FBI raids Atlanta corporate landlord in probe of rental market price fixing
entrepreneur.com
entrepreneur.com
Illegal collusion and price fixing happens when owners of competing companies communicate to set prices.
Apartments prices were historically a highly volatile compared to their lease lengths. One would have to own a majority of the apartments in a market to gain the data necessary to know things like upcoming tenant renewals, apartment renter influx/outflow, etc to combat things like mass-tenant exodus to a nearby apartment complex offering $100 less rent per month. This industry has been historically very competitive.
Realpage does the colluding for them inside a database and whispers back "here's our number".
How are non-participating properties punished? Debt Servicing. Try getting business loans for these properties without running Realpage's tools.
Look at the investors and board members of RealPage, InvesTran, etc. and those in the property management companies. They are a very small circle hiding normally illegal activity behind algorithms.
Encrypting or obfuscating illegal communications doesn't suddenly make them legal. Neither does charging money for the privilege.
I think it's under-studied how information and markets interact. There was the great "markets are efficient if and only if P=NP" paper. Basically the insight was that prices are information and a market is (supposed to be) a computing mechanism for finding "optimal" transactions. Price discovery is often difficult. It is natural for participants to outsource it to computers. But if all those computer services are run by the same company .. suddenly you have a single agent setting prices, not a market.
Wow, have never thought about this. Yes, yes they are similar... That's why I get basically the same interest rates across all financial institutions. There's no competition, basically they're communicating to "price fix" a rate.
Though I doubt America would raid the holy grail of capitalism, financial institutions
Credit scores don’t discourage competition. Competition can still exist within brackets.
The reason rates don’t differ much is because most of the rate is determined by factors outside of the lenders control. There’s a pretty small margin for them to compete on price with each other with. That’s why rates on stuff like mortgages are basically commoditized.
Businesses doesn't get kicked out by Experian if they grant a loan to someone with a low Experian credit score.
Almost everyone I've met who has ended up in trouble with the law in business got where they are by this exact pattern. When they get caught, it's usually just naked, obvious crime. I've seen:
* Trading fake invoices between subsidiaries to increase top-line revenue leading to fraud charges.
* Fake billing between companies to paper over private use of a business jet.
* Medical billing software where diagnostic codes were optimized by matching the procedure to the highest paying service scenario. i.e. making applying a bandage be a emergency surgery bandage application which would be billed at 9x the price of a normal office visit.
* Lots of startups that started with a forward looking "were' going to build invention x" only to discover two years in that invention x is not possible. Instead of pivoting, the founders double down on invention x to raise more money with a "we're close" or "we are commercializing as we speak" pitch.
* Taking loans against customer owned securities. Behold infinite non-diluting cash, and infinite jail time when caught.
In every case, the pattern was completely ok from the founder's point of view, but when you look at the practice in total it was pretty easy to see crime.
But one thing is found critical is that he always made sure his apartments were priced at the low end. He’d rather make sure they were all full all the time instead of dealing with volatility.
The man is hugely successful and they just named one of the colleges after him at my University.
100% occupancy at 90% of the market price with high quality tenants makes you more money than 80% occupancy + agent advertising / finding fees at full market price with bad tenants.
Before RealPage, most large landlords would aim for 97-98% occupancy and set their rents accordingly.
RealPage would encourage landlords to instead aim for 90-95% occupancy by setting higher rents. Most of the time, this turned out to be a more profitable strategy, even though it makes property managers nervous because they feel like empty apartments = lost money.
This isn’t talked about enough.
* If this software system managed to add, say, 1% to hundreds or thousands of people's rents... that's a lot of money and the company probably deserves what's coming to them, civil or criminal.
* Housing prices are still set by supply and demand. You can't charge LA prices in Atlanta no matter what kind of fancy scheme you run.
People want a bogeyman so bad for the housing crisis, but it's mostly stuff like this, where local NIMBYs stop homes from being built:
https://bendyimby.com/2024/04/16/the-hearing-and-the-housing...
