San Francisco seeks ban of software critics say is used to inflate rents | Hacker News Reader

San Francisco seeks ban of software critics say is used to inflate rents

latimes.com

71 pointsPaulHoule185 comments

If it's illegal to fix prices by collaboration, it should also be illegal to fix prices by implicit collaboration.

I'm under the impression this would be clearly illegal if all these rental companies got in a room with some pencils and calculators and binders full of price data to do the same thing. Why is it different if they do that via a middleman?

>Why is it different if they do that via a middleman?

Because injecting a middleman into the situation creates a facade of plausible deniability. Obviously, such deniability is complete nonsense to anyone with eyes and a brain, but here we are.

Why is the very existence of such a middleman not illegal? I'm sure their sales pitch is more subtle than "we'll help you get away with price fixing", but it should be obvious that the effect is the same.

Paying someone to perform a market analysis to help you determine how much to charge is an incredibly normal thing to do. It only becomes illegal collusion when enough people are paying that single person that they start being able to control the market.

What you may call a facade of plausible deniability others would call racketeering.

There are laws against this kind of behavior what is lacking is sufficient enforcement of them.

I figured doing so would be a tad too on-the-nose in my original post, but yes, it is a clear cut case of racketeering, if not outright fraud.

Agree completely regarding lack of sufficient enforcement. Honestly we could use a serious wave of RICO enforcement at the highest level in this country, targeting (but not limited to) pharma giants, major "healthcare" and & insurance companies, big banks, etc.

It's not - the FTC released a statement on this very topic a few months ago: https://www.ftc.gov/business-guidance/blog/2024/03/price-fix...

We won't really know the answer until SCOTUS rules on it.

We already know the answer. The question is, will the supreme Court allow a monopoly price setter anyways?

I don’t see this even making it to SCOTUS unless there’s a circuit split somewhere.

Is it any better if the data is scraped from public sources and sold as a real-time analytics tool?

I strongly believe so, the same way a business can check competitors' prices. If it's public, it's fair game.

Note: I am biased, I'm working on a platform that does exactly that, taking an orthogonal direction to real estate analytics: https://www.hellodata.ai. Using 100% public data.

If that's true then NIMBYism is also collaboration to inflate property prices. Perhaps we should also be cracking down on the policies that restrict supply despite such obviously high, and rich, demand.

I see no reason why a cartel should be legal just because it's managed by software.

That said, SF's sky high rents are largely due to decades of anti-growth policies that have prevented building enough housing to meet demand.

Knowing your competiotions pricing doesnt make ot a cartel. It is the agreement between compeotitors to regulate price that makes it a cartel. If I have a saas in industry X and I see that all my competitors price their saas between Y and Z usd/month. Then it isnt a cartel if I price my saas similar.

Yeah, there's nothing wrong with that. The weak point was that the software supposedly required some action to deviate from the suggested price and required some degree of adherence to the price. I don't have the software myself so I can't say how much of this is blown up and how much real, but that definitely seems like it makes things problematic.

if I own a ecommerce in a comepetive niche and I write a script to automatically adjust my price of my competitors lower/increase the price it is not a cartel. Only if I actually make an agreement with them.

Both parties made an agreement with the software maker to not deviate, in effect forming a cartel.

Yes, and that last one is what's being alleged.

Knowing pricing is enough to distort markets when the prices are not visible to the other players like buyers. The same thing happens in recruiting where companies share compensation data through through third parties, which removes real supply and demand dynamics because companies will stick to the data they have signaled to each other this way.

That said, SF's sky high rents are largely due to decades of anti-growth policies that have prevented building enough housing to meet demand.

Yes. This reminds me of the way so much emphasis is put on trying to prevent people from sparking wildfires with cigarettes or abandoned campfires and ignoring the work that needs to be done for good forestry and controlled burns for decades.

It's incredibly short-sighted and irresponsible behaviour when it's done by individuals but institutions somehow get a pass.

