Colorado’s Misguided Attack on Rent Determination Software | OPINION | Opinion

The renewed proposal, based on flawed assumptions, threatens to further worsen Colorado’s ongoing housing crisis. Instead of focusing on the root problems—outdated zoning laws and building codes—there is a misguided proposal to ban artificial intelligence-based rent determination technologies.

Colorado is no stranger to being a technology hub. In 2021, the state’s technology industry generated more than $76 billion in gross state product (GSP) and accounted for 9% of state employment. Over the past five years, the sector has created nearly 38,300 new jobs, more than any other major industry in Colorado. Recognizing the state’s favorable environment, businesses and entrepreneurs have flocked to Colorado to take advantage of growing opportunities.

Governor Jared Polis and state leaders are actively recognizing the importance of creating healthy guardrails for new technologies such as artificial intelligence (AI) to ensure they are used responsibly without stifling growth. Recently, Colorado has been at the forefront of efforts to provide AI consumer protections, positioning the state as a leader in addressing potential issues such as discrimination in these technologies.

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Unfortunately, some legislators are steering this technological impulse in a counterproductive direction. They are considering legislation that would ban rent determination technologies based on artificial intelligence, in the mistaken belief that property managers use the tools to artificially inflate rental prices. In particular, the focus was on RealPage, a real estate software provider that offers rental prices to property managers based on algorithmic market analysis.

The proposed legislation is based on faulty assumptions. RealPage is used in about 3 million rental units nationwide out of nearly 50 million units, meaning the company’s market presence is too small to have any impact on price regulation.

The move is particularly troubling because it could undermine Gov. Jared Polis’ broader efforts to address Colorado’s housing crisis. If passed, such legislation could discourage investors from building more housing by limiting their access to modern, data-driven tools that help them effectively manage their rental properties. Colorado, like many other parts of the country, is struggling with a housing affordability crisis. With a shortage of more than 100,000 homes and apartments, Colorado has the second-largest shortage in the country, behind only California. Population growth, coupled with outdated zoning laws and restrictive building regulations, has only made the problem worse.

Rental housing experts such as economist Jay Parsons have highlighted the severity of the affordability problem: “It is clear that there is a very real affordability crisis among low-income renter households for whom there is a serious supply gap.” The affordability crisis is further exacerbated by economic inequality, especially among Black Coloradans, whose poverty rate is 17.8%, more than double the poverty rate for white Coloradans (8.1%). This disparity makes the unintended consequences of such legislation even more troubling, especially for the black community. Instead of focusing on artificial intelligence-based pricing tools, lawmakers should focus on addressing the root cause of the problem: the severe housing shortage.

As a former property owner who spent several years renting out homes and apartments in Colorado, I understand first-hand how important administrative technology is for property managers to remain competitive. These tools provide valuable insight into market demand and help keep prices in line with current market conditions. Banning such technologies based on the mistaken belief that they cause rent increases misses the bigger picture.

Governor Polis has proposed common-sense solutions to address the state’s housing shortage. Unfortunately, political forces are undermining these efforts by targeting rent determination software to prove a point. While it is important to approach new technologies responsibly, banning data-driven tools used to calculate fair market prices only compounds the problem. Instead of blaming technology, Colorado lawmakers should focus on overhauling outdated building laws and eliminating unnecessary barriers to development. These changes will allow more housing units to be built and help meet the growing demand for affordable housing.

About 264,500 people moved to Colorado in 2022. Many are part of Generation Z or part of the working-age population seeking better opportunities in a state with a strong economy and promising job prospects. The influx of people puts even more pressure on an already tight housing market.

If Colorado hopes to meet the demand for affordable housing that accompanies population growth while remaining competitive with other tech hubs across the country, banning artificial intelligence-based rent setting is not the solution. Lawmakers should focus on increasing the supply of housing for all residents while continuing to support the growth of the state’s tech economy.

Maya Wheeler is the executive director of the Weses Dada Center and former executive director of the African Chamber of Commerce in Colorado.