That doesn't mean this company isn't gouging people a bit too, though.
And yet the market can remain irrational longer then you can remain liquid. We do not live in a fair market.
It feels good to blame some big, far-off company but it's not where the bulk of the problem lies. That doesn't mean the company isn't gouging a bit though and if they are, fine, nail them.
If the government's allegations are true, in markets where RealPage landlords control most of the rental supply, prices are not set by supply demand due to market failure.
Given how expensive many cities make being a landlord, it makes sense there will be some where commercial landlords control most of the rental supply.
They'd make less money [1]. Demand for shelter is close to inelastic, but demand for shelter in Atlanta is not.
Consider the extreme: they mandate rents of $1mm a month. Assuming no government interference, they might land a couple tenants at that price. But the vast majority would balk, thereby leaving them with less profit.
You can realistically use something like this to maybe bump rents a bit, but you cannot use it to radically alter markets, because it is supply and demand that set market prices.
You're correct in one technical sense and wrong in another. (Either way, a good discussion.)
In a competitive market, price and quantity are set by the marginal incremental cost (MIC) and average total cost (components of the supply curve) and the demand curve.
Monopolists, however, ignore the demand curve. Their quantity produced is entirely set by MIC and marginal incremental revenue (MIR) [1]. In a very real sense, the market is no longer about supply and demand--it's about the producer's costs and revenue. (Your technical win is in the MIR being related to the demand curve.)
[1] https://en.wikipedia.org/wiki/Monopoly_price#/media/File:Mon...
That doesn't make sense, to obtain the MIR monopolists have to have an implicit consideration of the demand curve. Monopolists can't push the price off the demand curve without pointlessly leaving arbitrage opportunities (or burning money, I suppose) and their revenue depends on price and quantity.
There is a fun thought experiment too if we consider a silly degenerate case, imagine the demand curve has a practically impossible shape and spikes to infinite price at 10 widgets. Any logically sound strategy will tell the monopolist to produce 10 widgets because profit would be infinite. So they can't ignore a demand curve in theory because at a minimum they have to care that it is not a degenerate case.
The monopolist doesn't have to follow this rule: they set the price to whatever makes the most profits and leave the price there regardless of fluctuations in housing supply.
no doubt you can find things to quibble with this too, but it's more accurate to say "price is set by supply and demand" means that the quantity sold is at the "market clearing price". Any other price will leave unsold inventory or unmet demand.
the point being that market manipulations will shift the supply or perhaps the demand curves.
Monopoly pricing leaves unmet demand in favour of higher expected profits.
And I that’s also a possible answer your question, on why they are leaving money on the table. To avoid inviting political action.
Price fixing doesn't eliminate supply and demand entirely or make demand elasticity vanish.
What it eliminates is real competition among sellers ("fixing" the supply curve).
It raises prices - it doesn't magically make any asking price feasible.
Not finding demand to suddenly ask for $2M for a two bedroom house in Kirkwood is not some proof "hey, supply and demand is working just fine".
Which would be illegal.
That's basically what I wrote in my original comment. They're far from a real monopoly, but they can probably gouge people a few % points, which isn't great.
You can price-fix and collude with other big home-owning landlords to milk your buyers, but to a point. Beyond that people just wont rent and move away, downscale as much as they can to smaller appartment, find roomates, or try to move back to their parents.
Right now, it may be possible a rental company could own a large amount of apartments without fear of new units being added.
If YIMBY policies were in place, new apartments could be added within a year or two and in the long-term this would mean housing prices are met by supply and demand. The landlords only have power when supply is artificially capped.
What about the investment in the house and the quality of life of those having the BY? Wouldn't that be very different also, if a serene place with fewer houses becomes a mass housing jungle?
Maybe cities could extend outwards instead of making existing BY hellishly dense?
This is what we have been doing. It's not working
> What about the investment in the house and the quality of life of those having the BY?
As the neighborhood gets more dense you'll probably hit a point where the value of your land gets to a point where you can move somewhere slightly out of the city and have a chunk of money in your pocket.
