Algorithmic Rent-Pricing Litigation Expands Under New State and Local Laws

A fresh wave of legal challenges targeting property owners of apartment buildings is emerging due to recent municipal laws limiting the use of algorithms in determining rental rates. These regulations, enacted by various states and local governments, aim to prevent landlords from gaining an unfair advantage through the use of revenue management systems that leverage competitors' proprietary data.

The new laws often provide a simpler route to liability compared to traditional antitrust claims, and they may result in significant penalties, including statutory damages, fee shifting, and recurring per-unit fines. While these laws vary in their specifics, many explicitly forbid the sharing of rental prices, concessions, lease terms, or occupancy levels through algorithmic tools.

Some jurisdictions have taken immediate action against property owners who utilized such software, even if the offending products had been deactivated by the time the law went into effect. To navigate this evolving legal landscape, property owners and managers are advised to thoroughly document their revenue management practices, including the specific products used, the dates they were employed, the data sources integrated, and whether the algorithms continued to rely on competitors' confidential information post-law implementation.

This documentation will be crucial in determining liability and identifying any potential class action claims. Property owners should also review their current contracts with revenue management vendors, as many have already revised their terms to comply with the new regulations. However, it is essential to verify these modifications through direct examination of the software's functionality and the terms of the agreements.

As the multifamily housing industry grapples with these legal shifts, property owners must remain vigilant and proactive in ensuring their practices align with the burgeoning patchwork of municipal regulations designed to promote fair competition in rental pricing.