I agree that a cartel that is simply moved to a third party should not be legal. But HN doesn’t seem to agree when we discuss the advertising cartel using GARM as a nonprofit to collude. To me it seems that most people are unprincipled about what types of anti competitive behavior is allowed, depending on their personal politics.

I’d say the rents in the downtown area are not entirely due to lack of supply.

The large towers of “luxury” apartments definitely are willing to let units go vacant to maintain rent

Elevated prices incentivize investments in things like more units in redevelopments, and better transit (to make commuting less of a economic cost)

> [RealPage] Chief Executive Dana Jones said that the company’s software helps both landlords and renters, and that the root causes of rising rents are the lack of affordable housing, increasing demand and inflationary costs of building and insuring housing.

Yep. I do wonder how much the finger-pointing at companies like RealPage is an attempt to distract people from the actual reasons why real estate is so expensive here.

That being said, if RealPage and others are essentially helping landlords do price-fixing, they do need to face consequences, along with the landlords using their services.

I worked in this space for a little under a year. There is lots of price fixing in apartment rentals, but it varies widely from city to city.

The place I worked had several different systems that relied on a number of tricks. One I remember off the top of my head would be used by property owners to signal price changes to one another through carefully crafted Craigslist apartment listings.

I worked in CA housing years ago and they would just call similar rental companies and get comps in order to either maximize rents (in high demand areas) or undercut the competition (in lower demand areas). I believe these practices are still completely legal.

That's just normal price-setting. RealPage crossed the line into fixing when it (a) required (or strongly pressured) landlords to adhere to their recommend pricing and (b) achieved high enough market share to use that as market-wide pricing power.

> required (or strongly pressured) landlords to adhere to their recommend pricing

How?

According to the DOJ lawsuit against Realpage[1]:

    The lawsuit quoted one unnamed witness, a RealPage pricing advisor, saying that some pricing advisors told property management employees that they had to follow the software’s recommendations. A leasing manager at a RealPage client said, “I knew [RealPage’s prices] were way too high, but [RealPage] barely budged” when the manager asked to deviate from the suggested rent.

    An update to the software tracked not only clients’ acceptance rate, but also the identity of the landlords’ staff members who had requested a deviation from RealPage’s price, the lawsuit said. Compensation for some property management personnel was even tied to compliance with the company’s recommendations, it said.

1: https://www.propublica.org/article/doj-backs-tenants-price-f...

This is one of the claims in the California complaint discussed here a while back [0]:

> 50. This data, according to RealPage, spans over “16 million units,” which is a “very large chunk of the total inventory in the country.” RealPage standardizes this data to account for differences in the characteristics or “class” of the property in question. RealPage then runs this massive dataset through its pricing algorithm,whereby RealPage sets prices for participating Lessors through application of a common formula to a common dataset.

> 51. Specifically, every morning, RealPage provides participating Lessors with recommended price levels. Lessors typically must communicate to a RealPage “Pricing Advisor” that they have “accept[ed]” or “confirm[ed] the “approved pricing” within a specified time frame. If Lessors wish to diverge from the “approved pricing” they must submit reasoning for doing so and await approval. RealPage encourages participating Lessors to have daily calls between the Lessors’ employees with pricing responsibility and the RealPage Pricing Advisor.

> 52. If there is a disagreement between the participating Lessor and the RealPage Pricing Advisor, the dispute is often elevated to the Lessor’s management for resolution, and specific reasons justifying a departure from RealPage’s pricing level are usually required. But RealPage emphasizes the need for discipline among participating Lessors and urges them that for its coordinated algorithmic pricing to be the most successful in increasing rents, participating Lessors must adopt RealPage’s pricing at least 80% of the time. As one example of such encouragement, Jeffrey Roper, RealPage’s main architect, publicly described the problem as: “If you have idiots undervaluing [setting prices independently], it costs the whole system.”

