ALBANY — Artificial Intelligence companies have the right to decide how much New Yorkers pay in rent, according to a federal lawsuit filed against the state attorney general’s office last week on behalf of the world’s leading provider of AI real estate software platforms.
Texas-based RealPage filed the civil complaint against state sAttorney General Letitia James in U.S. District Court in Manhattan in an attempt to block a new state law that will ban algorithmic rent pricing. The law goes into effect on Dec. 15.
James is being sued in her capacity to enforce the statute, which was signed into law by Gov. Kathy Hochul in October.
In the lawsuit, RealPage alleges that New York’s law will ban lawful speech and was the result of an intentional misinformation campaign that made false claims about the company’s revenue management software.
“This misguided effort to manage rental prices tramples on RealPage’s First Amendment right to offer advice and recommendations,” said Theodore J. Boutrous Jr., an attorney for RealPage. “New York legislators should propose real solutions to housing affordability issues instead of banning constitutionally protected speech.”
In its lawsuit, RealPage claims that the new law is unconstitutional, “both facially and as applied to RealPage and its customers.” By flatly banning RealPage’s speech in advance, New York’s law imposes an invalid prior restraint, it adds.
A spokesman for the attorney general’s office declined to comment.
The law, among the first in the country, outlaws the practice of landlords using algorithms to set rent pricing. Among other things, the law bans software that uses user-inputted and public data about rental or lease terms to advise or recommend market-appropriate rent prices for properties.
Violators could face up to $1 million in civil penalties, as well as criminal prosecution.
In October, one of the bill’s sponsors, state Sen. Brad Hoylman-Sigal, a Manhattan Democrat, said the use of real estate management software like RealPage lets landlords access renewal rates and other property information to drive rent increases.
RealPage was also the target of a recently settled U.S. Department of Justice antitrust lawsuit. The Biden administration estimated the software company caused U.S. renters to spend an extra $3.8 billion in 2023.
Under the proposed terms of that settlement, RealPage can no longer use real-time data to determine price recommendations. Instead, the only nonpublic data that can be used to train the software’s algorithm must be at least a year old.
The lawsuit filed last week points out that the new version of the software is permitted by the Department of Justice under its proposed antitrust consent decree with RealPage.
In October, California and New York signed laws to crack down on the rent-setting software, which critics argue gives access to a trove of confidential data and helps RealPage clients charge the highest possible rent. Philadelphia and Seattle have also passed ordinances against the practice.
Hochul’s office did not respond to a request for comment.
Information from the Associated Press was used in this report.