Contributor: Hiring algorithms is not a problem. California just needs more housing

The cost and availability of housing remain among the most pressing issues for Californians navigating economic uncertainty. Yet some cities in the Golden State are putting pressure on policy experiments that risk exacerbating the housing affordability crisis.

In Santa Ana, city officials recently approved legislation to ban the use of rental pricing algorithms — software that analyzes data that property managers use to understand the market and buyer preferences. Politicians have responded to baseless claims of price fixing and said they are protecting tenants.

Under the measure, landlords will be barred from using software tools that help recommend rental rates that are appropriate for market conditions. The law was passed despite warnings from critics that it is based on a misunderstanding of what these tools actually do and could lead to lawsuits.

Recent city ordinances in San Francisco, San Diego and other areas targeting pricing software show a trend toward blaming technology for high rents, even though both counties and states are already in place to regulate data usage and curb price collusion.

At best, blaming technology that helps property managers distract from the real issue. The problem is a huge housing shortage.

History and economic evidence is very clear – when supply lags behind demand, prices rise. Want to lower prices instead? Then increase availability: Build more houses.

Yes, the real estate market is big, dynamic and complex. But one important fact is inescapable: California’s burdensome regulatory standards have been a constant barrier to providing the housing that Californians need.

Often, the push for politicians to pile on more regulations, such as targeting software or pursuing rent controls, is done in the name of promoting affordable housing and protecting renters and other low-income earners.

But interestingly, any new house built helps all tenants, even those with low incomes. For example, research shows that even higher-income families moving into new luxury homes free up affordable units for lower-income buyers — an effect known to economists as filtering.

Real-world examples across the region underscore the point. Los Angeles rental housing has begun to moderate following the addition of more than 15,000 new apartments by 2025.

Contrast this with San Francisco, where rents continue to rise due to the ongoing housing shortage. San Francisco followed the same path as Santa Ana by outlawing pricing software tools by 2024, but rents didn’t go down and, in fact, went up because the city hadn’t adopted pro-construction reforms.

Experts writing for the Michigan Journal of Economics explained that the housing shortage in the US has continued to make homes unaffordable for many Americans, especially low-income renters. They point out that restrictive zoning is a major cause of low productivity relative to job growth and agree that rent control is counterproductive as it restricts supply, even when there is strong demand.

These common sense ideas are compelling enough to find support across the ideological spectrum.

Economist Edward Glaeser of the right-leaning American Enterprise Institute testified before the Senate Banking, Housing, and Urban Affairs Committee last year detailing the nationwide negative effects of the massive housing underperformance of 20 years ago. Glaeser cited data showing that, across the country, areas with the most housing laws have the highest rates.

And recently the left-leaning Center for American Progress released a proposal to cut the red tape that hinders housing construction, insisting that their recommendations “are built on the fact that we cannot succeed in housing affordability in the long run without increasing housing construction at the same time.” The headline on the program’s home page reads: “Build, baby, build.”

Having a roof over your head is a basic human need and is the foundation of financial stability and upward mobility. Bypassing the corporate tools commonly used to get headlines might make politicians feel better, but it’s not a real solution to California’s housing affordability problem.

Policymakers up and down California must agree that increasing supply along with demand is the most effective way to lower housing costs. Californians deserve policies based on economic reality — and when it comes to housing, that means building more.

Mario H. Lopez is president of the Hispanic Leadership Fund, a public policy advocacy organization that promotes freedom, opportunity and prosperity for all.