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Comment by davidw | Hacker News Reader

If this tool allows a market to be a bit collude-y, it may add a bit to rents, and it's worth suing them to see what comes out.

But that software won't get you LA rents in Houston. The macro picture is still supply and demand and we have to intervene there if we want housing to be more affordable in the places people want to live.

People are so desperate for some bogeyman to blame. Institutional investors! RealPage! Short Term Rentals!

Fixing those things would not hurt, to be clear, but lack of supply is the underlying issue, and it's often driven by local NIMBYism.

I went to a hearing to support the construction of 40 "units" (aka homes) in my city last week and got jeered at by a crowd of older, wealthy retirees who were SO ANGRY about those being built.

That same sort of scene (often with no one to speak in favor) is replayed day in and day out all across the country.

This isn't to say 'markets solve all problems' but legalizing a variety of housing is very much a step that your local city council can take.

It's a worthwhile issue to be involved in, because housing is at the nexus of so many other things - the economy, the environment, people's ability to live where they fit in best and much more. These groups are good:

* https://new.yimbyaction.org/

* https://welcomingneighbors.us/

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From the article

> Critics say the cooperation between RealPage and apartment managers has emboldened landlords to raise prices even if it means more units are left empty when tenants are forced to leave. Without RealPage, the plaintiffs argue, landlords would be hesitant to jack up rents; instead, they'd focus on keeping their buildings full.

So it sounds like in some point this is depressing utilization of existing stock.

And given that it is (literally) rent-seeking and no one else can build an apartment there that they would rent, it seems like it's exacerbating any supply issues we're experiencing.

Right, like I wrote, it's probably jacking rents up some.

But empty units are empty units and too many of them means you need to lower prices or you are losing out on money because you don't make anything from empty homes.

And whatever effects this has (I'm curious to see what comes out off the lawsuit), you're just not going to be able to say "wow, look at how much landlords in San Francisco are making.... gosh, I want to double my rents!" if you're in a place without a tightly constrained housing supply.

I think you are really not understanding the issue. Unless you have crazy supply of apartments this software can have dramatic effect on prices. You are vastly underestimating the impact of this price fixing. Example from my own building: we have an apartment that has been sitting idle since last 6+ months. Price of it has been going up!!!

I think this type of service may be used elsewhere as well. There was a video of Ford dealer with massive stock of trucks, but still charging the dealer markup. I really hope they(congress) are looking into this in all aspects as it really does skirt the spirit of anti-competitive laws.

> I think you are really not understanding the issue.

Yeah, I'm the one that goes to city council meetings and hearings and reads book after book, and talks with the state economists here in Oregon and I don't understand it?

It doesn't take "a crazy supply" of apartments to create competition.

It's why apartments cost less in Las Vegas than Los Angeles - there are more to go around relative to the demand.

the problem is they are making more money by having a few units empty while renting the rest at higher rents.

the landlord is making more money, people are being squeezed for all they got, and less people have homes.

this is a huge drag on the economy and adversely affects every single person in a region except the rent seeking landlords. Even if you own it is a negative as your CoL is going to go up as stores need to charge more to pay employees more so they can afford homes.

So someone has to step up and be squeezed for all they've got so people have homes? Who is going to volunteer for that?

landlords should prioritize filling units. if they insist on squeezing people for rent while leaving inventory unfilled, they should be squeezed by regulations.

Isn't this what Vancouver did, by levying additional taxes on vacant units? (In that case, for absent buyers parking money, but same effect)

Theoretically that works for current landlords - what happens in a year or two when there are now no new rentals on the market because there are no new landlords because who would take that deal?

It's surely a drag, but I think we don't know how big of a drag it is. My expectation is that it's small. What are the overall vacancy rates? Single digit percent? If yes, then it's not a big impact.

>What are the overall vacancy rates?

I don't believe that's the only measure of economic drag. For instance if, having no choice, people are spending a higher percentage of their income on rent, then it leaves less to spend on other economically stimulative activity, like frequenting a local coffee shop, buying clothes, etc.

This. 30%+ of income just to acquire rental shelter isn't healthy.

Especially when that regressively scales with income (i.e. people who make less pay a larger percent of their total income).