> hellishly dense?
I dont see why you equate density with hellishness, with density comes more services, entertainment options, (ideally transit options) and unless you sell your land is still your land. And generally we're not talking about turning your suburban neighborhood into Manhattan usually more something akin to a european neighborhood.
This is a street in Queens, the fourth densest county in the US. https://maps.app.goo.gl/ZyaWEUwgwCCCrdks9?g_st=ic
You’ve still got trees, yards, and single family homes.
The most "hellishly dense" places in the US aren't even as dense as the city of Paris, half of which is parkland, and the other half mostly ordinary six-story apartment buildings.
Click any link on the list of densest cities[1] and you will see a lot of low-rises and parks in every one. The ones that are actually hellish are the ones that are car-centric. Dense cities are quite pleasant when you're walking.
[1]https://en.wikipedia.org/wiki/List_of_cities_proper_by_popul...
It's not market failure, which refers to mutually beneficial transactions not happening.
monpoly/cartel power vs competition is what moves the price along the the axist between "cost to produce" and "value to consumer"
Another thing that can be true is that a company can be engaged in an illegal attempt to fix prices and still fail to raise prices, e.g. because they stupidly got half the landlords together to withhold units which only caused those landlords to have a higher vacancy rate while the other half got to enjoy a lower vacancy rate, leaving the average the same but costing the conspirators money because they had disproportionately more empty units.
Attempting to fix prices is still illegal even if your attempt blows up in your face and costs you money instead.
What you describe is the "price bracket" (say Atlanta vs LA, or good neighborhood in Atlanta vs bad neighborhood in Atlanta). Sure, you can't do that.
But the actual price has a lot of wiggle room inside that bracket, and apparently the final price is not (always) set by supply and demand, but (in cases such as this) by big landlords doing colluding price-fixing instead of competition. The demand not being very elastic, many will pay a little more, but only because unhealthy collusion has made options for less dissapear.
That’s missing the point of collusion. The point of collusion and price fixing is to break the market and prevent supply and demand from getting to natural equilibrium.
This type of collusion is real. Years ago several big tech companies were caught colluding to keep wages down. The demand for engineering talent was there, the supply was limited, but they agreed to not poach each other’s employees. After that was broken up, wages went up.
Supply and demand only works when the market isn’t under substantial collusion.
https://www.investopedia.com/terms/l/law-of-supply-demand.as...
The "market" is not real and hasn't been in years, and tech has 100% helped destroy it.
Cartelization used to be difficult because it was tough getting all market participants on the supply side on the same page. Tech makes it way easier.
Before things like RealPage and social media, if you wanted to collude with 100 other landlords in the area, you'd have to somehow set up meetings with all of them.
Now that's just a small slack group. Or software like RealPage
"The bogeyman is mostly immigrants"
Just to be super clear I'm arguing against one sided statements and not (legal) immigration which I don't have a problem with. However our politicians cannot allow population growth without also providing housing and infrastructure growth otherwise we end up here.
They know what housing demand will be, since they set and control it, so why do they restrict and frustrate supply (house building)? It's like they've either a vested interest, or building supply is more unpopular than house price increases and eventually homelessness.
LA is out of control. Average price on the west side is $3800 (vs SF which is $3200). I don't know how anyone affords that except a few lawyers and FAANG employees.
It's so bad, landlords are able to rent out bedrooms in shared apartments for $2500-$3500 a month.
https://losangeles.craigslist.org/search/apa?query=co-living...
Also, while NIMBYs might be part of the problem there is no room on LA's roads for more cars for more people. They'd need Tokyo level of trains to make it work and at the pace they're building it will be 200yrs before they get there, if ever.
and also, how much do companies there actually pay people? If you pay that much for rent, and still decide to stay there, are the wages so high, that it's worth it? An average couple would have to earn at least a few $k more per month there, than in other places with more reasonable rent prices.
