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I got a renewal notice a few months ago, and they wanted to raise my already pretty high rent by like 15%. It was higher than what they charge for brand new apartments, not even counting leasing incentives. I made a counter-offer and got told 'we don't negotiate'. The propublica article (https://www.propublica.org/article/yieldstar-rent-increase-r...) talks about how exactly this lack of negotiation / removing the human element lets them drive up rents across the board.

It's insane, and toxic.

Experienced the same system in the Bay Area. Rent increases by 300 - 500, but the new lease is lower. You can try signing a lease on a new apartment and deal with the logistics of moving, having some period of extension/overlapping rent payment, which is a huge hassle and may not even save you money.

Why would they want to add the expense of cleaning out an additional apartment, additional wear and tear, and pissing off a tenant who is likely to leave in the future only to collect less rent for the privilege? There must be some MBAs involved in that brilliant maneuver.

If you have nowhere to go, then the rent is whatever the landlord says it is.

That's why the top marginal tax rate for incomes is too low: Landlords (and other rentiers) have little disincentive to try to maximize their incomes at the expense of everyone else.

It’s a game of chicken.

My landlord uses RealPage and the property manager told me they (my building) target a 50% churn rate. If fewer than 50% of households move out at the end of their lease, they know they're not increasing rents fast enough.

That’s insane.

Because they calculate they are more willing to do that than the tenant is willing to move. It only costs them a month or two of the difference in rent they are going to charge a new tenant. They still make thousands more in the end.

Meanwhile, the tenant has to pay more money to move than it costs the landlord to rent the place again. The landlord knows they so they offer an extension at an increase of about the same amount it would cost to move.

They are betting they can do absolutely nothing and make more money. Even if they lose that bet, they still make more money.

There is zero downside when there is high demand for housing and other landlords are doing the same thing.

I think this is the exact reason why government should intervene - the market solution doesn’t work. Unfortunately so many government policies are working to make housing scarce and creating the problem in the first place.

100%. This doesn’t get fixed otherwise. It’s predatory. It’s basically the storage unit model applied to housing.

The Market solution is working. The fools who are willing to put up with this behavior and the Bay Area are being parted with their money. It is not long-term pain - It is short term pain repeated many times by many fools.

Government is how we got into this mess by limiting the supply of housing through zoning. Allow people to build up the unit in their backyard or in their garage and you'll unlock a whole new section of housing supply that will drive the bottom of the market down

It's the same with jobs in most areas that aren't big cities or tech hubs; it's a huge pain in the ass to switch jobs if you aren't in a super high demand field. Often requiring a substantial uprooting and move.

Lots of uneven sectors where huge portions of individuals loose to "market forces".

Also around DC area, the leasing office folks told me that the price changed dynamically and could only be overruled by the HQ. They said that many companies use that software in order to obtain their "optimal" price for the area, which is of course observationally equivalent to colluding with extra steps.

BTW, more recently I saw the same thing with large contractor companies. One quoted me an insane price for something and I asked why, and they replied that it's the price that the software (ServiceTitan) tells them to charge, and even showed me their screen.

Again, they said ServiceTitan decides the price depending on "the average price of other companies in the area" which is code word for you-know-what.

Am I missing the obvious here, a smart and nimble company can corner this market by lowering their price by X. They would have to give up X per unit but they make it up by (volume * lower_price). Isn't that how the market is supposed to work? Like if I want all the business and there's not an obvious differentiator I will compete on price?

Not sure about smart, but the word "nimble" can never be used to described anything about real estate.

Typically the price fixing part is one small feature of a large software suite, and deviations require written justification submitted to the provider (with the implied threat of losing access to the management software).

That's not how it works because there is no volume. You can't provide more supply if there's no supply to provide. Each building has a fixed number of units and the management for those buildings are trying to maximize the value they get out of each unit. Most cities have a mostly inelastic number of units and population grows every year, so you can pretty much charge whatever you want and people will pay it since there's no alternatives.

Why doesn't someone just build a new building? Mostly they will be blocked by NIMBYism. NIMBYism is a near universal philsophy, to the point that renters who would benefit from this are typically NIMBYs too. Sometimes they're the loudest NIMBYs, It will be pretty much impossible to build anything new until the state takes control of building away from localities and forces them to allow building.