> 53. A RealPage employee reported that these instructions are successful, with as many as 90% (and at least 80%) of RealPage pricing being adopted. As one Lessor explained, RealPage’s coordinated algorithmic pricing required counterintuitive changes in their business practices “because[, upon adopting RealPage’s coordination of pricing,] we weren’t offering concessions nor were we able to negotiate pricing” like they previously had. That Lessor went on to explain that RealPage “maximize[s] rents but you have to be willing to strictly follow it,” and, as a result, “we rarely make any overrides to the recommendations” provided by RealPage. Another Lessor described RealPage as bringing “discipline” and “courage to pricing.”

And is still present in the most recent consolidated class-action complaint I could find [1]:

> 18. For RealPage RMS users, including the Owner-Operators and Managing Defendants, to diverge from RealPage’s RMS pricing requires approval from a RealPage Pricing Advisor or an internal RealPage-trained revenue manager, and often approval from senior management within the Owner-Operator and/or Managing Defendant organization, and even from Owner Defendants. Very few justifications are accepted for any requested deviation, and Owners, Owner-Operators, and Managing Defendants routinely reject deviations based on claims that RealPage’s prices were off-market or out-of-step with local property conditions. While RealPage claims that all pricing decisions are ultimately left to its clients, various witnesses confirm that, in their experience, no modifications can be made to RMS recommended pricing without prior approval from either RealPage or the Owners, Owner-Operators, and/or Managing Defendants’ senior management.

It seems like the exact

[0]: https://news.ycombinator.com/item?id=34926683 [1]: https://www.courtlistener.com/docket/67174489/728/in-re-real...

Do you think Federal and state AGs already know and have proof of those systems, or would it help to drop a dime at this point?

As long as people don’t lose sight that the there’s a lot more inflating prices than this, going after collusion and price fixing—including mediating software—is still a worthwhile endeavor.

There are two different issues. One is a lack of housing that drives up rent. The other is collusion to artificially increase rents. In places with severe housing issues like CA, both of these are huge issues and both should be addressed aggressively.

Don’t forget the bureaucratic morass and red tape intended to make construction on one’s own land as difficult as possible in California cities.

Factor in properties purchased solely for short term rental.

The DOJ is planning to sue RealPage...

https://www.politico.com/news/2024/07/12/justice-department-...

I assumed this was the future around the time I started in going to Uni in 2019. Every apartment I have lived in since has used the same management software, so I assume they are all using the same price fixing systems as well.

> In its statement, RealPage said landlords are free to reject any rent recommendations made by the software.

“Hm this software we pay lots of money for says we could be charging more money? No no, let’s ignore this suggestion for the good of our tenants”

> this software we pay lots of money for says we could be charging more money? No no, let’s ignore this suggestion for the good of our tenants

But the software doesn’t make the number go up. Landlords’ privileged bargaining position does. Collusion requires some prohibition on undercutting; otherwise it’s just markets being markets.

A landlord gets absolutely crushed by vacancy.

If they accept the higher price suggested by the software, they risk being vacant for longer. A month of vacancy is generally not worth 100 extra dollars a month.

So if the price is too high, the landlord has a strong incentive to drop it.

The price suggestion isn't the issue, the lack of stock absolutely is.

My understanding is that with the way commercial loans work, the landlords are actually incentivized to keep things vacate rather than lower rents.

Is that wrong?

This is/was a real loophole which I believe was created by low interest rates. The abundance of cheap money encourage lenders to tell their clients to make up approximate rental values. But with tightening credit, I can’t imagine this practice can last

Correct, that is wrong. Lenders aren’t stupid, they want to see cash flow. Commercial mortgages will come with terms requiring a minimum debt service coverage ratio (DSCR) to avoid default:

https://www.investopedia.com/terms/d/dscr.asp

If a landlord leaves units empty, their income drops, so their DSCR drops, and the lender can consider the property in default.