Landlords, on the other hand, can accumulate, and leave properties empty, sometimes for years, until someone desperate enough arrives. Rent is not grain where they must sell it by a deadline or it goes bad.
It's a market disproportionately skewed in favor of the landlords.
I used to set my properties rent to be competitive with the other rentals in the area. In would vary a lot - sometimes more sometimes less. At this point there are so many companies setting price with subscription services that prices always go up.
> Landlords, on the other hand, can accumulate, and leave properties empty,
In a healthy market this strategy will leave small landlords bankrupt. The problem right now is that the small landlords can play along with big property management companies on price collusion.
This isn't about supply and demand.
Fixed that for you.
As one of the largest real estate private equity firms in the world, with $136 billion of assets undermanagement...
That was in 2019 when this report was written. It's now over a trillion.
In neighbourhoods heavily invested by private equity firms including Invitation Homes, more than 7,400 families and individuals are evicted every day. In Charlotte, North Carolina, for example, it was found that in 2013 Invitation Homes filed eviction proceedings against 10 percent of its renters.
Invitation Homes is part of Blackstone.
Blackstone is by no means the only financial actor adopting the business model mentioned above. However, because Blackstone is a leader in implementing the new residential real estate business model and one of the largest global actors in residential real estate...
https://www.ohchr.org/sites/default/files/Documents/Issues/H...
Blackstone AUM: $1T (2% of market)
Evictions per year: 7400 * 365 = 2.7M
Homes owned by Invitiation: 2.7M / 0.1 = 27M
% US Population in Invitation: 27M (x avg househould size) /400M > 5%.
But Invitation is only a fraction of Blackstone.
Something doesn't add up.
Whatever it is, you’re mixing geographic regions and using aggregate numbers for all companies as if they were all as one.
See the fact that the FBI is raiding them for price fixing. Which they should, as rent prices are a major political instability pressure point and a major factor in the unspoken social contract. Private landlords exploiting tech to destabilize housing needs to be checked without quarter.
Federal Police virtually never raid actual aristocrats in such a public manner, and especially not with a focus in their livelihood. Remember that the aristocracy was traditionally a powerful position: collectively challenging the King and often winning.
The aristocracy actually morphed into parliamentary government, which is the dominant government throughout the West. That's where you find the legacy that you thought resided with modern landlords. While some might still earn a living in that manner: making and wielding the law long ago became more attractive.
a similarly sublte distinction exists between prime ministers and presidents.
I worry this kinds of apparent loses sublte distinction will be politically abused in the coming election under the scenario were the direct vote count and the electoral college suggest different winners
By "parliament" I'm indeed referring to a legislature or a body of lawmakers that passes law.
Often, that body is named "Parliament". In the US, it's Congress. My meaning would exclude any body with the name of Parliament that does not make laws. Though, I'd acknowledge that such a system would likely be a proto legislature and carry lawmaking influence.
Prime Minster and President are just titles. Their function in any one government would reveal their role, from diplomat to commander to figurehead.
The "direct vote count" does not suggest a winner because it isn't a thing in the US except at the State level and in the minds of wishful thinkers. I have no idea what you mean by the relevance of a "subtle distinction" in that context.
https://junehomes.com/blog/2023/01/19/who-are-todays-landlor...
While it is asserted in your link that:
35% of landlords were between the age of 55 to 64 years
It's more fruitful to look at the landlord power distribution of number of properties per landlord and cast those renting two or more houses toward the "(small a) aristocrat" category .. with those renting out multiple million dollar plus houses in dense inner city upscale suburbs likely being very well heeled.
The US also has a better tax system since it uses property taxes more often, which reduces land values.
There is a conspiracy theory it's happening though - a funny thing is that the people repeating it can't decide if it's caused by "Blackstone" or "BlackRock", which are two different companies that sound the same.
More importantly you can't enforce a cartel in housing without legal force, because every participant is motivated to defect. So the way landowners enforce one is through zoning laws. Just get rid of those!
Because without ethics or meaningful enforcement there is nothing to stop them.
