California Housing Crisis: Why Banning Rent Algorithms Won’t Help

The cost and availability of housing remain among the most pressing concerns for Californians navigating economic uncertainty. Yet some Golden State cities are channeling energy into a policy experiment that risks making the housing affordability crisis worse.

In Santa Ana, city officials recently approved an ordinance to ban the use of rent-pricing algorithms — software that analyzes data used by property managers to understand the market and consumer preferences. Politicians parroted claims of protecting renters.

Under the measure, landlords would be prohibited from using software tools that help recommend rental rates appropriate for market conditions. The ordinance passed despite warnings from critics that it is predicated on a misunderstanding of what these tools actually do and could invite litigation.

Recent city ordinances in San Francisco, San Diego and elsewhere targeting pricing software reflect a trend of blaming technology for high rent, even though both state and federal guardrails already exist that govern data use and prevent pricing coordination.

At best, blaming technology deflects from the real issue. The problem is an acute shortage of housing.

History and economic evidence are abundantly clear — when supply lags behind demand, prices rise. Want to lower prices instead? Then increase supply: Build more housing.

Often, politicians’ push to pile on even more regulations, like targeting software or pursuing rent control, is done in the name of promoting affordable housing and protecting renters and others with lower incomes.

But interestingly, any new housing that is built helps all renters, even those with lower incomes. Research shows that even higher-income households moving into new luxury apartments frees up units that become more affordable for lower-income consumers — an effect known to economists as filtering.

Real-world examples across the state underscore the point. Rents in Los Angeles have finally begun to moderate following the addition of more than 15,000 new apartment units in 2025.

Compare this with San Francisco, where rents continue climbing thanks to a persistent undersupply of housing. San Francisco outlawed pricing software tools in 2024, but rents didn’t go down and, in fact, have risen because the city has yet to embrace pro-construction reforms.

Experts explain that the U.S. Housing shortage has continued to craft homes increasingly unaffordable for many Americans, particularly low-income renters. They highlight that restrictive zoning is largely to blame for underproduction relative to job growth and concur that rent control is counterproductive as it discourages the addition of supply, even with strong demand.

These concepts garner support across the ideological spectrum.

Economist Edward Glaeser of the American Enterprise Institute provided testimony to the Senate Committee on Banking, Housing, and Urban Affairs last year explaining the negative effects across the country of the huge underproduction of homes compared with even 20 years ago. Glaeser cited data showing that, across the country, areas with more housing regulations have much higher prices.

And recently the Center for American Progress put forth a proposal to cut red tape that impedes housing construction, emphasizing that their recommendations are “built on the fact that we cannot make headway on housing affordability over the long run without seriously scaling up home building at the same time.”

Having a roof over your head is a fundamental human need and is a foundation for financial stability and upward mobility. Outlawing commonly used business tools in pursuit of catchy headlines might make politicians feel better, but it is not a real fix for California’s housing affordability crisis.

Policymakers up and down California should acknowledge that increasing supply to match demand is by far the most effective way to bring down housing costs. Californians deserve policies grounded in economic reality — and when it comes to housing, that means building more.