By Jonathan Stempel
NEW YORK, Sept 30 (Reuters) – A federal judge in Manhattan blocked New York state from enforcing a first-of-its-kind law prohibiting landlords and real estate industry professionals from using algorithmic pricing tools to set, and potentially inflate, residential rents.
US District Judge Valerie Caproni issued a preliminary injunction on Tuesday in favor of RealPage, a software provider owned by private equity firm Thoma Bravo, which said the law violated its First Amendment free speech rights by restricting use of its software’s pricing recommendations.
The antitrust law was signed last October by Governor Kathy Hochul and sponsored by Brad Hoylman-Sigal, then a state senator and now Manhattan borough president.
It was intended to help New York crack down on what it called anticompetitive conduct by technology companies that artificially inflated rents and made living in the state, and in particular New York City, unaffordable for many. New York put the law on hold while Caproni considered the case.
MANHATTAN BOROUGH PRESIDENT LAMENTS PRICE-FIXING
In her 27-page decision, Caproni said that while it was a “close call,” RealPage was “marginally” likely to show that the law was unconstitutional.
“Under the rubric of preventing price fixing, the statute prohibits normal commercial conduct just because it is facilitated by software,” she wrote. “Whether one is considering a residential landlord or a manufacturer of widgets, there is nothing untoward about considering prices charged by competitors when deciding how to price one’s own product.”
New York Attorney General Letitia James defended the law, with arguments including that it regulated conduct rather than protected speech. A spokesperson declined to comment.
“We face a generational shortage of housing,” Hoylman-Sigal said in a phone interview. “The city and state are engaged in creating more supply, and it’s frustrating when landlords operating through RealPage are doing just the opposite, trying to constrict access to housing by price-fixing.”
RealPage spokesperson Patrick Mendoza called Caproni’s decision “an important victory” for the industry. “When housing providers can respond efficiently to real market conditions, residents benefit from greater choice, more reliable service, and more stable rental communities,” he said.
MANHATTAN RENTS RISE
Residential rents are higher in Manhattan than in most of the country.
In July, the average price tag for a place to live in Manhattan rose to $6,655 per month, and $5,486 per month for a one-bedroom apartment, according to the Corcoran Group real estate brokerage.
The prior month, New York City Mayor Zohran Mamdani won a rent freeze from the city’s Rent Guidelines Board on approximately 1 million rent-stabilized homes. Landlords are challenging the freeze in court.
RealPage is based in Richardson, Texas. It sued two days after reaching a settlement with the US Department of Justice and agreeing to restrict its algorithmic software from using non-public data from competitors to generate price recommendations.
(Reporting by Jonathan Stempel in New York; Editing by Mark Porter and Bill Berkrot)
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