You have single family zoning and height limits like everywhere else in the US. Allowing sprawl development works for a while but eventually you just run out of sprawl.
Rents are down in Austin, Berkeley and LA lately because of construction though. Funny enough, the LA one was an accident and they're trying to undo it.
Rents in my politically purple region 900+ miles from any coast have increased 100% over the past decade. What I pay now for a 1bd exceeds what I paid for a 2bd in a nicer part of the city when I originally moved here. Rental applications no longer require 3x income, only 2x now; it's just expected that people devote half their gross income on housing.
How anyone not making six digits lives in NYC is beyond me.
As people get richer, they have smaller households - ie, they stop living with their parents. If you don't allow smaller housing units to be built to match this, they will compete for existing ones and drive prices up.
This huge price-fixing case might give a clue to the seeming upset in your puritanical conception of "supply and demand"
> Restrictions from government are supposed to be reflections of the voters will.
Yes, those voters are called NIMBYs.
Whether and to what extent the sellers in the market have decided to be evil is, in fact, an aspect of "supply", which is simply the function mapping the terms of sale (in simplest terms, price) to the number of units sellers are willing to sell on those terms.
This is true even under perfect rationality, since deciding to be evil is just a way of describing someone whose utility function gives high positive value to something that the person making the description sees as a source of strongly negative value.
Also, corporate landlords can actually afford to maintain their buildings, which is a nice improvement over small ones.
"A month's rent less HOA fees may not translate to not less than 1/360th of an ownership share of the rented space" would be the 1 liner policy statement.
(All of these are real issues.)
on paper, corporate landlords should have better-maintained housing stock. in practice, i've never personally experienced it.
This definitely isn't true - there are markets where apartments aren't allowed/desirable, and in which corporate actors 'build to rent' entire subdivisions.s
Apartments have the opposite situation for weird legal reasons; there are almost no condos built in California anymore because the laws allow the original developer to get sued over quality issues, whereas for apartments the landlord has to deal with it.
> Apartments have the opposite situation for weird legal reasons; there are almost no condos built in California anymore because the laws allow the original developer to get sued over quality issues, whereas for apartments the landlord has to deal with it.
This feels like it confuses a couple of issues - one really needs to know the recourse a homeowner has against a home builder and how long this lasts (and to compare that recourse to what is available to condo owners)
Having served on an HOA board for years, I can mostly verify this. There isn't a lot of overlap between wise, community minded people and the people who strongly desire to be on a board.
The boards that have lost their way are dominated by people who really want to be there.
On the other hand with HOA, having another entity to tell you what to do with your large purchase doesn't sit right with me. On paper they're not so bad. My experiences with them(three times) have been completely incident free, plus got access to a nice pool and garbage collection. But you'll read a lot of no doubt true horror stories that show how things can go awry.
I've personally had my city pick up tires from a green space (also recorded the company that dumped 'em), cut overgrown yards and sidewalks, and they consistently collect my trash.
Why would someone with a functional local government ever entertain the straightjacket that an HOA enforces on its residents? It's not their business what color I paint my house, where I put my basketball hoop, or what size and style hedge I grow around my front yard.
I remember calling the police about the rifle firing(this was not on acreage), and they acted like I was annoying them!
From what one developer in Florida told me, the local government doesn't want to pay for roads, services, or amenities for any new developments, so requires they set up an HOA to cover it. Seeing as over 80% of new build homes are in an HOA, I tend to believe that.
Not very true for municipalities with above minimal population. It is true that some local govs are less funded, ergo less effective. But the trend is to do well with the resources available.
> I remember calling the police
Police are not code enforcement.
> Florida told me, the local government doesn't want to pay for roads, services, or amenities for any new developments,
I'm FL for 30 years. Local govs don't tax for neighborhood road improvements. They do tax for code enforcement. Residents get what they pay for and code enforcement is pretty good - responsive but not onerous.
source: volunteered for code enforcement for 4 years
They don't generally do any of those but the first on private property, except maybe (for the cleanup tasks) after citing and fining the property owner for failing to do it in addition to charging them the cost of having it done, and they often do the first only under a contract with the property owner, so that with a shared structure with a common set of bins, the contract would need to be with an association responsible for the shared bins.
