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Comment by cheriot | Hacker News Reader

> pricing algorithms to adjust prices on vacant apartments in real time… The program may also induce landlords to charge the rents recommended by the algorithm, putting upward pressure on prices and decreasing the availability of affordable apartments.

Wait until she hears about hotels and flights.

> The software analyzes non-public data that RealPage gathers from its property management clients, including confidential information on the rents charged by competing property managers, data it also makes available to its subscribers in aggregated, anonymized form. The program may also induce landlords to charge the rents recommended by the algorithm, putting upward pressure on prices

This is identical to how employers share salary information.

Either this is nonsense grandstanding (most likely) or the beginning of a sea change in consumer protection. I won't hold my breath.

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Hotels and flights are, granted, less essential than a place to live. Remember, you _have to live somewhere_. That is a functional difference compared to other "market-based" things (never mind that "market-based solutions" are a lot less workable when atomicity is lost. Yeah yeah, regulations making things harder to build, I think more should be built! But there are real, "wanted" things in the way of just having market magic solve everything).

Employers sharing salary information is also maybe a descriptive reality but I don't believe to be necessarily smiled upon. Remember the wage fixing scandals in SV?

Analogies are great because you can say A is like B, up until A is no longer like B and then they are terrible. But seriously, there are qualitative differences in things which make comparable effects be more or less of a problem (or even go from good to bad!). Thinking continuously by analogy misses the forest for the trees.

> Remember, you _have to live somewhere_.

You also _have_ to get education, healthcare and a whole lot more than nobody is doing anything about making any kind of affordable.

Maybe those things are bad too?

Luckily it turns out that it _is_ possible to do multiple things at once, in theory.

Especially odd to consider healthcare as "nobody is doing anything", as if this is a new political topic for debate instead of an ongoing fight for the past.... 40? years? The lack of progress isn't for lack of wanting it!

They should be.

You actually don't have to get an education and healthcare, although you ideally really should. But you can't opt out of physically existing in a location so long as you're still alive. And I've seen compelling evidence that inflation in healthcare and education is at least partially downstream of the housing crisis.

In that same vein, you don't really have to have a home, although you really should. With that type of thinking, the only thing you really really require to live is air, food and water, anything besides that you don't really require but is merely optional. You can live outside in a tent or under a couple of moving boxes.

Myself I'd say that both having a roof over your head, education, healthcare and a bunch of other stuff is a human right, but I digress.

> Myself I'd say that both having a roof over your head, education, healthcare and a bunch of other stuff is a human right, but I digress.

I mean I agree, you're missing my point.

> You can live outside in a tent or under a couple of moving boxes.

Not legally in a lot of places you can't! The point I'm making is that while we need (and should have as a right) many good things, the need to have a home is a particularly special one because locations are in fixed supply, and not even for one minute can you opt out of existing in a location, and every location that people want to exist in is currently owned by somebody, most of whom aren't interested in sharing.

And wouldn't you know it? Locations that have steady access to all that other good stuff (education, healthcare, bunch of other stuff) tend to be way more expensive than other locations, precisely because they gatekeep access to them.

On the right track keep going.

A place to live is a market based thing. There's no real difference between what RealPage is doing with housing, and what the CME Group is doing with crops. They both facilitate price discovery. The CME also is helping farmers maximize their profits. The difference is that farmers are allowed to grow as much crops as they want (perhaps a little too much in drought-prone areas), so food prices grow much more reasonably than rents. Meanwhile, developers aren't allowed to build enough housing to meet demand, so of course rents and home prices will skyrocket.

If you spend some time in South America you quickly find that most everyone can afford some type of housing, it's just a matter of how shitty it is going to end up.

The vast majority of the US has set some building codes that basically say "be rich enough to build to this code or be homeless." One can debate the merits of whether the streets are safer than a sub-code house. If you go somewhere like Asuncion, Paraguay you'll find people living in a shack who would end up homeless in the US.

IMO notably missing in zoning and building codes is they tend to consider the harmful effects of substandard zoning / code. But they seldom consider the harmful effects of the tradeoffs made to get it up to code/zone, including less money for healthcare, education, healthy foods, investing in your children, etc. Often it boils down to "fuck you, got mine, I won't risk some elevated risk of spread of fire to help keep you from freezing to death."

CME provides a place to trade futures products, which producers use to hedge risk. That is not like the apartment rent collusion.

