Why US renters are taking corporate landlords to court
cnbc.com
cnbc.com
DOJ will examine whether RealPage helped landlords coordinate rent increases: https://news.ycombinator.com/item?id=33744136
I'm not sure I fully understand the issue? like should competitors not be allow to price themselves based on their competitors? collecting competitor pricing data shouldn't be real-time and automatic? Corporate landlords shouldn't/can't hire consulting firms to assist with pricing based on their competitor's data?
The pricing for rental property should be based off of the cost of money to acquire the property + the cost of upkeep + some profit margin and rental companies should be competing to undercut each other on each of the three rather than just seeing how much __more__ they can price their units than their competition.
This is late-stage capitalism and I'd rather see discussion around policy to fix the core issues rather than bikeshedding about what material to use for the bandaid on the gunshot wound.
In my town for example rents are $1500-3000 for the houses the average renter would rent...but the "average renter" in my area only makes ~$35k/year. This means to live comfortably and have growth they cannot pay more than $1k/mo.
Even before Realpage there was the whole "my golf buddy says I am not charging enough...so rent needs to go up". This type of thinking allows "normally ethical" people to act in ways that they may not if they had all the info.
If there was a site that said "if you charge more than X you are causing poverty in the community" or "at this average rent the workforce will start to leave the area".
I am currently in a town with massive commercial vacancies (commercial units and corporate apartments). Everywhere you go there are for lease signs on long empty (and very nice) buildings. Most businesses in town have now hiring signs (1500 unfilled jobs in the county)...but for some reason unless you are in the declining class it seems everyone has blinders on.
What I am asking for is a call to action. I think a site like this can be setup in a way that is factual (using locally done studies from Universities for example). The world needs more "ethical capitalisim"...those involved can make the choice on their own to not hurt others without having to create new laws and restrictions (those only help the corporate landlord). I have faith that the good in people will prevail if we simply stop making it seem like raising rents is just "what you do" even if you don't need to.
The 50-100% increase in the most expensive thing most people pay for in their lives can do nothing but drive inflation and push out the workforce. The hopelessness amongst those who "didn't make the cut" is getting bad...you can see it in the eyes of the people.
Hackernews...you can make a difference. It is your choice...we can continue making apps/companies that hurt society...or maybe we can make one that "might" help.
I am confident there are plenty here who could whip a demo up in a weekend.
If the directors intentionally forgo profit, they could be criminally liable, even if they do so with the intent of helping the community at the expense of the shareholders.
Capitalism is designed, legally designed, to not be ethical, unless "maximizing profit" is your ethical code.
Essentially, externalities, like destroying the environment and widening the wealth-gap, are capitalism working as designed.
As such, we need specific laws to protect communities and people, though right now "laws" seem rather unpopular in quite a few countries.
No reason we cannot have a non profit counterargument to Realpage.
Issue with new laws IMHO is "...the more rules and regulations...the more thieves and robbers..." and it seems to be in the past that more regulations just helps those causing the problem.
The issue isn't that we need to remove the landlords...society needs to explain that they are not acting ethically. I would even be happy with just not giving handshakes and back pats to those who act in destructive ways.
The average renter in my area makes ~$35k/year...but the average realtor makes $135k (according to glassdoor). At some point this just pushes out the "average".
> In effect, the business judgment rule creates a strong presumption in favor of the board of directors of a corporation, freeing its members from possible liability for decisions that result in harm to the corporation.
It's not clear to me how conducting "ethical capitalism" could open you up to criminal liability.
does it matter? there will always be an above average renter. it's just a matter if the landlord can be patient enough to find them
This is more begging for empathy than anything else...I understand how that does not help the bottom line...but it also does not "force" anyone to do anything. Requires no new laws...nor does it violate them through collusion.
One might describe your suggestions as socialism (not communism, there's a difference.)
Again, I'm onboard myself, I prefer the democratic-socislism of Western Europe to the unrestricted capitalism of the US.
Unfortunately though your argument carries no real weight in the US because there money is king, and the only thing that matters is the bottom line. Capitalism will keep pushing every boundary (unrestricted by a court system paid for by capitalists) because social-good, and ethics are simply not highly valued.