And especially when the siphoned capital isn't being reinvested in new housing (because landlords and investors would rather collude and boost profit margins on existing stock).

Again, link in article we are all commenting on says vacancy rates are 30+% in New York metro.

So seems like "we" (ie people who read the article before commenting) do in fact know how big a drag it is in certain markets.

The article didn't say that at all. And vacancy rates in NYC aren't 30%. They're ~1.4%.

https://www.nytimes.com/2024/02/08/nyregion/apartment-vacanc...

I'm not claiming that this kind of service is good, or that having a trial is bad. I'm actually really interested in the judicial opinion because I could see it going either way. What I am saying is that it just doesn't feel plausible that this software is single handedly moving the market in a big way.

People really do want to point to a single boogeyman for housing unaffordability. And that's too simplistic. Nationally we're short millions of units at a time when we're wealthier than ever. Low supply and high demand means rising prices.

Fix it by making units easy and cheap to build.

We aren’t short millions of units nationally. We are short millions of units in a few popular cities, while we have surpluses in other less desirable cities and locations.

High demand in NYC is definitely not high demand in buffalo. But people need to be where the jobs are, and they aren’t in buffalo.

Rental vacancy in Buffalo is 4.9%.

https://www.rate.com/research/buffalo-ny

Better than NYC, but still low. For reference, the state defines anything below 5% vacancy as a 'housing emergency'.

Buffalo is popular right now because its rents are below national average. It isn't really that buffalo somehow is popular on its own, it is popular because it is cheap. This is completely different from NYC.

Keep in mind that Buffalo used to have a lot more housing than it does today, it was more than one million people in 1970, and today, its just 800k or so.

That sounds like we're short millions of units nationally, not just in a few cities.

Then please be my guest and volunteer to live in Detroit or Cleveland or Buffalo, rather than NYC, SF, Seattle, LA, etc...

Keep in mind that Buffalo used to have more than one million people 50+ years ago, and now only has around 800k.

The above number is for Buffalo's metro area. Buffalo is actually under 300k today and was almost 600k in 1950.

> But empty units are empty units and too many of them means you need to lower prices or you are losing out on money because you don't make anything from empty homes.

If the mortgage is covered by extortionate rents on your other properties then historically the empty unit is appreciating in value.

Renters are in a position where they have no shelter if they don't acquiesce. Landlords have a multitude of options that make it easier for them to horde empty homes.

> If the mortgage is covered by extortionate rents on your other properties then historically the empty unit is appreciating in value.

That appreciation is happening whether the unit is rented or empty.

The scenario the landlord sees for a given unit is (assuming zero mortgage costs just to make the math simpler [1]):

Empty unit: $0 in rent + $Y in value appreciation

Rented unit: $X in rent (X>0) + $Y in value appreciation (where Y is fixed between the two scenarios because both cover the same rental unit).

For the landlord, $X + $Y is greater than $0 + $Y.

The landlord's greatest total income is when all units are rented, as then all units are returning $X+$Y.

[1] including mortgage and tax costs adds two subtractions to the formulas above, which will result in a real net loss for an empty unit, as the mortgage and taxes must be paid, irrespective of the rented status of the unit.

You're assuming a single property and a rational Landlord.

Imagine the Landlord owns 10 properties and sets the rent to $2k/mo on all of them with 1 property remaining empty. Maybe that last property could be rented out at $1.7k/mo but from the landlords perspective that puts downward pressure on the rents of his other properties.

If one of the landlord's existing tenants moves into the cheaper property it's even worse. He loses $300/mo and now has to consider reducing the rent on an additional property. Should he find a new tenant at $1700/mo, he still feels like he's losing because he believes the rent should be higher.

From the landlord's perspective, it's better to squeeze if he has sufficient cash flow. Especially given the belief that lowering the rent will negatively impact the value of the property.

While you're correct that mortgage and tax are fixed costs that need to be met, you haven't considered that landlords have multiple options to offset those costs. When interest is low they'll use equity release and interest only mortgages.

In a city of any size, holding one unit on or off the market is not going to affect the overall price. It's in the landlord's interest to rent it out rather than have it vacant.

