New York Bans Algorithmic Rent-Setting Tools, Signaling Heightened State Antitrust Enforcement

New York Governor Kathy Hochul recently signed Senate Bill S.7882 into law, making New York the first state to prohibit the use of algorithmic pricing tools in residential rent setting. With the enactment of S.7882, New York has expanded potential antitrust exposure for residential landlords, property managers, and real estate technology providers involved in rental pricing practices.

This legislation is part of a broader trend among state and local governments to address alleged anticompetitive conduct stemming from the use of algorithmic pricing tools that are the subject of antitrust litigation at the federal and state levels.[1] While New York is the first state to pass legislation specifically targeting this conduct, multiple local governments have passed similar legislation.[2]

This LawFlash provides an overview of the legislation and identifies key takeaways.   

WHAT S.7882 PROHIBITS

Under S.7882, it is unlawful for a person or entity to facilitate price coordination by operating, licensing, or otherwise providing software, a service, or an algorithmic device with a “coordinating function” to residential rental property owners or managers.

For example, a software provider that consolidates pricing information from multiple landlords to generate rent recommendations for users could violate the statute. It is also unlawful for property owners or managers to set or adjust rent or lease terms based on such algorithmic recommendations, even if they are not directly involved in developing or operating the software.

Parties may be held liable under a “knowingly or with reckless disregard” standard, meaning that ignorance of a tool’s data sources or processes is not a defense where this standard is satisfied. Both developers and users, therefore, have an affirmative responsibility to understand what data an algorithm uses to generate recommendations.

S.7882 does not distinguish between the use of public or nonpublic information in the software, but instead imposes a blanket ban on the use of any pricing or supply information from multiple landlords in a tool that recommends rent prices or terms. In theory, this could mean that even using publicly available, historical prices or supply levels could violate the new law.

DEFINITION OF ‘COORDINATING FUNCTION’

S.7882 defines when software, services, or algorithmic devices perform a coordinating function. A product performs such a function if it does all of the following:

• Collects rent, supply, or lease data from two or more unaffiliated residential property owners or managers
• Analyzes or processes that data using computational methods (e.g., machine learning or algorithmic analysis)
• Recommends rental prices, lease renewals, occupancy targets, or other terms to a residential rental property owner or manager

WHO IS COVERED

• Technology vendors that operate or license tools performing a coordinating function (e.g., PropTech platforms aggregating rent data from multiple landlords)
• Residential property owners and managers that use such tools to set or adjust rent or lease terms

NARROW CARVE-OUT

The only exemption applies to tools used for government-regulated or affordable housing programs, such as those setting rent or income limits under New York’s rent stabilization or rent control regimes.

KEY TAKEAWAYS

• Single-owner systems are generally safe: Tools that rely solely on one landlord’s own data are not considered to perform a coordinating function
• Multi-owner data pooling is risky: Any tool that aggregates data across unrelated landlords and provides rent or occupancy recommendations risks liability
• Dual exposure: Both the operators of such software and the users who act on its recommendations can face enforcement risk
• Due diligence required: Given the “knowingly or with reckless disregard” standard, residential landlords should understand the data inputs, algorithms, and output logic of any pricing tool they use
• State enforcement: The law does not create a new penalty scheme; instead, violations are treated as anticompetitive conduct under New York’s existing Donnelly Act framework, where the New York Attorney General may bring both civil and criminal actions, and private parties may also bring civil actions

NEXT STEPS

Residential property owners and managers in New York should consider taking the following steps:

• Audit any rent-setting or revenue-management tools to confirm that inputs are limited to their own portfolio data consistent with the law
• Avoid using or subscribing to tools that aggregate or analyze data from multiple unaffiliated landlords without careful compliance consideration
• Document rent and lease-setting decisions to demonstrate independent, competitive judgment
• Consult antitrust counsel to confirm that their products’ design, data architecture, and marketing practices align with S.7882 and emerging artificial intelligence (AI) governance standards

Technology vendors in New York should consider taking the following steps:

• Review data sources and algorithms to ensure their products do not collect or process competitively sensitive data from multiple landlords in a manner that would violate the law
• Consult antitrust counsel to confirm that their products’ design, data architecture, and marketing practices align with S.7882 and emerging AI governance standards

CONCLUSION

As states increasingly move to regulate algorithmic coordination and data pooling, companies using or developing pricing or revenue-management tools should closely monitor these developments and evaluate whether their systems could be construed as facilitating illegal coordinated conduct.

Businesses may wish to implement or update antitrust compliance programs and AI governance frameworks that account for these evolving state standards. Our team is actively monitoring the implementation of S.7882 and related state and federal initiatives concerning algorithmic pricing.