Even by framing your argument as 'socialist', I immediately negate it in the minds of most Americans (who equate socialism either capitalism.)
Alas nations have a psyche, and "caring" is not in the American psyche.
Could it change? Sure. But I'm jaded enough not to expect it anytime soon. It'll only change when grass-roots people want it to change, and judging by election results up and down the ballot, there's no real swing in that direction.
maybe you can convince them to donate their houses while you’re at it
And...there actually are people out there in the world who do give/loan houses to the needy. In the past I have personally seen it but typically it is involved with church members helping other church members. No reason society can't do the same...except for the people who convince others it cannot be done.
The french already have an invention for this kind of activity.
Subtitle: "but the interest of those who live by profit has not the same connexion with the general interest of society"
> "His employers constitute the third order, that of those who live by profit. it is the stock that is employed for the sake of profit, which puts into motion the greater part of the useful labor of every society. The plans and projects of the employers of stock regulate and direct all the most important operations of labor, and profit is the end proposed by all those plans and projects. But the rate of profit does not, like rent and wages, rise with the prosperity, and fall with the declension, of the society. On the contrary, it is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin...
> Their superiority over the country gentleman is, not so much in their knowledge of the public interest, as in their having a better knowledge of their own interest than he has of his. It is by this superior knowledge of their own interest that they have frequently imposed upon his generosity, and persuaded him to give up both his own interest and that of the public, from a very simple but honest conviction, that their interest, and not his, was the interest of the public. The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always in the interest of the dealers...
> "The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order or men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it."
* Their NIMBY neighbors
* NIMBY zoning
If you actually show up to local hearings and city council meetings and the like, you see that the housing crisis is mostly local, even if, emotionally, it feels great to blame it on some far off entity: https://bendyimby.com/2024/04/16/the-hearing-and-the-housing...
People who actually study this stuff back this up with numbers:
* https://www.strongtowns.org/journal/2024/2/21-going-after-co...
* https://www.theatlantic.com/ideas/archive/2023/01/housing-cr...
Rent is falling, but nowhere near as fast as it should be.
These kinds of "algorithms" that are effectively "outsourced collusion" are the reasons why.
Even worse, there is zero reason why these companies should exist except for "collusion as a service".
Rental property pricing isn't rocket science. Set an occupancy target percentage and then adjust the price up or down to reach that target. The rental prices would then be responsive to the market conditions with absolutely no collusion whatsoever.
But that won't do what the landlords want which is prevent the price from going down at all.
I think it's possible that RealPage adds a few percentage points to rents, and that's a bad thing. 1% over a bunch of rentals is a lot of money and harm to renters and that's worth suing over.
That said, 1 or 2% here or there is no match for "supply and demand".
The private equity development apartments are all in on RealPage and are in absolute lockstep with one another (they also have a whole host of dark patterns which I won't get into). So, it's not enough to have development, you have to have development that isn't private equity driven.
The stuff that has a single owner is several hundred dollars cheaper and the differential is increasing. Some of this is age of the aprtment complex, but the age differential has been pretty small in areas where the university students drive demand.
It's not just RealPage. For example, being able to eat the rental loss of unoccupied apartments is because private equity plays financing games and is willing to give up huge amounts of cash inflow in order to avoid paying any amount of cash outflow.
However, RealPage is one of the legs of the stool.
> “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,”
Based on how multifamily operators refer to the software, it sounds like it was what they were doing before, just supercharged automation.
But this was part where it seemed like the algorithm made a leap, that the optimal trajectory wasn't max occupancy.
So for anyone, they would just opt out of the algorithm and charge a slightly lower price when they get a vacancy. I really dont think cartels work in a market as competitive as real estate rentals. It's a scape goat at best imho.
The software itself makes this very difficult to do--it's one of their dark patterns.
It's not like you signed ownership of the property to this software company.
The only thing you lose is the ability to suss out the prices - the same position you were in previously.
idk why some people are so desperate to ignore the documented pressures here, like are people just completely opposed to the idea that cartels can exist without a notarized agreement to break the law? And apparently you literally don’t even think that is sufficient, because “you could just break the contract” or something lmao.
the amount of openly bad-faith posting and commenting on HN has only continued to get worse and I have to think it’s partially due to the fact that it’s not supposed to be acknowledged. Such “suggestions” really only make it more potent as a weapon on a site/subculture that is already overly predisposed to rules-lawyering as a fallback when they lose an argument.
increasingly realizing the guy whose site redirects referrers from HN to a nutsack is right.