Some tenants aren't worth the rent, so it is in the landlord's interest to find reasonable tenants rather than have it vacant, but you don't want to take someone as a tenant who will trash the place and then not pay rent for several months until they are evicted. Additional laws can make who to accept as a tenant even more stringent. For example, if you make below 80% of median income in Seattle, landlords have to pay your relocation costs if you raise rent more than 10% in one year. This means not many landlords are interested in renting to anyone who makes less than 80% of median income anymore.

The landlord feels that he's losing money by renting it out at a lower costs, so he holds out for more.

I used small numbers for the sake of example, scaled up to a city it'd represent 10% of the city's housing stock sitting empty.

Jumping in to say I think it's important to try to control the incentives around how many empty units are "too many" empty units.

Having a tenant comes with cost and risk. Why charge 1200 for 100 apartments when you can charge 3500 for 34 apartments? Maybe even 3000 is still just as profitable

Every extra 100 you charge an existing tenant is pure profit, while reducing price to take on more tenants means more maintenance costs, managing staff costs, etc.

In an economic vacuum this may work itself out, but IF there is a widening wage gap where the you have 30 tenants who can afford up to 4500 a month and you have to drop the price, and then the next 50 potential tenants can only afford up to 1800.. there is financial incentive to squeeze more and more out of the 30 year after year rather than try to accommodate all 80.

Hopefully I'm painting the picture properly

The easy solution is to tax vacancy at a rate that makes this strategy not profitable.

Canada and the UK (among others) have toyed with these kind of "use it or lose it" penalties for unnecessary empty premises. I think they're a great idea, but they don't seem popular, maybe because the benefits are spread widely while the costs are paid by relatively few, but politically powerful, landowners.

To add some clarity for those of us not so au fait with the terminology, rent-seeking refers to economic rent, which here is the different in the apartment rental price actually charged (with the benefit of RealPage) and the price that would otherwise arise in a market which was free of collusion.

The argument is that free markets are (somewhat) efficient and mean that we use our finite resources (like land) in the manner which generates the greatest economic benefit. Normally if you rent-seek by trying to jack up a price above what the market would dictate, someone will come along and out-compete you. The trouble is that it's difficult or impossible for someone to to produce a substitute good here, if there's no empty lot on the street and all the prices are artificially high then how can I come along and compete on price offering apartments on the same street?

Realpage is just a tool, and the landlord can use it different ways. We use it to help us optimize for occupancy so that we dont have units sitting vacant, AND so we can better manage our vacancy over slow periods. It is downright magical at times how it has seemed to predict softening market conditions when I thought the software was simply recommending discounts left and right

An owner choosing to let a unit sit vacant for an extended period is probably more worried about "tenants rights" (squatters) and how difficult it is to evict. You can't blame software if an owners chooses to destroy his real avg rents by letting units sit vacant longer than necessary. 3 months of vacancy to score a 1 year lease, but the opex bills keep coming... no thanks.

Collusion is just a tool, an illegal one, but a tool nonetheless. You say RealPage is magical, I think it’s just evidence of its control over the housing market, not clairvoyance. It self-fulfills whatever prophecy it comes up with. And these prophecies seem to always predict ever increasing prices(excluding high frequency noise), far above what the market would normally allow.

Renting is supposed to have risks, without these risks it probably wouldn’t even be allowed in modern society. Landlords are well within their right to find creative ways to mitigate them, but it can’t involve breaking the very same set of societal rules their tenants are following, there is nothing creative about that. If only criminals targeted criminals, but they always go after the easiest victims.

Serious question… is the stock market collusion? Sellers looking at each others work, agreeing on a price?

There’s a very healthy, active and open market for apartment rents in most cities. If you are posting from somewhere with heavy rent controls, government market manipulation, or extreme demand, blame those instead! it’s still a market.

I’m not excusing bad actors, but real page is not a scapegoat

Can you predict the stock market?

Just like the rent-market can have price manipulation, so can the stock-market and any other market. It’s absolutely possible for a trading platform to do this through price recommendations, and it would be illegal.

The two things being compared here are completely different though. It’s not very useful. Whats the real-life stock equivalent to RealPage? Who even rents stocks?

