Philadelphia and neighboring New Jersey are experiencing a historic housing crisis. Two out of five (40%) households were cost-burdened in 2022 in Philadelphia, meaning they spend more than 30% of their income on housing. Similarly, in New Jersey, there is an estimated shortfall of 200,000–300,000 affordable housing units.
This affordable housing shortage is simply not getting the attention it deserves. Despite robust economic activity and a diverse, well-educated population, the region’s livability is in a dire state of decay with the Newark, Jersey City, and Philadelphia metro areas notching some of the highest rates of housing underproduction nationwide.
Thankfully, statewide efforts by Governors Josh Shapiro and Phil Murphy have sought to remedy housing deficits. Last month, Pennsylvania enacted a plan that includes a focus on building more homes in communities, while New Jersey has sought updates to zoning codes and residential planning processes. But the acute issues in the Mid-Atlantic will require bold measures to meaningfully increase the local supply of housing that alleviates the cost strain on city households.
Unfortunately, local lawmakers have different ideas. Specifically, there has been a surge in legislation aimed at banning analytical pricing tools used by property managers, alleging that landlords somehow use this technology to drive up rental rates. The City of Philadelphia is on the verge of passing a bill, and New Jersey is considering a measure of its own.
The truth is that the bills, while attempting to appear pro-consumer, have confusingly tried to pin the entirety of our housing woes on an artificial intelligence (AI) software company called RealPage.
The technology is effective in relaying changing conditions and recommended rates, but outlawing the software won’t change the true market value of available units. Such a ban doesn’t address the underlying problem – that rents will continue rising due to lack of inventory in the face of high demand.
Finding a “fall guy” is often considered an easy way out of a problem, so it’s no surprise that some other cities have also pointed the finger to distract from the real problem. San Francisco recently passed an ordinance banning algorithmic systems for helping to track changing market conditions, which once again sidesteps the massive elephant in the room. In the midst of a housing crisis, San Francisco suffers from some of the longest timelines for anyone attempting to build new housing.
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Steve Pociask is president and CEO of the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.TheAmericanConsumer.org or follow us on X @ConsumerPal.