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Kamala Harris’s Policy Speech and the Blame Game on High Rents

In her inaugural policy address as a presidential candidate, Vice President Kamala Harris attributed the surge in rental prices to the use of property management software and linked inflation to the prevalent issue of price-gouging. Just a week following her remarks, the Department of Justice, representing the Biden administration, initiated a lawsuit against RealPage, a significant provider of such property management software.

Berkeley City Council’s Legislative Response

In the wake of these developments, the Bay Area is increasingly participating in this blame-oriented discourse. Recently, the Berkeley City Council took a decisive step by voting to enact an ordinance aimed at “prohibiting the sale or use of algorithmic devices to set rents or manage occupancy levels for residential dwelling units.” A crucial final vote is anticipated today, which may solidify this regulation.

Long-term Implications of the Ordinance

The potential fallout from this ordinance could be considerable and long-lasting. The term “algorithmic devices,” which may sound complex, essentially refers to the software that aids property managers, both large and small, in determining an optimal value for their rental units based on prevailing market conditions. Users have the liberty to advertise their rental units for higher or lower prices, ultimately retaining control over their real estate assets.

Allowing landlords to leverage such software can expedite the process of bringing available rental units to market. The software alleviates the traditionally labor-intensive requirement of researching comparable rental rates for similar units in comparable communities with matching amenities. Additionally, if developers can utilize these modern tools to streamline property management, it’s likely they would be more inclined to initiate new construction projects in the East Bay and across various regions in California.

The Debate Over Price-Fixing Allegations

Debbie Potter, the former chair of Berkeley’s Housing Advisory Commission, expressed strong opposition to the use of this software, describing it as a form of illegal price-fixing. However, estimating rental values through comparative analysis should not be equated with controlling them. Notably, there is no mandate for property managers to accept the software’s suggested pricing. Without a collusion agreement among property managers to adhere to the software-generated recommendations, they are free to compete by underpricing their units relative to market value. Ultimately, human agency dictates the final rental prices, formed through negotiations and agreements among landlords and tenants.

Alternative Perspectives on Housing Affordability

Countering the ordinance, Berkeley City Councilmember Mark Humbert posited that the ban would necessitate an intrusive oversight mechanism to monitor who is employing sophisticated mathematics and computer algorithms to determine market value. Humbert offered a pragmatic solution to the escalating housing prices: simply build more housing in Berkeley. This suggestion aligns with proven results observed in other cities.

In Austin, Texas, a city that competes with Northern California in terms of tech prominence, rental prices have experienced a 19-month decline due to a robust increase in apartment construction. Similarly, during the early 2000s, Miami faced a significant housing price surge linked to a population influx of retirees from the Northeast and expatriates from Latin America. In response, builders ramped up construction efforts, supported by governmental backing, leading to a substantial drop in housing prices.

A Call for Constructive Changes

To effectively make housing more affordable, local leaders must address the barriers hindering new single-family and multifamily developments. This can be accomplished through reforms in the city’s rent control policies, modifications to overly restrictive tenant rights regulations, and streamlining the sluggish permitting processes currently in place.

The underlying issue behind exorbitant rents can be summarized simply, often addressed in an introductory economics course: in the East Bay, housing supply has yet to meet the demand. The Berkeley City Council’s endeavor to eliminate algorithmic pricing recommendations recalls the fable of the vain king who believed he had become beautiful simply by banning mirrors. Banning algorithmic calculations will not resolve housing affordability issues.

How AI legalese decoder Can Assist

In navigating the complexities surrounding housing regulations and legal frameworks, the AI legalese decoder can serve as a valuable tool. By translating legal jargon and offering straightforward explanations of the implications of ordinances like the one proposed by the Berkeley City Council, it can empower landlords, tenants, and policymakers alike. They can better understand their rights, options for compliance, and the potential ramifications of such legislation on housing availability and rental prices. With AI legalese decoder, stakeholders can advocate effectively for reforms that genuinely address the housing crisis, fostering a more conducive environment for affordable living.

Will Swaim is the president of the California Policy Center.

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