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Comment by kthejoker2 | Hacker News Reader

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.

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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?

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.

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

> 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.

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.

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.

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.

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?

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

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 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.

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.

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