For years now, California has led the nation’s affordable housing movement. Attorney General Rob Bonta deserves most of the credit. When he served in the state legislature, he introduced and passed a bill that strengthened the rights of tenants while capping rental price increases to reasonable levels. Scores of states have since followed California’s lead, and weeks ago, even the Biden-Harris administration followed AG Bonta’s example by codifying core portions of his bill into a federal proposal. That said, recent actions taken in San Francisco deserve a level of review.
Last week, San Francisco’s Board of Supervisors voted to ban algorithmic software that landlords use to help determine their rental prices. Some believe that this AI-powered pricing software is enabling collusive conduct in the rental housing market, which is raising prices. Their fears are understandable but with additional information they would draw a different conclusion.
Algorithmic AI isn’t inflating prices. It is just helping landlords better understand what pricing in the market looks like so they can make more informed decisions. Prices go up when there are housing shortages, and they come down when the available housing supply increases, as it currently is in Oakland and Sacramento, which watched rent prices decrease by over 8 percent in May compared to the previous year.
Prohibiting the use of this technology will not lower rent as some believe, but it could compromise the AI revolution that has created new innovations and job opportunities in the State of California.
The reason is because the challenges presented to this rental software arguably represent the first major challenge to algorithmic AI since its marketplace debut.
One law and economic professor stated that such actions could “set a legal precedent that limits the use of algorithms — which have become instrumental to many industries — across countless sectors of the American economy.” Professors who participated in an April University of California Berkeley School of Law symposium also warned that increased AI regulation could lead to a “wave of litigation” over AI technology, in which courts will begin analyzing the “black box” of corporate AI algorithms.
As an economist and former educator in the State, it is clear to me that this is not in California’s economic interests.
Today, just about every sector of California’s economy is using artificial intelligence. This technology is expected to generate millions of dollars’ worth of economic growth every year.
Now, to be clear, we need to impose smart guardrails and regulate AI smartly. AG Bonta is already on the case there when it comes to ensuring AI doesn’t produce or promote deep fakes, predatory robocalls, and other troubling practices. Legislators also need to pay attention to ways AI algorithms make discrimination in housing and other sectors possible and be willing to measure whether AI causes job losses or has other deleterious effects on our quality of life. But, by and large, AI is being used as a force of good in the California economy.
California’s tourism industry is using it to book customers’ flights and hotels. The state’s farmers are using it to predict demand for their products and get a better sense of weather patterns that could affect their crops. Even the California state government conducted an initiative to “promote a strategy and standard approach for implementing AI within state government” out of a belief that “Artificial Intelligence and AI-enabled tools offer unprecedented gains in the effort to transform the nature and scale of government work and services.” We should want to encourage these economic efficiencies, not discourage them.
California is the tech capital of the world. It’s been leading the AI revolution and needs to continue to in order to stay economically competitive.
California’s policymakers have already put in place in some of the nation’s best rent control protections in place to safeguard against any potential predatory actions landlords may take. I would caution against shackling an emerging tech industry that has thus far has proven harmless with too many barriers. Not unless new data shows we should have a good reason to.
A recent McKinsey Global Institute study estimates that by as early as 2030, AI could help create 20 to 50 million new jobs every year. Today, we have the largest sub-national economy in the world largely due to our tech industry. If we want to keep it this way, we can’t regulate out of fear or uncertainty alone. As long as there is appropriate monitoring, we need to let new innovations — AI or otherwise — mature and grow. Our children and grandchildren will thank us later.
Dr. Julianne Malveaux, a native San Franciscan, is an American economist, author, social and political commentator, and businesswoman. Currently, Dr. Malveaux serves on the boards of the Economic Policy Institute as well as The Black Doctoral Network. She is also President of PUSH Excel, the educational branch of the Rainbow PUSH Coalition, and President and owner of Economic Education a 501 c-3 non-profit. During her time as the 15th President of Bennett College for Women, Dr. Malveaux was the architect of exciting and innovative transformation at America’s oldest historically black college for women.
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