Comment by davidw | Hacker News Reader

Comment by davidw | Hacker News Reader

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Interestingly, the people at that company doing the actual economic research into pricing are saying what everyone else is:

> The surge in apartment construction is softening the Class B market more than any other asset class. In high-supply submarkets, Class B rents fell more than twice as much as Class A over the past year. Yet in submarkets with no new supply, Class B performed right in line with Class A.

https://www.realpage.com/analytics/class-b-market-softening/

This is pretty much in line with what economists everywhere are telling us:

https://www.washingtonpost.com/opinions/2023/10/20/housing-s...

Not to defend the company; if they caught them trying to fiddle things, throw the book at them. But I just don't see their software being powerful enough to manipulate prices that far out of line with the market. You can't charge San Francisco prices in Baltimore.

Of course, people want a Big Bad, a bogeyman to blame for the housing crisis, not 100's of small decisions in their city and state regarding zoning and taxes and so on that has shaped the North American city over the past 100 years.

I don't disagree that more housing supply is broadly the best way to combat rising rent, but if the numbers cited in the linked article are even close to true then I don't think it's surprising to think their software could meaningfully impact the market (for high-density housing at the very least):

> The collaboration "amounts to a District-wide housing cartel," Schwalb said, noting that "well over" 30 percent of buildings with five or more units use RealPage's software, along with 60 percent of 50-unit-plus buildings. Across a wider Washington-Arlington-Alexandria area, more than 90 percent of units in large buildings are subject to RealPage pricing, according to Schwalb's office.

Using a third party to set a community wide price level is something to carefully examine in court. Because such a setup could be used as a price fixing cartel with extra steps and plausible deniability for all parties.

Yes, it should be interesting to hear what comes out.

I'm not here to defend them. It's possible that, at the margin, their system helps gouge renters a few percentage points. They should be stopped from doing that.

But the broad wins are still with abundant housing.

As with much else, it's not either or... build more, and put a stop to this kind of thing if they find they are able to manipulate markets.

The software is recommending keeping units empty in areas with rental shortages because it pushes up prices.

There is nothing wrong with keeping units empty to manage overall rental yield.

It becomes an issue if a group of landlords agree not to rent below a certain threshold in a community. This is classic price fixing - leaving renters no alternative other than paying the minimum rate set.

> It becomes an issue if a group of landlords agree not to rent below a certain threshold in a community. This is classic price fixing - leaving renters no alternative other than paying the minimum rate set.

This is exactly what's happening, though. Landlords using RealPage/YieldStar are required to follow its guidelines and need permissions from the company to make exceptions. It's technology mediated collusion to price-fix.

"There is nothing wrong with keeping units empty to manage overall rental yield."

Heavily disagree. There is everything wrong with that. Housing should not be an investment or a profit source at all

There is nothing legally wrong with it.

I also disagree, it isn't right.

While real estate is commonly accepted as one of the prominent investment type of asset, it has been challenged with excellent arguments against it.

> Housing should not be an investment or a profit source at all

Who would build housing, then?

The soon to be occupiers would build them. Like they did in most places for most of human history

We're well past the age when someone can do a reasonable job of slapping together some logs.

It's fine if people make a profit at providing essential goods as long as there's enough surplus to redistribute to those who markets can't reach.

No one complains about farmers profiting from farms. We care about people going hungry, so we buy some food from tax revenues and help feed them.

It was an answer to the rhetorical comment that if housing stopped yielding a return on investment then there would be no housing.

I don't see the possible parallel with farmers, all there is in common is land potentially owned as property. Farmers bear fruits through labour. Real estate investors bear returns on capital.

That's interesting you mention some people going hungry, most people's inability to slap logs together to make shelter, and resorting to tax collection and distribution.

> Real estate investors bear returns on capital.

There have been many attempts to eliminate bearing returns on capital. They all resulted in a prostrate, non-functioning economy. There are two input requirements for a functioning business:

1. labor

2. capital

Neither can come for free.

People who need housing? It's what they call a necessity good. We get it, you have rentals - maybe it would do you some good to read more and write less.

You built your own housing?

> We get it, you have rentals

Nope.

The issue is rent-seeking. This is the basest form of rent-seeking and the downstream effects are felt by the entire economy.

So yes, there is something wrong with it. Instead of letting the prices float to the settling rate of the market, they're being manipulated to reach a specific financial goal.

That is morally reprehensible, especially when it comes to shelter.

> There is nothing wrong with keeping units empty to manage overall rental yield.

That's like saying there's nothing wrong from profiteering during a crisis. Are you for stores drastically increasing prices on essentials like water and food during a natural disaster?

Yes, there is nothing wrong with it.

Here's the thing. When there's a natural disaster, it used to be that everybody outside the disaster zone would fill jerry cans with gas, load up their pickup trucks with supplies, and immediately drive into the disaster zone and sell it with high prices. They'd get there far faster than the government.

With the anti-gouging laws, nobody bothers doing that anymore.

The result is (pick one):

1. no anti-gouging laws. Gas and supplies are available.

2. anti-gouging laws. No supplies are available.

In which case are the people needing supplies better off?

Put it that way I would say 2.

With 2. We can look into the application of these laws and figure out why nobody is picking up the opportunity to reasonably profit by making gas and supplies available.

Profeetering is defined as taking advantage of a situation to increase prices beyond "reasonable"

The law is clear with one thing: profteering by committing a crime is legally wrong.

It leaves us with cases where no crime was committed. But this post argues collusion happened in the case of property let pricing. let's not make the gasless situation the rule to the exceptions.

> We can look into the application of these laws and figure out why nobody is picking up the opportunity to reasonably profit by making gas and supplies available.

A reasonable price is what people are willing to pay for it. It's that old Law of Supply and Demand again.