While cities may do the things you describe, its usually going to long after the problem emerged.
At least with HOAs, they will fine you and possibly take your house. For these extreme cases it's a great way to keep people in shape. I guess the problem is when they get abusive and try to do the above for yard weed, paint, or other benign violations.
HOA's whose charters allow them to, and who actually do, act to regulate things like the aesthetics or worse specifically negating functional utility of non-shared parts of the property when there are no structural or safety impacts to the share infrastructure are awful.
My sort of conspiracy theory is that it's individuals expecting big returns driving up a lot of rent prices, rather than big rental corps that understand the value of slow consistent returns and don't feel the need to drive people out to resell. I have no proof of this though.
There's obviously something wrong with that.
> But corporate landlording, where an organization owns multiple buildings and runs it as a profit-maximizing enterprise, is a cancer on modern society and needs to be phased out.
It's literally the same but on a larger scale?
And actually I found little landlords to be the most "profit maximizing", petty, cruel and stupid. At least big organizations have some sort of reputation to protect, unlike anonymous landlords.
Question about this so-called "corporate landlording": Tall apartment blocks in urban centers are exclusively build by corporations, as they require many millions in financing to build. What is your proposal for these urban centers?
Obviously any form of multi-tenant space is more efficient than single-family housing, but there's a sweet spot somewhere between single-family and high rise that's the most space efficient.
> The developer and property owner are (usually) still different people in this case.
2) While true, BlackRock was essentially founded by Blackstone. Their naming is no coincidence.
3) Both were involved in said practice to an extent, with Blackrock having a share in American Homes for Rent, and Blackstone Invitation Homes.
No, they had a majority of SFH /rental/ housing, which is by far not the majority of SFH housing.
They also say in their investor releases that the strategy only works because restrictive zoning prevents building any new housing to compete.
And they're selling it now IIRC.
3) What share is that?
3) 10% for Blackrock. Blackstone is a little trickier as they sold off IH in 2019, only to buy Tricon in 2021.
https://calmatters.org/housing/2024/03/institutional-investo...
I'm sure the PE folks are just doing their best move but eek.. the net effects..
It really is that simple.
What are you trying to convey with this tautology?
The focus on building ownership is just a distraction from the disastrous immigration policy.
The big problem is we've financialized housing, a basic human necessity. This is wealth extraction and, really, state violence. People buy into this model because they think they're building wealth. For the vast majority of people they own only their own home so they're not really growing wealth at all. After all, they can't just sell their house. They have to live somewhere.
And no, this isn't a supply issue. We have enough housing.
Second, landlords can form an effective cartel by all using the same tool that spits out the same numbers to all of them. If a company bought up 80-90% of the housing supply and jacked up the prices we'd all recognize the anticompetitive behavior. There's simply one level of indirection here. It's naive to think that cartel-like behavior is an unintended consequence.
But taking out this one player won't fix the underlying problem.
The cartels and PE investors are investing in NIMBYism. It’s a bet that resistance to construction will continue to keep supply artificially constrained, forcing prices up.
If that resistance is removed these investments will underperform.
A vacant property still has to be insured, maintained, heated/cooled, taxes paid, mortgage or commercial loans paid.
So if the supply is high enough that landlords can't afford to hold enough of them vacant to maintain high rents, they will eventually have to rent more of them.
The landlord cartel theory requires landlords both to have unselfish solidarity with other landlords, and be selfishly greedy against renters.
But in rental market, the demand is not dynamic. You HAVE to get an apartment to live in once your lease is up. If 80% of the complexes around you are on this and on top of that the independents also set their pricing based on the market controlled by the majority, then they can charge you whatever they want. You HAVE to buy and you HAVE to get it with the price dictated by them. There is absolutely no supply and demand in this at play.
