A3989

An Act restricting the use and sale of certain algorithmic devices for establishing rent price or occupancy of residential property and supplementing and amending P.L.1970, c.73.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. (New section) a. It shall be unlawful to sell, license, or otherwise provide to a landlord an algorithmic device that sets, recommends, or advises on rents or occupancy rates that may be achieved for residential dwelling units in the State.

b. It shall be unlawful for a landlord to use an algorithmic device when setting rents or occupancy rates for residential dwelling units in the State. Each separate month that a violation exists or continues, and each separate residential dwelling unit for which the landlord uses an algorithmic device, shall constitute a separate and distinct violation.

c. A violation of subsection a. or b. of this section shall, per se, constitute a violation of section 3 of P.L.1970, c.73 (C.56:9-3) and be subject to the penalty provisions provided in the "New Jersey Antitrust Act," P.L.1970, c.73 (C.56:9-1 et seq.).

2. Section 2 of P.L.1970, c.73 (C.56:9-2) is amended to read as follows:

a. As used in this act, unless the context otherwise requires "person" shall mean any natural person or persons, or any corporation, partnership, company, trust or association of persons.

b. "Trade or commerce" shall include all economic activity involving or relating to any commodity or service.

c. "Commodity" shall mean any kind of real or personal property.

d. "Service" shall mean any activity which is performed in whole or in part for the purpose of financial gain, including but not limited to sale, rental, leasing or licensing for use.

e. "Algorithmic device" shall mean a device, such as a software program, that uses one or more algorithms to perform calculations of non-public competitor data concerning local, statewide, or regional rents or occupancy rates, for the purpose of advising a landlord whether to leave a unit vacant or on the amount of rent that the landlord requires from a tenant. "Algorithmic device" shall include a product or service that incorporates an algorithmic device, including artificial intelligence, but does not include: (1) any report published by a trade association that receives renter data and publishes it in an aggregated and anonymous manner; or (2) a product used for the purpose of establishing rent or income limits in accordance with the affordable housing program guidelines of a government entity.

f. "Non-public competitor data" shall mean information that is not available to the general public, including information about actual rent prices, occupancy rates, lease start and end dates, and other related data, regardless of whether the information is attributable to a specific competitor or anonymized, or whether it is derived from, or otherwise provided by, another person that competes in the same market or a related market.

(cf: P.L.1970, c.73, s.2)

3. This act shall take effect on the first day of the second month next following enactment.

STATEMENT

This bill prohibits the use and sale of algorithmic devices for establishing rent price or occupancy of residential property.

In recent years, a number of new software programs, often referred to as "algorithmic devices," have threatened to destabilize rental housing markets in cities nationwide, including in New Jersey. These programs enable landlords to indirectly coordinate with one another through the sharing of non-public competitively sensitive data in order to artificially inflate rents and vacancy rates for rental housing. Participating landlords provide vast amounts of proprietary data to the programs, which in turn set or provide recommendations for rent and occupancy rates. More and more landlords in the United States now pool their data and pricing decisions using such software. This software has contributed to double-digit rent increases, higher vacancy rates, and higher rates of eviction, and has distorted markets so that rents and vacancy rates have increased in tandem.

Often used by large corporate landlords, the software fuels the consolidation of corporate and private equity ownership of rental housing, at the expense of landlords large and small who compete in the market without use of this software. Landlords using these tools are not appropriately engaging in the market and the companies developing and selling these tools to landlords are contributing to these problems. Numerous antitrust lawsuits have been filed against certain of these companies, including a proposed settlement between the United States Justice Department’s Antitrust Division and RealPage, Inc. and a lawsuit filed by Attorney General Platkin and Division of Consumer Affairs Acting Director Hollander against RealPage, Inc. and 10 landlords operating in the State.

This bill does not restrict the development, sale, or use of software to help landlords manage units based on internal data or with use of publicly available data. Nor does it regulate the amount of rent that a landlord may charge.

This bill prohibits the sale, license, and use of an algorithmic device that sets, recommends, or advises on rents or occupancy rates that may be achieved for residential dwelling units in the State, with certain exceptions and including devices using artificial intelligence. The bill provides that a violation of the provisions of the bill shall, per se, constitute a violation of section 3 of the "New Jersey Antitrust Act" as a contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce, as applicable, and shall be subject to the penalty provisions of the "New Jersey Antitrust Act." Authorized penalties include: (1) dissolution of an offending firm; (2) temporary suspension of privilege to conduct business in the State; (3) revocation of power of a foreign firm to conduct business in the State; (4) injunctions to prevent and restrain violations; (5) penalties of not more than the greater of $100,000 or $500 for each day of the violation; (6) guilt, of a person or corporation, of a crime of the second or third degree, under certain conditions, which may be subject to imprisonment, a fine of between $150,000 and $300,000, or both; (7) treble damages, with a minimum of $1,000, and certain fees; and (8) other relief determined to be appropriate by the court. The remedies provided in the New Jersey Antitrust Act are to be cumulative.

The bill defines "algorithmic devices" and "non-public competitor data" for the purposes of the "New Jersey Antitrust Act."