Additionally RealPage is forceful with its price “recommendations”. Imagine if a trading platform forced you to buy/sell a certain percentage of your stocks at their suggested rate, and file an appeal to opt out.

> It is downright magical at times how it has seemed to predict softening market conditions

It's not magically predicting. It's called colluding. And yes colluding is very effective and profitable for the colluder - even if the collusion is being laundered through a program.

something has to be going on nationally because rents even in 2nd and 3rd tier cities are also high (like 1st tier high). there should be some financial benefit to living in a less popular, lower population place that has less access to a great diversity of foods or an art/music scene.

Part of it is 'household formation' among millenials.

Someone asked this question in the Oregon subreddit, about why the demand for housing has gone up so much even if the population has not.

https://oregoneconomicanalysis.com/2023/10/26/household-form...

At the end of the day, it keeps coming back to land values and land use. Over and over and over again. Land value tax fixes almost all of these problems - YIMBY is just a good alternative that solves some of the problems while being more easy to sell politically than a rewrite of our entire property tax system.

The macro picture is collusions drives up everyone's prices equally.

The same collusions occurs in multiple American categories. Americans think the free market lowers prices, but at the scale of macro business interests, it's in large conglomerates interest to raise prices under collusions, as they all win.

> The macro picture is still supply and demand and we have to intervene there if we want housing to be more affordable in the places people want to live. legalizing a variety of housing is very much a step that your local city council can take.

We already did this ages ago -- most cities have already made all the changes you are requesting, years or even a decade ago. Your talking points are like 10 years behind the times, housing is already legal in 99% of the US right now. (basically everywhere that isn't SF / Bay Area). And you can see brand new 5+1s all over every city, as proof of it. (so much so, that press even writes about it - https://www.bloomberg.com/news/features/2019-02-13/why-ameri... )

Yes, neighbors complain and complain, and it's easy to focus on them, cause they're loud and annoying. But they don't win -- they complain, and then the investors win anyway, and still get to build almost anything they propose. (I'm in the Midwest, and I can count on one hand the number of times an investor lost a proposal -- they get to develop anything they want 99%+ of the time)

> People are so desperate for some bogeyman to blame. Institutional investors! RealPage! Short Term Rentals!

Well, because those are actual issues, and "NIMBYism" isn't. "NIMBYism" is maybe 2% of the overall housing problem, while private equity, investors, illegal hotels ("Short Term Rentals"), pricing collusion ("RealPage"), and such are, collectively, probably ~50%+ of the problem.

There's dozens of problems at play with crazy-high housing prices. "NIMBYism" doesn't even rank among the top ten of them.

> We already did this ages ago -- most cities have already made all the changes you are requesting, years or even a decade ago

No, they did not. This is divorced from the reality of most cities.

> No, they did not.

Yes, they did, and you can see it in the metrics.

If "new housing" is "not legal", how are we at a 30-year-high in new residential construction? - https://www.reuters.com/markets/us/us-housing-starts-surge-1... and https://www.bloomberg.com/news/articles/2023-06-20/us-housin...

Note that we're also at a nearly 50-year record-high on urban apartment construction as well https://www.axios.com/2023/09/07/apartment-building-construc... -- the kinds of dense multi-family units that urbanists insist cities "haven't legalized".

Oregon was the first state in the nation to re-legalize middle housing in 2019, only 5 years ago, with HB2001, which is the kind of reform we're talking about. Most states have not caught up. The governor of Arizona just vetoed their own housing bill.

Building apartments where it was already legal to build apartments is great, and we're seeing it help curb rents in some places, but there's so much more to it than that.

> If this tool allows a market to be a bit collude-y, it may add a bit to rents, and it's worth suing them to see what comes out.

When I buy stocks, the price is set across the country, anyone can get a quote and see what it is at the moment. Is that collusion?

Housing is more limited geographically and while it's very far from a monopoly, larger providers might have some pull in the market.

IDK, we'll see what comes out of the lawsuit, I guess.

If more housing gets built, prices fall though, like in Austin.

Certainly not.