That does not mean a lender will foreclose or otherwise take control of the property, they also might not want to get involved. But it does give them negotiating power, and is something borrowers want to avoid.

But the DSRC doesn’t contract my understanding, it just shows there’s a floor to the number of unrented units.

Actually considering the DSRC it seems a large landlord would be more unlikely to lower rents unless desperate. Otherwise as people renew or lease at the lower rate, they’ll have less and less buffer

You claimed landlords are incentivized to keep spaces empty. Empty means zero income. DSCR with zero income is less than DSCR with some income.

Did they forget the lawsuit on the east coast, where their own documents said that they required 95% compliance, and that landlords had to write a reason for non-compliance, and they had their sales staff go above the heads of PMs who weren't following the software's advice.

"So, technically yes, you can reject the recommendations, but if you work for a PM company we will probably tell your boss you're ignoring the software they pay for".

The thing I don't understand in all this is how on earth are rents secret? I mean, can't a landlord fix prices just by looking at nearby rental listings and matching?

Are there certain key details that that the software and its back-end can share that enable price fixing better than open listings?

If tenants were hard to get, looking at nearby listings would motivate the landlord to go cheaper. (I do understand that the platform in question encourages compliance with the recommended pricing.)

When the market conditions favor landlords, they have no reason to compete, though, no matter how they get wind of prices.

(Oh, but, wow! San Francisco is really socking it to the housing problem here with this ban they are seeking, yay!)

This is all publicly available information but:

Advertise prices are not the actual prices that people are actually paying.

RealPage doesn’t just show the prices of other apartments around you. It gives a recommendation for what you should price your listings. The heart of the price fixing claim here is that this price is higher than landlords would select on their own.

The thing is, that if, say, 10,000 landlords had to vie for 1,000 renters, no application would help them set high prices. Nobody would stick to its recommendations, while would-be renters are not calling. They would say, screw that, and set a low price to try to attract the renter away from the next landlord.

Price fixing can only exist in an oligopoly (which becomes a virtual monpoly by getting together and fixing). There are too many landlords to comprise an oligopoly. If some of then plug into an app, that doesn't make them into an oligopoly.

This is all just scapegoating for deeper problems in the actual housing market. Rents are mainly high because of supply and demand.

Actually another thing is that landlords trying to set the highest possible price are being counterproductive. High rents tend to attract undesirable tenants. What you want as a landlord is not to extract the highest rent, but to find a great tenant. A great tenant isn't the one who can pay the top dollar. It's one who doesn't cause trouble or damage, and doesn't go into arrears on their rent. (Plus other attributes, like not complaining about every minor thing.)

How I know this is that over 30 years ago, I did IT work and materials preparation work for a real estate guru who taught seminars. He was a one man operation and hired me part time. In banging up the course materials, I picked up a thing or two.

Here is an article I just found about this topic:

https://www.landlordtalking.com/tips/tenant-screening/landlo...

Similar story about hotel price fixing: https://popular.info/p/how-hotels-are-colluding-to-jack

I believe this is widespread. There are plenty of hotels who have 100 rooms, yet only 6 are occupied on any typical night, yet they still price the rooms at $150/night.

Any sane manager would discount the rooms to $75/night, pulling in all the guests from neighbouring hotels, filling the place, and raking in a tidy profit.

Yet 'head office' says discounts aren't allowed, even if it increases revenue. Presumably because the CEO is mates with the competing CEO's and they all decide not to undercut eachother.

Any sane hotel manager knows that not all hotel clientele have the same level of risk, so you don’t just lower the price until every last room sells. Just one person can cause a disturbance that results in having to refund multiple other hotel guests. One factor of a nice hotel room is nice hotel guests that keep rooms nice and don’t cause issues.

Also, outside of money laundering or something, no hotel is operating on 6% occupancy.

