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Comment by davidw | Hacker News Reader

Both things can be true:

* 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.

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> Housing prices are still set by supply and demand

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

Why is housing so much cheaper in Houston than Los Angeles, then?

> Housing prices are still set by supply and demand

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.

So why don't they use RealPage to jack up Atlanta rents to Los Angeles rent levels if they've cornered the market so much? They're leaving money on the table!

If they're simultaneously jacking up LA rents, then ATL will never catch up!

If they've cornered the market, they can just set all the rents in Atlanta to LA prices, no?

Only if they've cornered the market in locales people would leave ATL for in search of cheaper CoL.

> why don't they use RealPage to jack up Atlanta rents to Los Angeles rent levels if they've cornered the market so much?

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.

[1] https://www.e-education.psu.edu/ebf200/node/247

So, you're saying that supply and demand are indeed real with housing.

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.

They are using an uneven playing field to find the local profit maxima in rents and vacancies. They have insight into number of vacancies, time-on-market, etc. that individual renters and even landlords/property owners (absent collusion) do not have. They are coordinating this and providing collusion-as-a-service.

So that brings us back to my original comment, doesn't it.

I agree they are not the sole reason for high rents. In markets where they operate I think they are a contributor.

Supply and demand still applies even when competition is minimal. It just means the force that’s supposed to keep the price from being set to extract maximum profit isn’t working.

> you're saying that supply and demand are indeed real with housing

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...

Monopolists base production on their costs and revenue, not supply and demand. Both "supply" and "demand" are real things—that monopolists ignore if it profits them.

> Monopolists, however, ignore the demand curve.

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 thing about monopolies is that the monopolist still has to deal with the demand curve, but they get to set the supply curve. As price goes up, demand goes down; they can't change this. In healthy markets, when supply goes up, prices go down because of competition. Then the price ends up at the intersection of the two curves.

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.

I think it's highly unlikely that they're a true monopoly. Housing is just too fragmented a market. There are too many people willing to defect, too many mom and pop shops, and of course you have other cities that people can move to if they just can't handle the prices.

Housing is inelastic enough that they don't need a 100% monopoly to engage in highly monopolistic practices. The article mentions that about 80% of rentals in Atlanta are using algorithmic pricing, and 80-90% of landlords are following their recommendations as is. If the algorithm is laundering their collusion onto 64-72% of the housing market, that's larger than plenty of monopolies that have been broken up in the past.

No. When people say “the price is set by supply and demand,” they mean that the price and quantity of produced goods are set at the intersection of the supply and demand curves. As the linked article in the parent comment shows, a firm with market power will maximize profit by producing goods with a different price and quantity, but they will still use the supply and demand curves to calculate how to maximize profit.

price and quantity are always at the intersection of supply and demand, by definition.

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.

> Any other price will leave unsold inventory or unmet demand

Monopoly pricing leaves unmet demand in favour of higher expected profits.

I’m really skeptic of the over simplistic approach of “supply and demand”, as if a wildly inelastic market such as housing has much similarities as a different more elastic one. To use the point on GP, if suddenly a huge landlord decided to jack prices to 1mm a month, I would expect prices to reach a more adequate equilibrium, but not because market mechanisms, but because a lot of things are going to burn, at least politically speaking.

And I that’s also a possible answer your question, on why they are leaving money on the table. To avoid inviting political action.

>So, you're saying that supply and demand are indeed real with housing.

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".

> You can realistically use something like this to maybe bump rents a bit

Which would be illegal.

It's coordinated frog boiling. You're supposed to boil your own frogs without perfect knowledge that you have the best temperature.

In microeconomic theory, it is still set by demand, except that they are capturing some of the rents, causing “dead weight loss” in the market as a whole (eg higher profits but less overall money changes hands). So there are still limits on the monopolistic behavior, but it is still bad for the buyer

> So there are still limits on the monopolistic behavior, but it is still bad for the buyer

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.

No monopolies operate outside of the limits of reality. Trying to draw this line between what you feel is real and fake does not seem to resonate.