But consider an actual hypothetical cartel that is explicitly defacto and dejure price fixing. Suppose the members of this cartel instead create a new LLC. Suppose that new LLC now performs the role of price-fixing with the condition that not conforming will lead to expulsion from the price feed system. Has this transformation taken a cartel that is explicitly colluding and made it into one that is not colluding?

If so, we now have a mechanism to turn every cartel into a non-cartel via the umbrella LLC. And the latter costs $300 to set up in Delaware. So the anti-cartel law has a $300 bypass. Reasonable, I suppose if you believe that that law has reached the end of its utility.

The trouble with colluding is that if everyone agrees to set the price at $300, another seller can undercut them with a price of $290 and take their business away.

Or one of the members of the cartel can agree to sell at $300, and then offer a kickback under the table to get the business, or offer some other cash equivalent incentive.

Cartels only work if the government is used to make it illegal to cheat on the cartel.

except this isn't the case. there have been many examples of cartels and collusion in the past.

As many examples of failed cartels and collusion, too. That's why they always seek the government to force cooperation. This is how unions operate, for example. Taxis and the AMA are other examples.

> That's why they always seek the government to force cooperation.

you're talking about labor cartels, but the article (and op) are talking about real estate cartels. one operates with government involvement, the other does not.

edit: my original point was that simply the threat of someone undercutting a cartel is not enough to be able to state that cartels cannot exist without government involvement/coercion.

The real estate cartel has no means of enforcement, so its ability to hold the line on prices fails the moment one of its members decides it is in their personal best interest to lower the price to undercut the competition.

I see. Your position is that cartels only exist because governments ensure they exist. I think that is a tautology (in that everything exists because governments ensure they exist since governments enforce law so things exist in society depending on whether they enforce or don't) or wrong, so we have a fundamental disagreement here and unifying will take so long that there's probably no point discussing further.

> Your position is that cartels only exist because governments ensure they exist

Not exactly. Cartels based on voluntary cooperation are unstable and tend to not last very long. Stable cartels are based on coercion of some sort - some mechanism to keep the members in line. The law is the usual means to achieve that.

Thats called a monopoly, and monopolizing intentionally is illegal for the same reasons.

The LLC owns no product to sell. It's merely a price feed service. You are welcome to use other price feed services. In fact, for the fee of a few hundred dollars, unaffiliated people will happily set up other price feed services.

Is one central company telling every bank to hold shares and only release them in specific amounts to achieve optimal price? That’s what’s happening with real page, the supply side is being curated across the whole industry so there is no real competition and thus no real price seeking function. Free markets don’t work with that type of collusion.

There are millions of owners. Do you really believe they'll all stick to the cartel price?

enough do to make enough of a problem that we're discussing it now.

So how come the landlords in Houston are losing out on so much money when they could be charging San Francisco prices?

Those are decoupled markets. Employers pay more in SF, so landlords can extract more. The problem is that landlords in both markets are colluding to extract more than pure market forces would otherwise support. Now if employers then have to raise wages further, that distortion could result in higher inflation.

Capitalism doesn’t work when monopolies and cartels gain sufficient power to eliminate the price setting function of competition.

Cartels don't work without coercion of its members.

Remember the no-poaching cartel among tech companies in Silicon Valley? and the companies were cheating on their cartel agreement? and the infamous email Steve Jobs sent complaining about the cheating?

A landlord has no power.

homes should not be an investment. no one needs stocks everyone needs a home.

True! But show up at a hearing like me and you will hear angry people - who most definitely vote - talk about how those apartments may lower the value of their homes.

The problem in the U.S. (independently of everything else) is that value serves as a filtering mechanism.

Value of properties in a neighborhood correlates to the crime rate in that neighborhood - and that’s true nationwide, and because of certain political protections there’s no way to “divorce” the two - which presents a thorny problem.

Horrible, horrible, horrible analogy. There is so much to say about this but the bottom line is that stocks do not follow price fixing it is more a market equilibrium. This on the other hand is pure price fixing.

It's just a suggested price. There's no coercion.

>It's just a suggested price. There's no coercion

I think you may be misunderstanding the definition of price fixing.

What's the coercion here?

Price fixing is the result of collusion/collaboration, not of coercion.