Any sane manager will know there's a too-low amount at which point you start to lose money on the room, because you had to pull in an extra housekeeper, a certain percentage of people pee on the bed or break a chair, sheets need laundry, fees to the corporate franchise, there's a $10 food credit for anyone with Gold status, etc.

> Presumably because the CEO is mates with the competing CEO's and they all decide not to undercut each other.

"Presumably" meaning what? Do you have some evidence or are you presuming it because it "feels right" as an explanation?

Presuming that the price fixing mentioned in this article is also applied to hotel prices (which the FTC and DOJ are also looking into right now).

I really hate this anti-skeptic rhetoric that's becoming so popular on HN right now. It's like you can't even be suspicious of something without having evidence of it happening. But if you had evidence, you wouldn't be suspicious in the first place!

But the person I'm replying to didn't say "the price fixing mentioned in this article might also be applied to hotel prices". He/she said "Presumably because the CEO is mates with the competing CEO's and they all decide not to undercut each other" which is a pretty specific presumption. One can be suspicious of something without having any actual evidence of course, but if you're going to share your suspicions on Hacker News I think it's reasonable to expect to ask be asked to substantiate them.

You see things like this on planes. Some folks pay a lot, some pay a little. Once the flight's cost is paid for and it's absolutely going, then even $1 is additional profit.

In the case of hotel-casinos however I don't know if I believe in the posted prices at all as a lot of people are getting comps. My mother-in-law has a moderate gambling habit at the local casino and she gets free rooms all the time.

They opened a new hotel-casino near the Catskills that I was thinking about using as a base camp but I thought the posted room rates were insane but I'm sure if you were gambling you'd get a better deal.

Also they end their data in 2022 when the effect of the pandemic was still there to push occupancy down. I remember going to Buffalo a lot around that time and having Priceline put me in various Marriott group hotels at great rates.

"Free" isn't exactly free. The casino would not be comping rooms if they weren't more than making up for it on gambling losses from those getting the offers.

Of course. If you gamble today, particularly on the video slots, it all goes on your loyalty card so they know exactly what they can afford to give you in comps.

Comps or not I think the casino is going to look very differently at people who gamble vs people who don't. I mean, paying $140 or $180 for a room makes very little difference if somebody is losing $200 a day and, compared to other properties, the casino has an incentive to fill the hotel completely with gamblers.

(Myself I think about going to Las Vegas for a conference or event like CES but the casinos wouldn't like me because I won't gamble unless the odds are in my favor.)

It makes sense to use the software. It doesn’t make sense that they sign an agreement that they must use the software’s output. Requiring use of the output should be illegal.

Also the first rule of crime is don't write down that you're doing a crime.

> they sign an agreement that they must use the software’s output

They don't. This is the key weakness of the case and the reason that dozens of large landlords have already exited the class actions. Not everything that ProPublica prints is true.

> Not everything that ProPublica prints is true.

They didn't. They're quite clear in their articles.

https://www.propublica.org/article/yieldstar-rent-increase-r...

"Apartment managers can reject the software’s suggestions, but as many as 90% are adopted, according to former RealPage employees."

It's a pretty thin veil; a sort of https://en.wikipedia.org/wiki/Will_no_one_rid_me_of_this_tur... scenario.

"'The beauty of YieldStar is that it pushes you to go places that you wouldn’t have gone if you weren’t using it,' said Kortney Balas, director of revenue management at JVM Realty, referring to RealPage’s software in a testimonial video on the company’s website."

> They didn't. They're quite clear in their articles.

Not everything that bloggers say ProPublica said is what ProPublica said, or true.

Don't wiggle out of it; you very clearly implied ProPublica made a false statement about this. You were incorrect.

They will do absolutely everything they can in the city to lower the cost of housing EXCEPT allow more of it.

"it's those greedy landlords fault"

A problem can have more than one cause.

Both the city and private housing providers colluding to price fix housing costs can be wrong. The whataboutism is tiring.

