.

Nationwide, the progressive research firm Accountable.US found that on average, rents have risen 31% since 2019, while wages across the country have only risen 23%. And large real estate corporations have seen their profits increase over the same period.

“We found that the six largest publicly traded apartment companies brought in $300 million in combined increased profits in the first quarter of 2024 alone,” said Tony Carrk, executive director for Accountable.US.

The research firm’s report noted that all six real estate companies have faced lawsuits in numerous states related to the use of RealPage’s property management tool.

Bowcock, RealPage’s spokesperson, said in a statement company is “disappointed” that Platkin “is recycling the inaccuracies of predecessor cases to blame RealPage for New Jersey’s housing affordability challenges.”

“RealPage’s revenue management software is purposely designed and built to be legally compliant and has always used data legally and responsibly, and we have a long history of working constructively to show that. RealPage’s revenue management software helps housing providers comply with fair housing laws, rent control laws and state of emergency price gouging laws, and does not use any personal or demographic data to generate rent price recommendations,” the statement said.

In Jersey City, some landlords who don’t use the software worry that a rent algorithm ban could be bad for their business, too.

Ben LoPiccolo, a developer of several hundred apartment units in Jersey City, said he does all his pricing by hand using publicly available online tools like Realtor.com, Zillow, and CoStar.

“ We put in the sweat equity ourselves,” he said.

But LoPiccolo said his prices are similar to developers who use algorithm services.

“ I think they're comparable because at the end of the day, those results in those buildings end up in other websites,” he said.

Now, LoPiccolo worries the ordinance is “too broad” and could lead to a crackdown on developers like him.

“ If I'm pitching a business plan to my investors … you have to show your investors what the competitive market is in the area. So I honestly wouldn't know what to do because just writing a business plan would be against the law,” LoPiccolo said.

The Jersey City Council is scheduled to vote on the ordinance Wednesday night.