The CME facilitates price discovery with derivatives. RealPage facilitates price discovery with data science.

If they are really facilitating collusion, then they would be selling a broken product. For example, for simplicity's sake, let's say that a city has a lot of landlords, but all their units are identical and they all follow the RealPage algorithm for price suggestions. Realpage suggests that they charge an exorbitant $10000 per unit, which leads to only 50% of all units being occupied, so your expected value of $5000 per unit. However, if you're a landlord, you'd be better off renting your units at $9000, leading to 90% occupancy. Your expected profit per unit is $8100, so you're actually much better off without the algorithm.

Futures products allow producers to offload some of their risk. CME provides a regulated transparent place to trade those products.

While I was a small-time landlord in the past, I am not now. It is difficult (financing, zoning, permits) to put up a new apartment building, so there is no extra $8100 for me.

If landlords meet weekly at the diner to set unit pricing it would be anti-trust collusion. The landlords paying uncle Bob to do the same thing is an extra step and it is still collusion.

>The landlords paying uncle Bob to do the same thing is an extra step and it is still collusion.

Did you read my example? My point is that this not what they're doing. You pay Realpage a fee based on the total square footage of units you want to be priced. In exchange, they estimate the market rent of your apartment to the best of their ability. They have no incentive to do otherwise.

Hardly anyone says "I have $200, where can I fly." Usually its "I have to go to X for y reasons, X is already booked and paid for, lets get a flight" at which point you are extorted by the dynamic price model for a flight you must take. It's somewhat hilarious when Spirit in particular overbooks, and tries to offer you money to take a flight some other day, assuming you can just rearrange everything in your life around this airline's fraught booking department. Like sure, let me go call the hotel and the rental car company and the venue and my boss and tell them I am attempting to move heaven and earth at the last minute for $108.

> Hardly anyone says "I have $200, where can I fly."

Not sure about that, there are entire industries around cheap flights for people that are location agnostic. ScottsCheapFlights comes to mind.

But ScottsCheapFlights is a very particular concept and not how most people go on vacation. Even with it people have a vague idea of where they would like to go, just perhaps not when.

For example, I would like to go to a major city in Europe sometime this summer. Which city isn’t urgent to me. The week I go doesn’t matter. Except oh so and so is getting married that week of June and I’ve recently been to Germany so would prefer something else.

Very very few people plan their vacations like this. They would rather pay twice the rate a deal site gives them and plan around school breaks for their kids, know which country they are kicking off their bucket list, have a direct flight from their home airport, etc. We who are willing to book an international flight and only then figure out what our vacation will be give up a lot for our discounted ticket prices.

Hm I'm not sure it's very very few as you say. Most people I know also don't know much about the various countries in the world (vacation-wise) and would be happy to go somewhere for a set price (in a set time such as school holidays) rather than a particular destination. In fact, the more avid travelers (rather than casual vacationers) are the ones more likely to pick a particular destination to go to.

I've heard of many people saying, I have 1000 bucks to spend on a vacation, I'd like to go somewhere for that amount during this time.

Person 1: "Let's go on vacation in the spring."

Person 2: "Sure, where should we go?"

Person 1: "How about Japan?"

Person 2: "Sounds great, how much are tickets?"

Person 1: "Hmm, they're around $1,600 each. That's too expensive. What about going to Amsterdam instead?"

That seems like a totally plausible exchange.

Sure, for certain trips. Most trips I'm assuming are obligate. All of my flights have been non negotiable in time and destination in the last few years. Visits to family that align with several schedules, weddings, and funerals.

waves hand I've done that - especially when going to Europe I just try and get near my destination then like to get the rest of the way by train. It's nice as I get to see an extra city for a day or two.

Hey, I think dynamic pricing like that is basically BS as well, and would applaud efforts to stop a lot of that! Though a part of me wonders how much of a subsidy that stuff is to other people, I know in practice they're not differentiating between "price insensitive" and "people who really need to get to a place at a certain time".

> Hotels and flights are, granted, less essential than a place to live. Remember, you _have to live somewhere_.

What about property tax assessments? Municipal governments don't care about pricing out local residents when they hire companies or banks that do exactly what Realpage is doing (i.e. collecting information, applying some proprietary regression model to it, and spit out valuations). In fact, they can put a lien on what should be your home, even if your one dollar short. The issue isn't market-based solutions. The issue is lack of transparency.