Talk to somebody trying to replace a SFH with a duplex in San Francisco and then get back to me.

This is the best way to bust the landlord monopoly (if there is one).

Build more houses than we need. Suddenly those landlords have to compete for good tenants. And monopolistic cooperation will suddenly become impossible: when vacancies go up, and finance costs stay the same... the pressure will be on, and all it takes is a single landlord to cave and lower his rent to break the whole thing apart.

Before I moved to Canada, I lived in a country with surplus housing. Renting there was not only incredibly cheap, but very easy to arrange. You could play prospective landlords off each other to get better rent or have them do minor renovations. Legislation makes little to no difference in the face of market power.

Definitely. Nobody likes a greedy landlord. Let's flood the market with housing and destroy them.

The best way to deal with greedy members of any particular profession is ironically to flood the market with more people in that profession

My thoughts exactly. Price fixing should be illegal, but that's not the primary mover of insanely high rental prices in San Francisco.

It's going to work there because of the demand inelasticity. If you tried to fix prices in a place that did not have the demand it would be a different story.

Bingo.

Software that critics say is used to inflate rents. Had a stroke trying to read the HN title.

A comma would also work, but I don't know if you can use commas in HN titles.

...seeks ban of software, critics say

That doesn't seem right to me.

Indeed. Wouldn't be surprised if San Francisco tried to ban software, and criticism too. Perhaps "Software, critics, and software critics seek to ban San Francisco."

This would be an improper use of a comma.

I also read it as "software critics" but isn't it grammatically correct? Maybe our minds mess it up given the context and our backgrounds.

It's written in headlinese [1].

[1] https://en.wikipedia.org/wiki/Headline#Headlinese

It’s not just landlords.

I wrote this article about the wider phenomenon of memes and collusion in public markets:

https://magarshak.com/blog/?p=385

Unrelated question about "San Francisco seeks ban of software critics say is used to inflate rents"

Is this sentence clear for a native speaker of English?

I read the article and as far as I understand there is software that makes it that rents are high and SF wants to ban it.

Now when I carefully parse the words it makes sense (~ "SF seeks to ban some software, and this software is criticized for making rents high")

Was the title clear and understandable to you after a single pass?

It was clear and understandable to me, but follows a format I've seen many times. Headlines in English tend to have a style that's widely used, but would not be considered good usage outside of headlines, which I could expect to be troublesome for non-native speakers.

Yep, on first read I happened to get it right, but on further examination, I see the ambiguity. The trick is to not associate "software" with "critics", even though they're right next to one another and software could be an adjective rather than a noun.

San Francisco to ban software that "enables price collusion" by landlords

https://news.ycombinator.com/item?id=41133143

San Francisco to Ban Rent-Setting Software Amid Gouging Worry

https://news.ycombinator.com/item?id=41163936

[dupe]

Some more discussion: https://news.ycombinator.com/item?id=41133143

https://news.ycombinator.com/item?id=41163936

Algorithmic price-fixing of rents is here

https://news.ycombinator.com/item?id=41212616

If SF just relaxed zoning laws people would actually be allowed to build more housing. That is the only way SF will ever be able to address the root problem of affordable housing. Things like this are a bandaid that will have minimal impact.

Both have to happen. I live in a very friendly to develop location and rent/housing prices have skyrocketed up to CA prices. Not due to a lack of housing, there isn't an apartment complex in the area without vacancies. Yet everything has lock step raised their prices.

This. Rent prices have been skyrocketing across the country. There’s multiple causes, but there is good reason to believe that software-mediated collusion is one of them.

It's very Jacobin to pretend that the last-place mayoral candidate, a rich landlord, in San Francisco, the city with the worst housing crisis on the planet, has struck upon a useful and remarkable solution to bring down rents. The biggest problem in America today is that our socialists are the worst and stupidest socialists any country has ever suffered. We need better ones.

