Testimony of Geoffrey Manne & Eric Fruits to City of Portland Homelessness and Housing Committee
Re: Opposition to proposed ordinance amending the Affordable Housing Code to prohibit algorithmic pricing tools
Thank you for the opportunity to provide testimony on the proposed ordinance prohibiting the use of algorithmic pricing tools in Portland’s rental housing market. Geoffrey Manne is the President and Founder of the International Center for Law & Economics (ICLE), a nonpartisan nonprofit research organization based in Portland. Eric Fruits is a Senior Scholar and Economist at ICLE.
Our opposition is grounded in economic principles, antitrust law, and an understanding of how algorithmic tools function in competitive markets. We have recently written on the competitive effects of algorithmic pricing tools (“Trump Administration Has Opportunity to Chart a Better Course on AI,” attached) and submitted an amicus brief in Gibson v. Cendyn.
Key Concerns with the Proposed Ordinance
Mischaracterization of Algorithmic Pricing Tools
Algorithmic pricing tools are not inherently anticompetitive. They automate processes that landlords have historically performed manually, such as analyzing market conditions and setting rents. As emphasized in the amicus brief, automating lawful business practices does not transform them into unlawful activities. These tools provide recommendations based on publicly available data, and landlords retain full discretion to accept or reject these recommendations, preserving independent decision-making.
The ordinance conflates the use of these tools with price-fixing—a serious misunderstanding. Price-fixing requires an agreement among competitors to coordinate pricing, which is illegal under antitrust laws like the Sherman Act. However, merely using similar software does not constitute collusion. Courts have consistently held that independent decision-making, even when informed by shared data or tools, does not violate antitrust laws.
Economic Benefits of Algorithmic Pricing
Algorithmic pricing democratizes access to sophisticated market analysis, benefiting smaller landlords who lack resources for manual data analysis. This levels the playing field and fosters competition by enabling smaller players to compete effectively with larger property owners.
Moreover, as noted in the ICLE’s amicus brief, these tools generate significant economic efficiencies by improving capacity utilization, reducing transaction costs, and enabling rapid responses to market fluctuations. For tenants, this can translate into more stable housing markets over time. Without such tools, landlords may revert to outdated methods like arbitrary annual rent increases or gut instincts, leading to greater market distortions.
Flawed Assumptions About Rent Increases
The claim that algorithmic pricing universally inflates rents overlooks critical factors like housing supply shortages and local economic conditions. Studies have shown that rising rents are primarily driven by structural issues—such as restrictive zoning laws and insufficient housing construction—not by pricing algorithms. Penalizing landlords for using modern technology distracts from addressing these root causes.
Unintended Consequences
Prohibiting algorithmic tools could harm tenants in several ways:
- Reduced Market Transparency: Without access to data-driven insights, landlords may revert to inefficient pricing strategies that worsen affordability issues.
- Disincentives for Investment: The ordinance could discourage investment in Portland’s rental housing market, exacerbating the city’s housing
- Legal Risks: The ordinance risks overstepping established antitrust principles by targeting lawful business This could expose the city to costly legal challenges.
Recommendations
Instead of banning algorithmic pricing tools outright, I urge the Committee to consider alternative approaches that address legitimate concerns while preserving the benefits these technologies offer:
- Focus on Supply-Side Solutions: Addressing Portland’s housing affordability crisis requires increasing the supply of affordable and market-rate housing. Streamlining permitting processes and revisiting zoning restrictions would be more effective than banning technology.
- Encourage Transparency: If transparency is a concern, encourage landlords who use algorithmic tools to disclose how rental prices are This approach promotes accountability without stifling innovation.
- Target Actual Anticompetitive Behavior: Enforcement efforts should focus on explicit collusion or agreements among landlords—not on the mere use of shared software.
While well-intentioned, this ordinance risks undermining competition and innovation in Portland’s rental housing market without addressing the true drivers of unaffordability. When used appropriately, algorithmic pricing tools are valuable instruments for enhancing efficiency and fairness in competitive markets.
I urge the Committee to reject this ordinance and instead pursue policies that tackle Portland’s housing challenges at their core—by increasing supply and fostering competition.