Right now renting is even cheaper than owning!
small correction. People who legally immigrated earlier are the most vocal supporters of stricter immigration rules for future illegal immigrants.
Social Security Program was created in 1935. Medicaid was established in 1965. Non-citizens became eligible for social security in 1996. Why talk about ancient history when there was little to no burden in citizenship ?
No, this is clearly false. Rules apply to illegal immigrants too - those who just crossed the border without approval or prior paperwork. Those rules are rather lax and are not enforced as can be seen in the current administration and "sanctuary" states - who simply ignore the rules.
I get the feeling that no one is really serious about stopping this problem, since even the rules they propose are obviously ineffective (and probably meant to be).
They do this because they need investments, and all other forms of investment are less appealing due to regulation/risk. They need investments due to the misguided economic cargo culting that inflation is necessary, to promote investment. So the people invest. In property.
You can see this magnified in China where traditional types of investments are unavailable, so the property bubble is constantly growing as it is constantly bursting.
People follow the incentives, and not just the incentives set by the government, but the incentives of reality. If you drop a boulder, the river doesn't just stop; the river flows around it.
doesn't it just anchor prices at $n?
We’re just not building enough housing.
> RealPage's effects can be seen most noticeably in Atlanta, where software-based pricing affects more than 80% of rentals. Since 2016, rents in the city have grown by 80% — and higher vacancy rates have not driven prices down.
https://www.redfin.com/news/redfin-rental-report-april-2024/
And a percentage point or two across thousands of people renting adds up to real money they are helping to skim. I don't see any downside to going after them.
That said, no, one company is not to blame for soaring rental prices across the US. It's mostly supply and demand.
Collusion allows firms to get somewhat closer to the monopoly price.
I don’t how much this software really does to enable collusion, though? It seems like some landlords might defect if they have too many vacancies?
This part of RealPage's offerings is a commercial price fixing collusion tool, plain and simple.
- Disclosure: I formerly wrote software for and was employed by RealPage, though not on this specific product.
Whereas if there are a million households who need a housing unit and there are only 750,000 housing units, you've got a big problem. For which the solution is to build more units.
This is only true if enough of those five million housing units are competing to get filled
If a single person or company owns all five million housing units, they can set the exact same, arbitrarily high price for all of those houses. Then it's a problem for the people who need houses: take it or leave it
Meanwhile buying up an unbounded amount of newly constructed housing only to leave it idle would be extremely unprofitable, because they would have to be paying the construction companies the existing market rate (i.e. the monopoly price) to keep someone else from getting it, but then couldn't rent it out and recover any of the money because that would increase supply and lower prices (or, to put it another way, no further renters can afford the monopoly price so their choice is a lower price or an empty unit).
Alternatively, we're letting too many people in. Land and resources are finite.
Collusion is criminal, it does not matter if you make money on it or not, or if “the market could bear the costs of our collusion” or “the collusion was only possible because of other market inefficiencies”
Next HN is going to argue you can't actually war profiteer since the fact that there is a war is driving up prices too.
Sherman Antitrust Act:
Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal.
Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a misdemeanor [. . . ]
This is a classic Sherman Act violation - multiple companies explicitly colluding to raise prices.
But we see the opposite — NYC has a vacancy rate of 1.4% and peak rental pricing.
Discussion: https://news.ycombinator.com/item?id=40562834
Discussion: https://news.ycombinator.com/item?id=40562834
The market price is as high as it is because we have a housing shortage. RealPage just helps landlords take advantage of an underserved market.
What we do see is landlords (corporate and private) taking things off the market on purpose to keep prices up, in addition to the collusion this thread is actively talking about.
By every conceivable metric housing has kept up with population.
Shortage? No.
Constructed scenarios that force people to lower their standard of living so landlords can make more money? Yes.
(Do they just manage the property and collect condo fees, or do they also collect rents?)
Another reason why landlords need extreme oversight.
you mean _because of_ supply and demand, rather than in spite of?