There's also many other explanations of rent increases, such as lack of supply, which are more likely imho.
Pinning this on cartel like behaviour, when the market clearly has a lot of competition, is just moving the spotlight away from the root cause - that of a lack in supply. This is region specific - some regions that have increased supply have then seen rental decreases, while other regions which did not have increased supply (in new builds) have not.
"It was on display in the bottom of a locked filing cabinet stuck in a disused lavatory with a sign on the door saying 'Beware of the Leopard'." -- Douglas Adams
However, it's behind 4 obscure menu options, and 3 passwords of which your staff have none (I'm exaggerating--but not by much). This is part of the dark patterns I mentioned.
If you are super technically saavy, you can find it and opt out. In reality, the dark patterns are more than sufficient to prevent it.
why are people so eager to blame this problem on obviously miniscule factors?
https://www.theatlantic.com/ideas/archive/2022/11/us-housing...
That doesn't make a lot of sense.
Take a market where there is 100% price transparency - cars, electronics - are a couple examples.
As a manufacturer I can easily find out exactly what my competitors are charging and change my price at will.
Is that collusion? The market is dependent on transparent pricing.
That is the problem. Not Wall Street. Not some xenophobic "foreign buyers!". Not even short term rentals.
It's zoning and NIMBYs and on top of that now, interest rates.
The 'bogeyman' theories feel good because it means you don't have to face up to the reality of your neighors' NIMBYism. But they're wrong. It is your neighbors.
I agree there's a lot of other barriers to fixing housing! But the algorithmically-driven collusion here is off the wall crazy town. Zero accountability for what would have wrecked any entity doing the same a couple years ago.
Rent overrides required written business justifications, would often trigger follow ups to the agent attempting the override and then their management to dissuade them, and eventually might be refused in the end.
Realpage monitored compliance of customers using their provided prices and those who didn’t meet a certain level would be kicked off the platform.
Pages 17-22 here: https://oag.dc.gov/sites/default/files/2023-11/DC%20OAG%20Re...
This part jumps out:
> the landlord’s regional manager
Why would the owner of a property have a regional manager? That makes it sound like they're deliberately conflating local property managers with actual landlords. I suppose if the actual landlords are passive REIT investors, then there's still a possibility of actual collusion.
In this game theory setup, breaking from the cartel only pays off with excess supply (long vacancies, new units you could lease), which is fairly atypical especially bc of regulatory hurdles. If the market is supply constrained, being part of a cartel maximizes profits. Over longer periods, a competitor could increase supply and inject some dynamism that rewards breaking from the cartel, but for urban/suburban apartment complexes, this is long time and of limited effect to the cartel's pricing power.
This is why the FTC exists to prevent this type of illegal coordination (bc it's so attractive to profits!)
Edit: typo
But the algorithm is simply not capable of creating San Francisco prices in Houston, because "supply and demand" carries more weight than the algorithm.
Even if you built additional 25% of more properties the algorithm can take 20% off the market with a single pricing decision for months before landlords decide the vaccancies are not worth it.
Buildings don't move, and they're already expensive. Software that enables and enforces price fixing across markets might have exacerbated temporary inelasticity by local zoning, high reliance on import building materials, and restrictions on certain materials or construction, but the system wasn't built to handle a single company with $10T in assets buying up the nation, let alone an industry around it.
Blaming anyone with an economy smaller than a nation state just doesn't explain the scale and timing of the effects.
Why is this happening in communities in the rural South where there's plenty of room to grow? Who's buying up minority communities, inflating prices so that home owners can't afford the tax increases, and then buying those properties from under them and renting them back at a higher rate? It's not anyone you who they'll ever meet at a local town hall or whose home they can march up to to protest, that's for certain.
Like I keep pointing out: if they're so good at raising the prices by more than a percentage point or two, why aren't they jacking up Houston prices to San Francisco prices?