Smart and mild people on both sides of the aisle are critical, but you also need a handful of principles-first ideologues on both sides to keep the Overton window from speeding off to one side.

The problem is when the middle gets radicalized and the whole lot of them zoom off to the edge of sanity.

Our socialists are not extreme. They are fake. Half of them are trust fund kids from Little Ivies with permanent incomes from their dads' regional apartment empires.

Algorithmic price-fixing of rents is here

https://news.ycombinator.com/item?id=41212616

If producers can communicate to form a unified actor, why can't consumers too ?

And just like that, the USSR was magically reconstituted.

I'm skeptical this is actually materially increasing rents, but I also think this shouldn't be allowed as a matter of principle.

SF city officials are looking to cast blame to anyone and everyone in their grasp -- including private equity companies, operating and innovating legally in the market. It has been shown that the software offering improves tenant lives by making it easier and faster than ever before to manage their rental experience. This innovative and game-changing software has been further enhanced with the use of AI, giving users more power and flexibility than ever before.

What!? Where has it been shown that rent price fixing makes tenants lives better? Why and how could price collusions algorithms make the life of a renter better? This sounds like something on would see on the real page website.

Are you on the marketing staff for Realpage? Or just astroturfing? Who otherwise would write “This innovative and game-changing software had been further enhanced with the use of AI”?!

Please ban this throughout the entire state, not just SF.

they're just sharing information. ie. protected speech.

They will do literally anything but build housing.

I mean this might help a little bit but if demand exceeds supply it won't help much.

Politicians are merely responding to where the money and power increasingly is:

California Apartment Association [commercial landlord lobby group] has given $26.7 million to 936 different filers [politicians] over the last 26 years: look at who's on the payroll:

[0]: https://www.followthemoney.org/entity-details?eid=3106&defau...

They even challenge out-of-state rulings (which would ultimately also bubble up to the 9th Circuit Court of Appeals):

> 4/2024 The California Apartment Association, in partnership with the San Francisco Apartment Association, today filed an amicus brief urging the U.S. Supreme Court to accept a case challenging the eviction moratorium imposed in the State of Washington.

> The case, Gonzales v. Inslee, seeks to declare Washington State’s eviction moratorium an uncompensated government taking.

[1]: https://caanet.org/caa-urges-supreme-court-to-review-washing...

Ultimately it's why I left California. If you live there you are subject to a real estate cartel that will extract all your surplus earnings, and they seem to have an absolute lock on power with the help of a ton of useful idiots who buy BS arguments against home construction. There's no rational response but to leave.

There's a growing YIMBY movement but at this point the mismatch between supply and demand is so great you'd have to embark on a crash building program to make housing prices sane.

Yes but it's depressing how it only takes a tiny $4.5 million in (direct) political contributions in 2019/2020 election cycle to control the ~$100 billion CA rental industry:

Special Investigation: California Apartment Association’s Deep-Pocketed Campaign To Kill Tenant Protections (2021)

All in all, in 2019 and 2020:

- the CAA Issues Committee made campaign contributions of $534,091

- the CAA Independent Expenditure Committee handed out $1,299,795

- the CAA Housing Solutions Committee delivered $261,675

- the CAA Political Action Committee gave $2,409,976. That’s a grand total of $4,505,537 in campaign cash shelled out all over California by the CAA and real estate industry in 2019 and 2020.

https://www.housingisahumanright.org/special-investigation-t...

Is California Apartment Association the Most Notorious Landlord Group in the State?

https://medium.com/yes-on-proposition-21/is-california-apart...

No-one ever talks about reducing demand for housing.

I can see the clickbait YouTube video now: "Reduce demand for housing with this one modest proposal"

Referenced: https://en.wikipedia.org/wiki/A_Modest_Proposal

I'm not proposing anyone eat their children.

However, immigration does seem to be a factor driving supply.

I'm not sure what particular aspect you're hinting at, but...