So to fix the problem isn't to regulate landlords (aka, attempting to legislate price controls), but to produce more supply.
It's both. Producing more supply works best when it isn't being sabotaged by landlords intentionally keeping units vacant.
they should be free to do so. They have a holding cost, which they're going to have to pay.
I mean, why don't wheat farmers intentionally hold sales of wheat to force the price higher?
GP means _in spite of_. It's the only way to explain the number of apartments kept vacant to artificially reduce supply.
See below for instance.
https://www.thecity.nyc/2024/02/14/rent-stabilized-apartment...
The latest New York City Housing and Vacancy survey estimates that last year 26,310 rent-stabilized apartments were “vacant but unavailable for rent,” down from about 43,000 in the same survey two years ago.[1]: https://www.nytimes.com/2023/04/20/nyregion/rent-stabilized-...
These are exactly the apartments where landlords have exactly zero ability to set price, let along to collude to fix prices.
wow great idea, why didn't I think of that
In high COL cities like SF, rent doesn’t even cover the carrying costs of a mortgage.
And if they paid the place off, say a $1.2M home, they might $5,000/month in rent. That’s a screaming 4.2% return on their money (ignoring property taxes, insurance, maintenance). Including those it 2-3%.
It's very profitable!
Have you tried being a landlord, if it is very profitable? If not why not?
The best way to be profitable as a landlord is to inherit a paid-off property and rent that out.
But if you aren't that lucky and have to actually pay for the property you rent out, it is very difficult to make a profit, let alone one that beats just putting the money into an index fund.
Edit: for context, it is the orange county area where average home price is $1.4m afaik.
Sure, with a large enough down payment you can make the mortgage low enough to be cash flow positive if you rent it out.
This does not make it profitable though! You'd have to consider the opportunity cost of putting that huge amount of money into a down payment instead of into some ETF.
Locking up $2M in an asset has a cost. It's not "free".
I live in New Zealand, which is quite addicted as a country to profiting from real estate. The ability to leverage your money into an asset that provides both enough cashflow to cover costs and interest servicing as well as appreciates in value ~7% annually means that for most people, becoming a landlord is the most reliable path to easy wealth.
Yes, you can become a margin trader, but the cashflow management is much harder, the margin interest rate is higher (here at least), and it is much more difficult compared to buying an existing house and renting it out.
I think anyone who thinks that, has not actually tried buying a house to rent it out (or thoroughly done the numbers at least).
> provides both enough cashflow to cover costs and interest servicing
Here's the problem, it does not. Try finding a property that you can buy and then rent for more than your total costs. I've been looking for more than 10 years and have yet to find such a thing. Maybe price/rent ratios are different in New Zealand.
This suggests it's common in the USA too: https://www.moneypenny.com/us/resources/blog/how-much-renter...
Except for the few largest models, rents are right around $4000/month +/- a few hundred depending on amenities and lot size.
To buy one of the average neighborhood houses you're looking at tying up ~$240,000 in a downpayment and then you'll have an ~$8000/month expense. That's just mortgage + insurance + taxes. If you wanted to rent it out you should also allocate some extra each month for a maintenance fund. And if you need help managing the renters, a property management firm will take ~10%.
If you were thinking of buying this for an investment for that sweet profit landlords supposedly make, you also need to consider the opportunity cost of that 240K downpayment. It could've been earning a safe ~$1K/month or so.
So... I need to be able to rent out this property for about $10K/mo just to barely break even. But I can only rent it for $4K/mo, maybe $4.5K/mo tops. There's no profit to be made here.
This is just one example but I have hundreds of these over the last >10 years from my county. I grew up hearing how owning rental properties was the road to riches so I always wanted to get in on that. But as I keep looking at the numbers for years and years, the reality is that it is exceedingly difficult to find any property where you can make money by buying it and renting it out.
The people I know who are actually making profit from renting properties are either because they inherited a free house, or older folks who lived their house for 30+ years and paid it off, moved to a small apartment and rent out their old home.