Berkeley’s Outrageous Attack on Pricing Tools in Housing

Recent developments in the city of Berkeley, are threatening California’s reputation as a leader in artificial intelligence (AI). Specifically, Berkeley is pursuing an ordinance that will ban the use of algorithmic data-evaluation tools used in the rental-housing market to assist in properly assessing the landscape and making pricing recommendations. Although touted as a win for renters, the ordinance will ultimately hurt the pockets of consumers and entrepreneurial businesses. It would also create unintended chilling effects on related industries.

The Taxpayers Protection Alliance has warned about the damaging effects of disorderly state and local rules as well as the threats they pose to the new products, the new efficiencies, and the lower prices that result from advancements in technology.

Berkeley should remember that data-modeling mechanisms and AI are increasingly supporting many aspects of everyday life. When online shopping, algorithmic pricing tools are used to assess what the customer is looking for relative to existing supply, providing the best price. With helpful AI tools, consumers can rest assured that they are receiving optimal prices – for bus tickets, rental cars, gasoline, and more.

However, Berkeley’s overly broad ordinance subjects any individual or business in housing to costly litigation if found utilizing statistical tools. It could be perceived as a ban against math, as its overly broad framework might even unleash litigation in response to the use of mathematical calculations to find rental patterns. The far-reaching nature of the proposal would likely impose great costs on taxpayers, because the authorities would be forced to police a large number of possible avenue of compliance. Moreover, besides the fiscal considerations, this would distract the city from carrying out the basic tasks of governance.    

Property managers also utilize algorithmic software to gain valuable insights into the market, enabling them to maximize the number of properties available to rent. Without algorithmic pricing tools, property managers may be in the dark when hypothesizing about suitable rates without proper insight into market behavior. This would take extra money from the pockets of renters and property managers alike.

By stifling AI tools, Berkeley’s ban could severely affect California’s reputation as the global leader in technological innovation. Home to 32 of the 50 top AI companies worldwide, the industry contributed $623.4 billion to the state’s economy in 2022. Further, California is ranked as the number-one state for tech business establishments. The tech industry remains a leading driver of the Golden State’s economy and a significant contributor to the state’s way of life.

Berkeley is ignoring the big picture: California faces a severe housing crisis, with housing production averaging fewer than 80,000 new homes each year over the last 10 years. Further, the majority of Californian renters – more than  3 million households – pay more than 30 percent of their income toward rent. Nationally, the country has a shortage of 4.5 million homes, according to Zillow.  

Instead of attacking algorithmic pricing, Berkeley should focus on initiatives which will properly address this housing crisis. Following the laws of supply and demand, lawmakers should target the supply problem by reducing the immense regulatory costs of homebuilding, rethinking zoning and land-use restrictions, and prioritizing other deregulatory initiatives that will promote home-building.

Berkeley’s latest ordinance is dangerous and overly broad. The ordinance will only stifle innovation, create burdens for the city and its taxpayers, and hurt consumers and businesses. Instead of attacking helpful AI tools used in everyday life, Berkeley should focus on the larger issue and work to reform bad policies that raise the prices and restrict the supply of housing.