And there is such a thing as pricing power which enables certain actors to control prices without dominance, even then.
Hiding behind an algorithm seems unlikely to work now that there's blood in the water from the recent Realtor lawsuits.
The FTC posted an article about algorithmic price fixing not too long ago too.
Corporations don't die and turn their houses over to kids. Home ownership is widely regarded as the best way to build wealth, and corporate buy-ups are making an already difficult market permanently off-limits to millions of Americans.
But are politicians acting on that? No. They're busy passing corrupt developer-handout legislation like CA's (recently struck-down) SB 9.
We have a chance to stop this scourge before it's too late. Have you called your representatives about it?
I like articles like the one above where you can see the author's original title, before the editors got their grubby mits on it. Much more informative:
Realpage antitrust lawsuits allege collusion among corporate landlords
Massively higher information content in that title. But of course, lower "conversion rate" so add moar clickbait.
If large landlords (like the company that bragged about owning 80,000 units) are colluding amongst themselves, then won't property owners not directly colluding also raise prices?
How do you provide relief to all those renters?
Nationalize (rental) housing or make it so no corporation can own housing. Co-ops where renters are actually owners for large scale buildings. More single family housing.
Riots.
I mean.. there are lots of ways
Ideas labeled as crazy or even violent have sprung up over history when people are pushed to breaking points.
Capitalism’s formula for infinite expansion will eventually break people.
How things like housing, healthcare, education, food are allowed to profit boggles my mind and is deplorable.
Capitalism yada yada - people need resources in order to get homes, people will only construct homes if they get resources in exchange. These are just facts of the world - it sucks that building costs, but it does.
Profit is stolen wage or stolen housing.
When profit is allowed for things that make people safe, housed, healthy, fed, or educated, those profiting are, imho, committing crimes against humanity.
Is it really capitalism when local governments and NIMBYies prevent housing?
In truth, communism has broken housing in the US.
There has never been communism. Especially in the US.
Stop pretending people owning homes is impossible and only for corporations - it only makes you seem like the simp for profit piece of trash you are.
People don’t prevent housing. Capitalism does.
Right now, only "luxury" housing developers are building new housing in high demand areas, so this is a recipe for curbing new development.
> Co-ops where renters are actually owners for large scale buildings.
Co-ops are cheaper monetarily, but you instead "pay" with you're inconvenience or conformity, which sometimes can include your skin color. Good luck proving that though.
> More single family housing.
That works, but there isn't any room to build any more in the most expensive housing markets
> Riots
Are also a great way to discourage new housing development and destroy the existing supply
* safest for the humans needing homes which is the only pov that should be considered.
I know in SF some of the bigger companies weren’t allowed to buy any more big buildings but they would facilitate sales for other building and perform property management, which obviously means they control the price for a broader population of apartments than they own.
The article spells it out pretty clearly.
> Prices are coming down in markets such as Atlanta and Austin, Texas, where home construction is high. But analysts believe low rates of homebuilding on the U.S. East Coast could give well-located landlords more pricing power.
https://www.ftc.gov/advice-guidance/competition-guidance/gui...
Not sure why some neighborhoods get different restrictive zoning than others…
Why shouldn't people be allowed to choose what kind of neighborhood they want to live in? If you want high density, then choose a high-density area. If not, choose a single-family area. Those areas can be (and are) defined by zoning.
If our goal as a civilization is to ensure everyone has adequate, affordable housing, the motives of private landlords seem counterproductive to that goal. Even if you can say "they'll front the money to build more units", it's going to skew towards choices like luxury units that generate above-market returns, not maximizing the number of people with warm beds.
If we start from "people need homes" rather than "landowners deserve a return on investment", I'm not sure where you can make a case for anything but bulk appropriation.
....(of an acquaintance) He took the opportunity to refinance his properties at a 2 percent rate and also substantially raised the rents that he was charging (i.e., his costs fell and his revenue soared). He estimates that his property doubled in nominal value between 2019 and today. He raised rents by 50 percent.
note that realpage isn't using same-day rent prices to enable undercutting or colluding on prices amongst different properties, so you won't find Property As 2br2ba unit costing the exact same amount as neighboring propertys 2br2ba unit on the basis of preventing price competition.