There's a different limited supply: the paychecks of the potential renters. Can't extract blood from a stone, but they can try to squeeze it right up to the limit. People can only live so far from their jobs before it's no longer worth any savings in rent.

Because even if big, demand is limited by what people can actually pay.

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.

The supply and demand of housing would be very different if a YIMBY policy agenda was in place.

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.

>The supply and demand of housing would be very different if a YIMBY policy agenda was in place

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?

> 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.

On the density point - the natural observation is that most people tend to live in high density areas, because that is where most of the housing is. It is possible to have "hellish" density (the worst of a slum somewhere like Hong Kong), but most of the time dense living is simply the standard human option.

You don’t even have to densify that much.

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.

> hellishly dense

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.

I don't think hellishly dense cities even exist. There's only hellishly dense neighborhoods and slums. The stereotype some people have is the densest 12 square blocks of Hong Kong extrapolated to the overall size of Hong Kong. Yet if you visit Hong Kong you will find yourself taking a pleasant walk from your hotel, through a park, to a restaurant.

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...

"monopoly/cartel pricing" is a different phenomenon from "supply and demand"

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"

>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.

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.

Supply and demand don't exactly work on an inelastic market like rent. You can't wait until find an acceptable price, you need a roof today. You can't accumulate, so you only look for rent when you don't have one and NEED one.

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.

> Supply and demand don't exactly work on an inelastic market like rent.

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.

I agree with some of what you say, but to a lesser degree. However, we like to see garbage companies acting like this to be taken down and destroyed with extreme prejudice as a warning to others. Monopolies and cartels that abuse customers and raise prices should have the corporate veil pulled back and put on life support, if not get the chair. I don't really have any sympathy at all for these predatory tactics if what they say is true. I personally feel it should be criminal as well as civil.

I'm not sure I agree. If one company is setting all the prices then you're forced to pay that price since there is no supply at a lower price. In a normal situation, landlords don't have perfect info and so will set prices differently. But if one company controls most of the market they do have perfect information and can raise all prices together.

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.

I wonder what fraction of the population actually pays those rents. It seems unbelievable. That's more than the average income in most Western countries.

Yep...

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.

From the supply side NIMBY attitude is clearly a major problem. However that's looking at it in complete isolation, vast majority of population growth has come from Immigration, so it would be just as one sided to say

"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.

One interesting cultural thing at a company I worked for was to not say "no", and instead say"yes, but have you considered..." Restricting immigration and reproductive rights is not going to go well, politically, but pointing out that it is seems there's a need to be some sort of overarching plan to actually absorb X number of people into a system with a carrying capacity of Y number of people, especially because it seems "the market" hasn't been able to solve that, given how widespread the housing crisis seems to be (though I'm biased because I live in one such region). Cities do have urban planners drafting capital improvement plans(CIP) (usually), but I don't know how much top down directives are involved to say the plan must include plans to increase housing by X%, especially when X can't actually be planned for.

Completely agree; it's great to allow it but we need to grow housing and infrastructure to match it - right now we also need to 'catch-up' for the years we failed to. By the way reproduction is not driving growth in most of the US or Western Europe, immigration is and that is fine but politicians plan, quota and set criteria for legal immigration, they've not really got the same control of reproduction rates.

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.

Supply and demand often becomes the "states' rights" argument in any sufficiently complex economic discussion.

This isn't about supply and demand.

> Both things can be true

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.

Haha. People want a bogeyman so bad, but really it’s this bogeyman.

> 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.

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.

"supply and demand" is price's effect on supply and demand, not supply and demand's effect on prices.

https://www.investopedia.com/terms/l/law-of-supply-demand.as...

> 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.

And yet the market can remain irrational longer then you can remain liquid. We do not live in a fair market.

What's unfair about the market is that it's mostly local "I've got mine" people shutting out the people who teach their kids, attend to them at the hospital, police their streets and so on, via things like zoning laws.

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.

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