Governor Kathy Hochul has acknowledged what the rest of us have known for a long time: housing prices are out of control. “I’ve said it before and I’ll say it again: the rent is too [high] and New Yorkers need our help,” Hochul said.
How to help? In her recent State of the State address, Governor Hochul proposed banning software that uses AI algorithms to help property owners and real estate companies determine the rent price of a given unit. The governor believes that such software drives up housing costs.
Empire State residents know well that housing costs are out of control. Many buy homes rather than rent, which is not easy considering that — to highlight one example — the median cost of a house on Long Island is an astonishing $714,000. That’s up 11.5 percent since just last year, and significantly higher than the national average.
It wasn’t supposed to be this way. Levittown, like so many developments across New York, was founded as the model American suburb, a place where you could raise a family in an affordable home away from the hustle and bustle of the city. That dream has been fading for years.
This is a serious problem – but blaming AI is not the answer.
AI software, which merely analyzes market data — including rental trends, occupancy rates, and local market conditions — to provide pricing recommendations based on supply and demand is likely not to blame for high housing costs. Indeed, the cost of housing on Long Island has been high for years, well before the advent of modern AI technologies.
A far greater cause of New York’s housing crisis isn’t AI but includes a range of factors such as a lack of supply and an aging housing stock.
Consequently, inventory is very tight. That means when a Long Island house goes on the market, it’s priced very high and it usually isn’t long before multiple potential buyers are engaged in a bidding war, driving up the price even further.
That’s the other end of the economics problem. Despite short supply and dizzying prices, a lot of people want to live in the New York metro area these days. Demand is high, with the average Long Island house on the market for just 43 days a very short window.
If supply is low and demand is high, then prices are naturally going to go up. But how did our housing economics become so unbalanced?
A much more likely cause than AI or “computers is rising interest rates, with current homeowners locked into lower rates and understandably reluctant to depart their castles. High taxes and ever-expanding regulations are also likely to blame. It is a mistake to stoke an anti-AI panic, which could stifle growth in New York’s vibrant technology industry.
We don’t blame cigarette lighters for arson, or the auto industry when bank robbers flee from crime in fast cars. The same is true to for AI, which encompasses computer programs that assist with learning and reasoning and has been in use for many years — think of the autocomplete feature of your word processing program that learns how you write and helps you quickly finish sentences and phrases based on AI-informed predictions.
To be sure, if New York’s landlords or providers of software or any other products to those landlords use AI (or any other technology) to break the law, they should be held accountable. Instead of blaming an entire class of technology, however, Governor Hochul should look to more fundamental solutions to help Long Islanders build and buy the homes they need.
Joseph DeMarco is Partner at DeMarco Law, PLLC and an adjunct professor at Columbia Law School