As I understand it, the DOJ's basis is that it's illegal to use an algorithm that is both deterministic and also is using said "comparison data" from properties that use the same algorithm. Is this really a sound legal strategy? Algorithms are only algorithms because they're deterministic; if they're not then you've made some form of a ML model.
This sounds like apartment communities could only use an algorithm to ingest comp prices and make rent decisions if they commissioned a new bespoke algorithm that can only ever be used by them (what happens if the algorithm supplier copies and pastes code? Or delivers basically the same product with only changes to a seed value?)
Not at all, many classical algorithms and data structures are and must be probabilistic. Classical quicksort/quickselect is the best example.
I think it's just a case of the case being easier to argue this way.
https://www.ftc.gov/business-guidance/blog/2024/03/price-fix...
I didn't understand the implications of the FTCs decision here. Presumably no one is colluding to use the algorithm together. They are each independently clients of the algorithm creator.
So is the first user to buy the software okay? But then each subsequent user is colluding with the former clients?
If you replace "the algorithm" with "our mutual friends pricing advice", it's the same old blatant price fixing clearly prohibited.
And no need to presume: the FTC arguments are quite clear they were advertising to take each landlords data and tune the pricing as if they owned all properties themselves. It's page 23 in the PDF, 11/23 in the memorandum.
https://www.ftc.gov/system/files/ftc_gov/pdf/YardiSOI-filed%...
The difference between this comparison and what's actually happening is that the friend doesn't actually price decisions for "today" with information they learned from other competitors that also asked them for price decisions "today".
Instead, it's like a friend giving you a preset excel spreadsheet where you plug in your competitors' price history and your price history and it spits out a number. Is it really illegal for everyone to use the same spreadsheet with the same math in it?
Another child comment of my original top level comment suggests the collusion was that, to use the algorithm at all, a rental property had to accept its output price at least 85% of the time.
Yes, if the competitors are colluding to share their price history with competitors for the purposes of market manipulation.
> Another child comment of my original top level comment suggests the collusion was that, to use the algorithm at all, a rental property had to accept its output price at least 85% of the time.
That's one of several smoking guns. Even if the recommendations were not required to used but only for initial pricing, that's also a smoking gun.
No need to refer to comments, read the FTC memorandum, it cites their historical cases.
The issue is that this sharing is only done so that they don’t have to waste bandwidth and cpu cycles scraping prices they already know from their competitors’ websites.
Is it collusion if everyone is shopping their competitors prices?
Or is it illegal to use the same math equations in the same order?
and might I add, imagine this algorithm is possibly “the most perfect algorithm at generating positive rent growth” to which there is no improvements possible, so a government body forcing you to create your own algorithm could be de-facto government sabotage. It would be like the government preventing railroad operators from using the same ticket pricing calculation minimumPrice = miles * costPerMile + flatCosts
Not at all! Competitors are free to publish their prices, to whoever they want, for loads of reasons, but colluding to raise prices isn't allowed. Realpage advertised this as a pricing cartel as a service though.
Prices for rent used to be much more negotiable than they are today, in part because of Realpage. From personal experience, landlords before Realpage were more willing to take a lower offer on something that had been vacant a while. But maybe they should have kept it vacant if they knew they were already the best price for similar accomodations.
>and might I add, imagine this algorithm is possibly “the most perfect algorithm at generating positive rent growth” to which there is no improvements possible...
A perfect algorithm with global knowledge is what the act is trying to prevent, because tilts the market entirely in favor of supply against demand. Same effect as a monopoly, which is why it's illegal.
A lot of this stuff was hashed out in cases around a hundred years ago, by people who tried and failed similar hope-theres-a-loophole arguments, and there are plenty of loopholes they could've hid behind, but instead:
"According to the complaints, RealPage’s own marketing materials make clear that it “utilizes the competitive data” of competitors, to allow those competitors to “outperform the market,” As RealPage allegedly put it, it offered clients “the ability to ‘outsource daily pricing and ongoing revenue oversight’ to RealPage,” allowing RealPage to “set prices for its clients’ properties ‘as though we [RealPage] own[ed] them ourselves.’”