New York is an unattainable pipedream for many small business owners, largely due to the city’s high cost of living. Renting in The Big Apple is more expensive than anywhere else in the country, with a one-bedroom apartment costing over $4,280 a month on average. To bring the dreams of entrepreneurs within reach, New York lawmakers need to rethink the state’s approach to combatting the housing affordability crisis.
The New York State Legislature just approved a bill to prohibit landlords and real estate management companies from “colluding to raise rents through the use of algorithms.” The bill will soon be sent to the desk of Gov. Kathy Hochul.
New York has been wasting time and resources on an attempt to make property management software take the heat for its housing woes. The software being targeted is used to help manage less than 2% of rental units in NYC and just 3 million out 50 million rentals nationwide – hardly a presence big enough to control prices. Additionally, property manager users are not required to accept the software’s rent recommendations – and, reportedly, they do so less than half the time – so price-fixing is an unjustified accusation. While the intended rollback on rental software is meant to support renters, this unfounded move would do nothing to lower rents and would have unintended consequences.
Prohibiting the use of neutral, AI-powered analysis sends the wrong message to entrepreneurs: that New York is not a friendly environment for innovation. The approach threatens to undermine the development of technologies that can be harnessed to improve society. Businesses can, for example, use advanced computing to assess market trends or to streamline operational tasks and free resources to create, to the benefit of the entire ecosystem, including consumers. It is shortsighted that our legislature would push policies that effectively ban math and undermine this new frontier of technology, with no actual benefit.
Modern calculation tools like these are especially important for small businesses, the backbone of New York State commerce and employers of 40% of New York’s private sector workforce. Technology tools help the little guys compete against large corporations. Similarly, small landlords who don’t have in-house analysts can use rental recommendation software to identify optimal rates for their units based on market comparables, allowing them to stay competitive against big property management companies. This type of arithmetic also encourages investment in multifamily housing, because modern tools make it easier to manage everything that goes along with being a landlord.
Antagonism towards innovation could undermine New York City’s reputation as being the fastest-growing technology hub in the United States. The city’s tech ecosystem accounts for over 291,000 jobs and over $124.7 billion in economic output. New York should be doing more to welcome entrepreneurs, not hindering its own ability to compete with Silicon Valley.
Although rental rates across the top 50 metros nationwide have declined an average of 1.1% since December 2023, New York City saw a 5.6% increase. In stark contrast, new construction is driving rent prices down in cities like Austin, by 23% since August 2023, according to Redfin. The difference between the two cities is housing supply. In fact, the 1.4% apartment vacancy rate is the lowest New York City has seen since 1968.
Rather than placing a bullseye on mathematical tools, city and state leaders should pursue real solutions for New York’s housing affordability crisis. A builder-friendly approach, with fewer zoning restrictions and permit delays, would boost housing supply, which is currently far outpaced by demand – because prices fall when supply rises.
For New York and its neighbors Connecticut and New Jersey, the brutal regulatory climate caused the housing affordability crisis, not artificial intelligence. Why blame new technology for an old problem?