> Wait until she hears about hotels and flights.

What is the single pricing system that the majority of hotels or flights use? If there is one, and it's used for tacit coordination of prices, then yes, that should be pursued as an illegal cartel as well.

But my understanding was that each airline uses their own yield management algorithms. Delta does not use software that knows about price increases at American before they happen, for instance.

I'd welcome correction if you know otherwise.

> This is identical to how employers share salary information.

Um, no? RealPage actually suggests pricing. They use data from property A to tell property B what to charge. And they (allegedly) coordinate price increases across multiple properties.

This would be like if employers shared salary information and shared a software package that proposed lower and lower pay across all employers.

In fact, the airlines got caught doing this a while back.

https://www.propublica.org/article/yieldstar-rent-increase-r...

> Competing airlines began using common software to share planned routes and prices with each other before they became public. The technology helped head off price wars that would have lowered ticket prices, the Department of Justice said.

> The department said the arrangement may have artificially inflated airfares, estimating the cost to consumers at more than a billion dollars between 1988 and 1992. The government eventually reached settlements or consent decrees for price fixing with eight airlines, including Alaska Airlines, all of which agreed to change how they used the technology.

Interesting. Thank you! Sounds like that as addressed appropriately then.

This is very similar to what companies like PayScale do, from my understanding. I have a friend who works there and has told me that companies pay a them for employer-provided salary data and provides them a model for what they should pay employees.

“Efficient market” perhaps is not all it was once cracked up to be.

Someone should do something really wild and tell Congress about how local municipalities restrict the supply of housing, which raises prices. This allows owners of said real estate to extract very high rents, while limiting effective competition, harming consumers. It's wild!

The DoJ should start with an antitrust investigation of Atherton.

Or preserve the character of their neighborhood. Not everyone wants to be surrounded by 4 story buildings

People needing shelter to live trumps your selfish desire to not have poor people near you.

>This is identical to how employers share salary information.

For me, the difference is that using the same software to set the price based on the non-public information effectively makes it a form of collusion on setting rents, which seems analogous to the illegal practice of employees colluding to cap wages. It's not the same, I know, but has a similar negative effect in that the market is being subverted in some way.

The real question for me is what, if anything, comes out of the investigation. If some new legislation prohibiting the practice comes out, I could see the big landlords simply publicizing that data to avoid any legal issues.

Hotels and flights are discretionary purchases, housing is a necessity.

Regardless, if any of those are shown to be an elaborate price fixing scheme, I would hope that government officials would take action.

I don’t see the need to be so needlessly negative.

Cities restrict construction of housing to such a degree that focusing on this topic is a distraction. It let's people point to a irrelevant boogieman and say zoning/permitting/codes don't need to change.

To the Senator's credit, she's investigating other oligopolies as well.

Both can be true. I for one am fully on board with the change zoning movement. I also think it should be managed at the state/local level though, so as a senator, she’s focusing on more or less the right thing.

> Wait until she hears about hotels and flights.

If most/all hotels artificially maintained empty rooms and based their prices exclusively off booking.com or Priceline, I'd want that racket broken apart too.

>This is identical to how employers share salary information.

Friendly reminder to all: you can opt out of most of this.

Most employers subscribe to The Work Number, but you can opt out of your data being shared here: https://employees.theworknumber.com/employee-data-freeze

Note you will still see your current employer submitting data if you log in, but it's not visible to other employers who participate.

The work number isn't what's being discussed here. It's companies like Culpeper and Radford who get aggregate data from your employer and in return provide market benchmark information.

>> Wait until she hears about hotels and flights.

Or TicketMaster's adaptive pricing! When are these politicans going to focus on society's big problems: getting me Taylor Swift tickets.

> Wait until she hears about hotels and flights.

Are they all using the same program and colluding on pricing?

What comparison between hotels and flights is being missed?

I don't know as much about hotel pricing, but my understanding of flight pricing is that it's done with buckets of fare classes: prices are set in buckets, and they only go up (or down) as each bucket is exhausted (or re-opened, if a ticket is canceled). I'm sure it's more complicated than that these days, but I don't think it's directly comparable to the rent adjusting system described in the news release.

It for sure is more complicated than that. Your prices will get jacked up over time due to browser cookies. Never book hotels or flights without turning on private mode in your browser.

Flight prices are adjusted far more frequently than rental properties. Just get updates on a tracked flight ~6 months from now and watch it change weekly or even daily.