> The law is clear with one thing: profteering by committing a crime is legally wrong.

Enjoy the inevitable resulting shortages, then.

BTW, anti-gouging laws also cause hoarding, making the shortages even worse.

you refuse to see unreasonable pricing happens as a result of anti competitive maneuvers, corruption, and you mentioned it: hoarding.

All illegal tactics.

But I give it to you, bureaucratic measures have shown again and again to have even more nefast consequences than business criminals doings.

> you refuse to see unreasonable pricing

"unreasonable pricing" is a nebulous undefined concept.

> hoarding

Hoarding only happens when the government tries to repeal the Law of Supply and Demand. It is not a natural state of free markets.

Whenever the government tries to repeal the LoS+D, all kinds of worse consequences result.

Those who grew up with the spectre of communism threatening the end of America, if not the whole world may be convinced that that's true, especially those in the upper middle class with less pressing financial concerns, but those who've now lived through several "once-in-lifetime" economic crises and been thrust into the job market may be less convinced. Watching the American brand of capitalism rot slowly from the inside isn't a convincing argument that the laws of supply and demand are immutable natural laws handed down by Republican Jesus and some may even be looking for better. Watching mainstream media dramatize and exaggerate, to the point of hysteria, it's no wonder that hoarding seems like an incurable problem with rationing, but if you're able to understand that's the media creating a circus, you're hopefully able to see past some of the rhetoric from the previous century.

The LoS&D is immutable. American regulators have made endless attempts to repeal it, and they all failed.

It applied in Communist countries, too, and nobody tried harder to repeal it than they did.

> Watching the American brand of capitalism rot slowly from the inside

Caused by the constant misguided attempts to repeal the LoS&D. Rent control is a n illustrative example.

That's a false dichotomy. The only reason supplies aren't available anyway is because they've been soaked up by scalpers. The situation you're describing it a textbook example, not something that happens in the real world.

The only reason scalpers buy things is to resell them. Scalping does not cause a shortage.

The reason supplies aren't available is the local supply is out of action from the disaster, and nobody has any incentive to bring supplies in to the disaster zone.

> Scalping does not cause a shortage.

Scalping by definition causes a shortage due to speculators buying up large quantities of something with the plans of selling it at an inflated price caused by a lack of supply.

It isn't the only reason, but saying it doesn't cause shortages is absurd. Availability of things like masks, hand sanitizer, and toilet paper rapidly recovered once people who drove across entire states emptying shelves were shut down.

https://www.nytimes.com/2020/03/15/technology/matt-colvin-ha...

> Scalping by definition causes a shortage

The only purpose to scalping is reselling it. Not taking it out of supply.

> caused by a lack of supply.

Scalping neither increases nor decreases supply.

> Availability of things like masks, hand sanitizer, and toilet paper rapidly recovered once people who drove across entire states emptying shelves were shut down.

People were hoarding, not scalping. And they were hoarding because stores were not allowed to increase the price.

> People were hoarding, not scalping. And they were hoarding because stores were not allowed to increase the price.

They were hoarding items in high demand with the intention to sell them way above market rate. If only there was a word for that...

Buying things at one price and putting them for sale at a higher rate is not hoarding.

It's called "arbitrage" and is a normal part of a functioning market.

So it used to be that rich people were able to get supplies previously, and now rich people are in the same situation that the poor people were always in?

It used to be that rich(er) people would get more supplies than they needed and sell them. It still is.

Under gas rationing in WW2, people would sell the gas they didn't need at high prices in the black market. Along with the black market came crime, because it was illegal.

Think "black market". The Soviet Union all had prices set by the government, but nothing for sale. The economy subsisted on the illegal black market.

Do you really think that's better?

Believe it or not, there's community networks that do this for free. Not everyone is after a buck.

Oh, I believe there are. But that is nowhere near enough to fill the demand.

> Not everyone is after a buck

Not enough to run a working economy on.

I don't think profiteering is what's going on here. Its more like if you had a large block of shares to sell in a public company you might offer it up in smaller pieces so that you get a better price than if you were selling your full inventory all at once.

Landlords should serve the public. "We will provide less service to the public so we can make more money" is horseshit. Deliberately limiting access to a critical human resource should be criminal.

If the problem was caused by 100s of small decisions, then we need 100s of small solutions. I don't see why one of those can't be disallowing "more than 90 percent of units in large buildings" from sharing software that encourages them to agree on an artificially high rent floor. You can't charge San Fransisco prices in Baltimore, but you can charge 10% higher than the local market price if you get enough landlords on board, which they did.

Absolutely. But as below, my guess is that it's a few % points. Worth fixing for sure, but I'm also wary of 'bogeyman thinking' where people think this 'one thing' is going to solve the problem. The reality is that we need a lot more housing of all shapes and sizes and that is going to take a lot of work.

I guess that's fair, although I haven't seen any bogeyman thinking in the complaint or article or comments yet. I'd recommend reading the linked Propublica investigation though, it's more than a few percentage points.

Oh, I wasn't referring to the complaint at all. That's correctly focused on the issue at hand.

What I mean is the casual observer wondering why housing prices are bad. Blackrock, AirBnB, this outfit... people want to blame someone besides the local and state politics that got them where they are:

https://www.theatlantic.com/ideas/archive/2023/01/housing-cr...

I agree. It’s traditional to want to blame other people while voting in policies that harm oneself.

If it were easier to build housing, someone would always eat the margin here. Lead times are short these days since you can have a lot of stuff prefabbed. The hard part is usually permits and the like. You can put up a new apartment tower in a year given that permits will be zero problem.

I think even wood-framed CLT type buildings can go up in that time frame. A precast concrete building could be done in half that time or less.

+1

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