New York Enacts S7882 Prohibiting Algorithmic Coordination in Residential Rent-Setting

What the Law Does

The law provides that it is an “unlawful violation” to “knowingly or with reckless disregard facilitate an agreement between or among two or more residential rental property owners or managers to not compete with respect to residential rental dwelling units, including by operating or licensing a software, data analytics service, or algorithmic device that performs a coordinating function on behalf of or between and among such residential rental property owners or managers.” It further states that it is an “unlawful agreement” for a residential rental property owner or manager to “knowingly or with reckless disregard set or adjust rental prices, lease renewal terms, occupancy levels, or other lease terms and conditions” based on recommendations from a tool “performing a coordinating function.”

The statute defines “algorithm” as “a computational process that uses a set of rules to define a sequence of operations,” and “algorithmic device” as “any machine, device, computer program or computer software that on its own or with human assistance performs a coordinating function.”

A “coordinating function” is specifically defined as performing all of the following subfunctions for residential rental dwelling units where the inputs come from two or more owners or managers (who are not all owned or managed by the same corporate parent):

• (i) “collecting historical or contemporaneous prices, supply levels, or lease or rental contract termination and renewal dates … from two or more residential rental property owners or managers,”
• (ii) “analyzing or processing” that multi‑owner information “using a system, software, or process that uses computation, including by using that information to train an algorithm,” and
• (iii) “recommending rental prices, lease renewal terms, ideal occupancy levels, or other lease terms and conditions to a residential rental property owner or manager.”

The law includes an explicit carve‑out: A product used “for the purpose of establishing rent or income limits” in accordance with the Emergency Tenant Protection Act of 1974, the Rent Stabilization Law of 1969, the City Rent and Rehabilitation Law, the Emergency Housing Rent Control Law, or “an affordable housing program administered by a federal, state, or local government or other political subdivision” will not be considered to be performing a coordinating function.

Who is Covered

The statute would apply to any “residential rental property owner or manager,” defined as “any individual or entity that owns or is a beneficial owner of, directly or indirectly, in whole or in part, or manages one or more residential rental dwelling units in New York state.”

In addition to property owners and managers, the statute covers persons or entities who facilitate agreements not to compete with respect to residential rental units. This expressly includes those who facilitate algorithmic price coordination by operating or licensing software, data analytics services, or algorithmic devices that perform the defined coordinating function “on behalf of or between and among” multiple residential rental property owners or managers. It remains to be seen what other forms of conduct, if any, might be construed as recklessly facilitating non-compete agreements among property owners and managers.

Key Takeaways

For residential rental property owners and managers that have used pricing software or AI-assisted tools:

Tools based solely on a single owner’s data would generally fall outside the statute, whereas multi‑owner, data‑aggregating tools that recommend pricing or lease terms risk violating it: Tools that rely solely on an individual owner’s or manager’s own data and do not collect, analyze, and use competitively sensitive inputs across two or more unaffiliated owners or managers, and that do not recommend prices or other lease terms based on such pooled multi‑owner data, are likely to be outside the statutory definition of a “coordinating function.” By contrast, tools that aggregate and process multiple owners’ data and then generate pricing, renewal, or occupancy recommendations risk falling squarely within the prohibition.

Liability can arise both from facilitating coordination through a tool and from using certain pricing tools to set rents or other lease terms: The law reaches both the facilitation of agreements “to not compete” via operating or licensing a tool that performs the coordinating function, and the downstream act of setting or adjusting rents, renewal terms, occupancy levels, or other lease terms “based on recommendations” from such a tool. This two‑pronged structure means that even users — without any role in operating or licensing the software — may face liability exposure if they rely on recommendations produced by a tool that performs the defined coordinating function.

Because the statute uses a “knowingly or with reckless disregard” standard, owners and managers should conduct diligence to understand the data sources and recommendation logic of any pricing tool: The statute’s mental state standard — “knowingly or with reckless disregard” — underscores the importance of diligence. Owners and managers should understand what data a pricing or revenue‑management tool ingests, whether the data include prices, supply, or lease timing from other unaffiliated owners or managers, and whether the tool analyzes those inputs to recommend prices or related terms.

A narrow carve‑out applies to tools used to set programmatic rent or income limits, but it does not exempt market‑rate tools that perform the coordinating function: The carve‑out for products used to establish rent or income limits for specified rent‑regulation and affordable‑housing programs is narrow and functional. It does not exempt a product from the statute if the product otherwise performs the coordinating function in market‑rate rent‑setting.

S7882 will take effect 60 days after enactment. The statute does not create a new penalty schedule; rather, it declares the specified conduct an “unlawful violation” and an “unlawful agreement” under New York’s antitrust law. As a result, remedies and enforcement mechanisms under New York’s existing antitrust framework will apply.

Please contact your Vinson & Elkins team to discuss these developments and their potential effects on your business.