RealPage adjusts rental property pricing daily: https://www.realpage.com/videos/yieldstar-optimizes-rent-pri...

People's rent doesn't change daily

Nor do the plane tickets I bought six months ago.

The price if you purchase today changes daily, in both scenarios.

Yeah fair point. I don't know what point I was trying to make.

> Flight prices are adjusted far more frequently than rental properties

To my knowledge, airline pricing algorithms are fiercely guarded and competitive. Hotels, less so, but it's a fragmented space. RealPage, in contrast, is a single algorithm coordinating pricing for large sections of the market.

I think that's irrelevant to what I'm saying: the prices on airline fares can go up and down in any time increment, because what drives them (to my understanding) is not opaque algorithmic pricing. If they're being pulled from the airline's GDS, it's just the bucket's price.

> The program may also induce landlords to charge the rents recommended by the algorithm, putting upward pressure on prices and decreasing the availability of affordable apartments.

This is definitely nonsense grandstanding. I have no idea what they're even trying to say here. The program may also induce landlords to decrease rents as recommended by the algorithm, putting downward pressure on prices and increasing the availability of affordable apartments.

> The program may also induce landlords to decrease rents as recommended by the algorithm...

The algorithm's sole purpose - how it gets customers and makes money - is to maximize revenue and prevent that as much as possible.

Reducing rents may also maximize revenue by reducing vacancy. The reason the algorithm recommends landlords to increase rents more often than it recommends them to decrease rents is because the supply of housing isn't growing as quickly as demand. Without this algorithm, landlords tends to set rents in reactive manner, so the price they set lags behind the optimal market price, so when the algorithm recommends the market rent, it tends to be higher.

Unfortunately, the state of economic education is so poor in this country that Senators would rather grandstand about making economic signals illegal rather than actually address the root cause of these economic signals.

> Reducing rents may also maximize revenue by reducing vacancy.

Actually, the algorithm seems to do the opposite.

https://www.propublica.org/article/yieldstar-rent-increase-r...

> During an earnings call in 2017, Winn said one large property company, which managed more than 40,000 units, learned it could make more profit by operating at a lower occupancy level that “would have made management uncomfortable before,” he said.

> The company had been seeking occupancy levels of 97% or 98% in markets where it was a leader, Winn said. But when it began using YieldStar, managers saw that raising rents and leaving some apartments vacant made more money.

> “Initially, it was very hard for executives to accept that they could operate at 94% or 96% and achieve a higher NOI by increasing rents,” Winn said on the call, referring to net operating income. The company “began utilizing RealPage to operate at 95%, while seeing revenue increases of 3% to 4%.”

I already addressed why this is the case in my previous comment.

Those occupancy levels are insane to me - 80% used to be considered the norm when working out the cap rate. Maybe it’s different for exceptionally large properties.

> Reducing rents may also maximize revenue by reducing vacancy.

Yeah but come on were you born yesterday.

> The reason the algorithm recommends landlords to increase rents more often than it recommends them to decrease rents

The algorithm causing landlords to raise rents is the problem with the use of the algorithm, the subject of discussion. The mechanics of how the algorithm comes to that conclusion may be technically interesting but are not the problem, nor the solution, to rents being raised.

We can solve the underlying problem and ban this shit. We don't have to choose one neither blocks us from dealing with the other. This is happening now and would be easy to stop, if we wanted to. What do you gain from making people think we can't or shouldn't stop this?

> What do you gain from making people think we can't or shouldn't stop this?

Because they aren't doing anything illegal. They are merely facilitating price discovery. If they really were creating a cartel of landlords, then they would be selling a broken product. For example, for simplicity's sake, let's say that a city has a lot of landlords, but all their units are identical and they all follow the RealPage algorithm for price suggestions. Realpage suggests that they charge an exorbitant $10000 per unit, which leads to only 50% of all units being occupied, so your expected value of $5000 per unit. However, if you're a landlord, you'd be better off renting your units at $9000, leading to 90% occupancy. Your expected profit per unit is $8100, so you're actually much better off without the algorithm.

Do laws come down from heaven in this view? We make them when we find that something is harmful. This is harmful. We can make it illegal.

What it could be matters for shit. What it is in practice is maximizing wealth extraction from the people least likely to be able to bear it towards those who already, necessarily, have much more of it.

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