By Paul Gessing

New Mexico's Legislature adjourned last month, and not a moment too soon. That's because the party that controls our state government spent most of the legislative session pushing misguided policies that expand the size of government, increase spending, fail to reduce tax burdens, and add red tape to our economy. Our leaders need to address the root causes of these problems by shrinking government.

Look no further than the housing market. Policy advisers to Gov. Michelle Lujan Grisham report that in the past eight years, the average home price in New Mexico has gone up 70%, and the median rent costs have increased 60%.

That's unsustainable for working families.

Analyses have emphasized the drastic undersupply of housing in New Mexico. An accumulation of development-deterring rules and regulations have suppressed the supply of housing, which in turn negatively impacts the going rates to buy or rent.

The Lujan Grisham Administration rammed through a costly new building code in 2024. This new code raised insulation standards and mandated electric vehicle (EV)-related infrastructure. It also hasn't helped that cities have been overly slow to reevaluate impediments like building height restrictions and unwise prioritization of costly single-family detached homes – which now makes up more than 65% of the state's housing stock.

While increasing the housing supply in New Mexico's largest cities was supposed to be the goal of the 2025 legislative session, a proposed bill (HB 215) would have worsened housing issues in the State. The bill would have barred the use of software by property managers to suggest rent prices or lease renewal terms. This entailed revoking the processes for analyzing and training an algorithm/AI on historical or contemporaneous prices, supply levels, or lease or rental contract termination and renewal dates of dwelling units from two or more rental property owners.

For consumers, much of what we buy is online or is supported by software tools like these that swiftly match our demands with available inventory and executing transactions the moment that we need them – think of flights, trains, cars, hotels and many other necessities.

While New Mexico's proposal failed in the legislature, similar laws enacted in California have been passed. In short, statistical assessments of the rental property landscape simply reveal a snapshot of its current market conditions, not the other way around in establishing such conditions, as some may claim.

AI tools are just tools. If a landlord wishes to charge different rents or give discounts to customers, they are welcome to do that. AI is simply one of many tools that can be used to make sure that rental prices reflect current market conditions in the area.

Not only is AI not a problem driving New Mexico housing prices, it could be part of the solution. But the real solution to rising housing costs is to increase the housing supply. Austin, TX is an example of a fast-growing city that has tamped down rising prices through increased supply. In this market, where construction has been allowed to keep up with and even surpass population growth, rents have fallen 22% from their peak in the summer of 2023.

Reversing the anti-technology approach to housing is critical given that basic functions of tools for price discovery in the rental market stand to encourage more entrepreneurial activity and motivate more potential property owners to bring more housing units to market. Allowing processes to demystify markets like these can also further push business leaders to move their AI-oriented operations to New Mexico and support better outcomes for local consumers.

Of course, solving New Mexico's housing shortage starts with increasing supply.

Paul Gessing is president of New Mexico's Rio Grande Foundation, an independent, nonpartisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.