Price fixing doesn't work without coercion. Let's say you and I agree to sell cars at the same price. How would that be enforced? What's to stop you from cutting your price to grab some business from me?

> Price fixing doesn’t work without coercion.

https://en.wikipedia.org/wiki/Price_fixing

>What's to stop you from cutting your price to grab some business from me?

The fact that the parties mutually benefit from their collusion, which is why they sought to price fix in the first place. It's an agreement like any other.

Please, just read up on the definition of price fixing. It'll clear these questions up for you.

A price fixing agreement is not a contract, because there is no exchange of value.

Hence, it is not enforceable and the members will cheat on it, because the incentives are a Prisoner's Dilemma. Read about the PD, it'll help clear things up for you.

I'm familiar with the prisoner's dilemma. This is not that.

In general, I don't find price fixing that difficult a concept to grasp, which makes it challenging for me to break it down any further for you.

So, unfortunately, I don't think there's anywhere else to go from here. But, thanks for the discussion.

Of course it is the same. Work through the scenarios. It's always advantageous for the cartel member to cheat on the cartel agreement.

Stocks are fungible. Housing is not.

Housing is fungible. You can turn money into a house, and house into money. You can borrow against a house. You can borrow and put it into a house. You can rent out a house.

Look up fungible in a dictionary. Housing is not fungible because not all units of housing are interchangeable. Being able to sell something does not make it fungible.

There are enough dwellings in any city to make them interchangeable.

Really? All real estate is worth the exact same? That's news to me.

When people trade things that have different values, money is also exchanged to make up for the difference.

For example, when you trade your old car for a new car, you pay the difference in value.

Your definition of "fungible" applies to literally everything on the planet. Everything can be exchanged for money and back again. That's not what fungible means. Here's another example to help you differentiate:

* Gold is fungible. Any bar of pure gold (of identical mass) is exactly interchangeable and has an identical value with any other bar of gold.

* Diamonds are not fungible. Every individual stone is unique and must be properly graded by a licensed jeweller. Two stones of the same mass are highly unlikely to have the same value.

The entire reason markets exist is so people can exchange what they don't want for things that they do want. For the purpose of this discussion, they are fungible.

By this broken logic, "Movies are fungible". Because you can turn money into a John Carter, and you can turn Dune: Part 2 into Money. You can borrow against Star Wars, and you can license out Barbie.

But everyone knows, movies are not fungible, because they are not interchangeable. I can buy oil, or unleaded gasoline, and it's basically the same everywhere, it is "replaceable by another nearly-identical item, mutually interchangeable" -- oil and gasoline are fungible. But "Movies" are not fungible, because "Lord of the Rings" is not a replacement for "50 First Dates", which is not a replacement for "The Matrix", even though they're all movies.

Housing is not like Oil, housing is like Movies. It's not fungible, because a 2bedroom row-home in Foster City, CA is not "nearly-identical/mutually interchangeable" with a 4bed,2bath home in suburban Louisville, nor a 1bedroom condo in the Chicago Loop.

Even when the housing is all in the same zip code, much of it is still not fungible with it's alternatives, because housing is so regularly different and unique in a myriad of different ways. ("this one is on a hill, that one is in a valley, it has a higher risk of flooding. This one is in School District A, this house across the street is School District B, this house is in a city with income taxes, this house on the next block over is in a township with no income taxes, that house will need a new roof sooner, this house is in a HOA neighborhood, that house is near the bus line, this house is close to the freeway onramps, that house has fiber but this one is only Comcast Coax, etc")

I've watched thousands of movies. While they are not identical, and a very few rise above the usual, they are fungible. Action movies are interchangeable, murder mysteries are interchangeable, romcoms are interchangeable, and on and on. Once you've seen a few, they follow predictable paths.

There's even a formula for them:

https://www.amazon.com/Save-Last-Book-Screenwriting-Youll/dp...

Definitely interchangeable.

Similarly with genre books. As a kid, I decided to read all of Ian Fleming's James Bond books. But after 5 or 6, I noticed that they all followed a formula, and got bored with them and never continued. with the series.

Yes, all houses are different, but the differences are largely superficial. You'd be happy living in any of thousands of homes in your locality.

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