In a committee hearing that contained testimony from a range of advocates, a bill changing how residential rents can be set passed by a vote of 7-3. Colorado House Bill 24-1057, titled Prohibit Algorithmic Devices Used for Rent Setting, would make the use of algorithmic devices in rent setting for residential tenants punishable under the Colorado Consumer Protection Act.
The bill is sponsored by Democratic Rep. Steven Woodrow. He told the committee the bill’s intent is not to prevent the use of products that rely on publicly available information.
“To be clear, the intent of this bill is not to prevent the use of products that rely on publicly available information to recommend a price, like Zillow.com or other free websites,” said Woodrow. “Rather, the distinction this bill seeks to make, the line that it draws, is with respect to algorithms that rely on proprietary non-public information submitted by one’s competitors in real time.”
Woodrow also claimed that over the past several years competitors in a number of industries have found a way to price fix through the use of complex computer algorithms. He said residential landlords were part of the group using this type of technology.
The bill met pushback in committee from several associations.
Andrew Hammer, general counsel at the Colorado Apartment Association, told the committee the bill would deprive rental housing providers from using the most accurate and current information when making a pricing decision. He added it was critical to make the right price and do it fast, and the bill would have the unintended consequence of depriving the members of his organization from optimizing their revenue by lowering their vacancy rate.
The Denver Metro Chamber of Commerce testified to its concerns about the bill. Drea Modugno, senior manager of government affairs at the chamber, told the committee her organizations adamantly support protecting Colorado renters from unfair business practices and collusion, but believes the issue should be addressed through the court system. She added more information about the devices referenced in the bill.
“The algorithmic devices referenced in this bill are common accounting programs used to collate data effectively and effectively list units within the market price,” said Modugno. “These devices adjust rates to ensure units are filled, and at the end of the day, that’s all our common goal here.”
The vice president of government affairs at the Colorado Springs Chamber & EDC, Dave Dazlich, told the committee the use of algorithmic devices is a long standing and complex practice. But his main concern about the bill was its references to the Consumer Protection Act.
“We are concerned that by expanding the liability of multifamily developers when it comes to the Consumer Protection Act and the liability that is attendant with that, that prices can only go up, negatively affecting housing affordability and attainability,” said Dazlich.
The Colorado Landlord Legislative Coalition asked for an amendment to the bill to provide more clarity on the definition of an algorithmic device to help with compliance with the bill.
There were also a number of organizations that testified in support of the bill.
New Era Colorado, a youth organizing organization, was represented by its Denver regional lead organizer Trish Hyde. Hyde asked the committee to vote yes on the bill and to take a step towards addressing the housing crisis in the state.
“This bill will protect renters as the consumers they are,” said Hyde. “We call upon this committee to vote yes on House Bill 1057, because every year renters across our state feel immense anxiety about the difficult decision they must make when their lease renewal arrives.”
David Seligman, executive director at Towards Justice, said the bill is part of a broader effort to make the housing market more competitive and fair. He said the bill only addresses one aspect of the use of algorithms in the rental market.
“It only addresses one of the most insidious uses of algorithms,” said Seligman. “Which is for the purposes of sharing non-public information, as opposed to information that is public and algorithms could still scrape to suggest rental prices.”
The lead attorney for the Justice for the People Legal Center, Jason Legg, told the committee the bill takes a step toward leveling the playing field on pricing information between renters and landlords.
Three amendments were passed by the committee before the bill passed to the full House. One of the amendments provided more specificity to the devices the bill would regulate and the data included in those regulations. The other two amendments clarify the definition of rent in the bill and carve out an exception for anonymous aggregated data published by a trade organization.
The bill currently awaits its second reading before the full House.