Banning AI for Business Can Backfire – Inside Sources

Artificial intelligence is not new. The ability of machines to learn was first proposed in the 1950s, and computers have been used to help businesses and consumers since. These machines are now more useful than ever. While their potential has created excitement about opportunities, concern over their effect has risen, leading to the adoption of regulations and legislation to slow down or control AI, broadly and in specific industries.

Take rental housing. Prices are determined by the market dynamics in each city or region. The decision to execute a lease agreement is always made by a willing landlord and tenant. For property managers, using AI to analyze comparable units to establish an asking rent is faster than reading ads, clicking through postings online, and making an individual calculation for every unit. Yet local and state governments are blaming high, “unfair” housing prices on AI price analysis technology rather than considering the effect of their policies, from restrictions on needed apartment building construction to rent control.

Consider New Jersey, for example: the State Assembly approved the Forbidding the Algorithmic Inflation of Rent Act last week, sending the bill to Gov. Mikie Sherrill’s desk. Ironically, Jersey City’s Ordinance 25-057, “Preventing Algorithmic Rent-Fixing in the Rental Housing Market,” has “yet to significantly affect affordability,” according to a local news outlet. “Despite the ordinance, Jersey City rents continue to climb … rents in Jersey City have increased 1.7 percent since the ordinance’s passage, while the national average has decreased 1.5 percent.”

Similarly, in 2024, San Francisco was the first city to ban the use of algorithmic devices by landlords to help set rents for residential rentals in the city under the premise that those tools reduce competition by allowing indirect coordination to “fix” rents, meaning keep them artificially high. However, rents have continued to skyrocket in the city since the ban, which did nothing to improve affordability because it did not address the area’s housing shortage.

In contrast to Jersey City and San Francisco, algorithmic rent pricing is still allowed in Austin, Texas, where rents have fallen due to investment in additional housing that adds to supply.

On the state front, New York became the first to outlaw the use of “price-fixing software” in rental housing, assuming that any property owner using this technology to identify fair prices was “colluding” with other landlords. The New York law ignores the state’s underlying issues related to housing availability, construction costs, zoning and density restrictions, limited stock, and demographic changes.

In fact, forbidding the use of AI to determine rents will likely increase the cost of housing by discouraging investment in needed supply. Who wants to build where they can’t use the tools they need to conduct business?

Opposition to AI innovation was encouraged by former President Joe Biden when he signed the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence order. This order, along with the “Blueprint for an AI Bill of Rights: Making Automated Systems Work for the American People,” set the stage for state and local governments to take actions that discouraged or penalized the use of AI tools to reduce costs and streamline processes.

Recognizing that this approach would undermine AI development, President Trump released the “Removing Barriers to American Leadership in Artificial Intelligence” order, which revoked certain existing AI policies to clear “a path for the United States to act decisively to retain global leadership in artificial intelligence.”

Additionally, on March 20, the president’s AI legislative framework was released with six policy priorities: protecting families; safeguarding communities; respecting intellectual property rights; censorship and free speech; American AI dominance; and ensuing an AI-ready workforce. The order also urged Congress to apply the framework uniformly across the country, rather than allowing a patchwork of state and local AI laws that inhibit further development and appropriate use of these valuable tools.

As the 9th U.S. Circuit Court of Appeals wrote in a decision to settle accusations of illegal coordination via software by Las Vegas resorts, “Obtaining information from the same source does not reduce the incentive to compete.” In cities where rents continue to climb, there are housing shortages caused by stubborn government policies that preceded the use of artificial intelligence.

Misinformed AI regulations and laws being adopted by state and local governments will not only make it more difficult for property managers to gauge the right prices for their rental units, but they will make housing availability and cost issues worse.

Putting a spoke in the business world’s wheel will only cause costs to rise for consumers.