This assumes vacancy is at 0%, for cities like SF I can see this, but do all cities have near 0% vacancy rate? Genuine question, I don't know. I would offer at lower price and have all my units filled.

This is how dynamic pricing for event tickets works. Everyone uses the same software which prices tickets across all secondary and primary markets. One way to create artificial scarcity to inflate prices is not offer tickets or apartments for rent. Another way is to initially charge outrageous prices so that a less outrageous price is more appealing. Like a parent paying outrageous prices for a Taylor Swift concert months in advance insure that their child can see the show for their birthday people looking for apartments are forced at the artificially inflated prices because that location has their employment and social connections.

> They said the increased cost was due to the very large new building which went up a couple blocks away. Not owned by the same company.

The system is beyond broken when an increase in the supply of housing by a competitor results in higher prices for everybody.

Well, you see, the new fancy construction has to pay off its construction loans so it has to rent at an increased price. The small apartment buildings have to match it, or they’re simply leaving money on the table.

Yeah, this makes no sense and is pretty blatantly bogus to anyone with at least a high school understanding of supply and demand and is also pretty blatant collusion. They didn't also trot out gentrification, due to the new building going up, as a reason to raise the rent too?

You shouldn't always expect prices to go down when there is new supply, because it can also increase demand. If people are investing and building new units in a neighborhood, it is usually improving it, which makes it more desirable, more people want to live in the area, and prices go up. If you are lucky, this reduces demand elsewhere and overall prices might drop.

No, you should absolutely expect prices to drop, it's extremely well documented.

However, landlord advocates spread the counter narrative, of people mistaking symptom for cause, and unsophisticated public laps it up. People hate to see change and want to blame new buildings for high prices, even though they lower them universally.

If vacancy is at 0%, you increase supply and vacancy is still at 0% you should absolutely not expect prices to fall. In fact, you should expect exactly what is happening, the market will reevaluate it's prices upwards until vacancy reaches some positive value. It's economics 101. This software just makes the process hyper efficient, where as normally it'd be far slower as landlords would not have perfect information.

The only way to fix this is to drastically incentivize building to the point that supply is higher than demand.

Where is vacancy at 0%? This is pretty much impossible.

Mostly agree with your comment though!

Vacancy should be up close to 10%, IMHO, with anything below 5% considered a dire crisis that needs immediate fixing.

it's extremely well documented.

Please share. Remember, prices are at the intersection of supply and demand, and moving one curve will inevitably affect the other.

I was going to link to a review of the literature on the local effects of new construction, which reviews the empirical literature showing that any additional demand is more than offset by additional supply, but I'm having trouble finding the PDF. (For global effects, remember that building new housing does not change the global demand for housing, as it does not create new people, so hopefully it's obvious that new housing supply must be a global downward pressure on prices).

But this newer paper is far more comprehensive on far more topics. IMHO it's far too charitable to some really bad and research with highly biased and methods (e.g. Damiano) but it still does point out the flaws there.

https://furmancenter.org/files/Supply_Skepticism_-_Final.pdf

Unfortunately this review does not cover the spate of papers in the 2020s that I was originally thinking of, so I'll see if I can dig that up still.

> If people are investing and building new units in a neighborhood, it is usually improving it, which makes it more desirable

I'd argue that most people in the US don't want to live next to giant apartment complexes, even if they themselves already live in one. People like sun, and skylines, and space. An attractive, well maintained apartment building that has parking for all it's residents in an area that's not too crowded doesn't have to hurt the neighborhood, but it's not going to make it more desirable. At best it just accommodates the people who already want to live there.

My building also uses RealPage and I got the lease renewal notice the other day. I was on the way out when I saw the note so I skimmed it and only saw the "20% increase" number not realizing it was for if I wanted to switch to a month-to-month lease. When I read it fully later it ended up only being a ~3% lease for a full year, which is actually kinda reasonable considering other rents I saw in the area on Zillow. Very strange.

(Boston.)

All too eerily similar to my experience in both a Seattle and a San Francisco apartment. The whole thing reeked of illegal collusion.

> he claimed it was because the boom in high-rise apartments in the city had created too much competition and the owners had all agreed to use this software to fix that.

Rent homogenization software is doing the same thing realtor associations have done for years -- offer incentives to users who hold the line on "standard" pricing and penalizing those that don't.

Then wrap the above scheme up in something more convoluted so it doesn't immediately look like collusion.