The number of single adult households has doubled since the 60s[0].

This dramatically increases the amount of housing needed. All those that make up trend of going from married to single, account for 2 houses needed instead of 1.

But the same people who complain about housing are often same ones who are anti-marriage.

[0] https://usafacts.org/articles/how-has-the-structure-of-ameri...

> The number of single adult households has doubled since the 60s.

Not the number, the proportion. The population has doubled during that time; it would be weird if the number of households stayed flat.

Single households with no children also drive demand for very different housing than married households with children.

Related. Others?

San Francisco to Ban Rent-Setting Software Amid Gouging Worry - https://news.ycombinator.com/item?id=41163936 - Aug 2024 (48 comments)

San Francisco Moves to Ban Anti-Competitive Rent Software - https://news.ycombinator.com/item?id=41155792 - Aug 2024 (7 comments)

San Francisco to ban software that "enables price collusion" by landlords - https://news.ycombinator.com/item?id=41133143 - Aug 2024 (17 comments)

Hoping to cut San Francisco rents, supervisors approve software-pricing ban - https://news.ycombinator.com/item?id=41125232 - Aug 2024 (1 comment)

Why US renters are taking corporate landlords to court - https://news.ycombinator.com/item?id=40261647 - May 2024 (110 comments)

Rents are soaring. Is RealPage to blame? - https://news.ycombinator.com/item?id=39992731 - April 2024 (207 comments)

Lawmakers Seeking to Outlaw Rent Price Fixing Reported by Propublica - https://news.ycombinator.com/item?id=39206493 - Jan 2024 (56 comments)

Big landlords used software to collude on rent prices, DC lawsuit says - https://news.ycombinator.com/item?id=38114264 - Nov 2023 (375 comments)

The rent is too damn algorithmic - https://news.ycombinator.com/item?id=37829575 - Oct 2023 (147 comments)

Landlord Software Is Making Life Hell for Renters, Report Says - https://news.ycombinator.com/item?id=35786820 - May 2023 (17 comments)

I saw RealPage's crappy rent-jacking-up software so you don't have to - https://news.ycombinator.com/item?id=34926683 - Feb 2023 (403 comments)

DOJ will examine whether RealPage helped landlords coordinate rent increases - https://news.ycombinator.com/item?id=33744136 - Nov 2022 (123 comments)

RealPage and landlords illegally created a 'cartel' to set prices, lawsuit says - https://news.ycombinator.com/item?id=33633541 - Nov 2022 (3 comments)

US senator seeks antitrust review of apartment price-setting software - https://news.ycombinator.com/item?id=33444092 - Nov 2022 (6 comments)

Lawsuit filed against rent-setting software RealPage - https://news.ycombinator.com/item?id=33317414 - Oct 2022 (50 comments)

Clever algorithm may be what's driving rent prices so high - https://news.ycombinator.com/item?id=33313028 - Oct 2022 (6 comments)

Rent going up? One company’s algorithm could be why - https://news.ycombinator.com/item?id=33224502 - Oct 2022 (279 comments)

Landlords use software to set rental rates - https://news.ycombinator.com/item?id=3294248 - Nov 2011 (5 comments)

“Landlords are using software to launder price fixing”

Jesus, no wonder kids today hate capitalism and are flirting with political ideologies on the extremes of the spectrum.

Capitalism has nothing to do with this, because land is not capital. Land, as a non-fungible asset, is monopolistic by nature. There is no free market involved because competition cannot exist. Furthermore, because you must occupy some piece of land, it commands a monopoly price that ends up taking absolutely everything that the poorest can possibly pay, ensuring the continued existence of poverty no matter how much we progress as a nation.

Land ownership should not be confused with capitalism because it is not a free market, and the advantages of location are not capital.

Capitalism has _everything_ to do with this as while the _amount_ of land may not be growing, the economic system does _nothing_ to cap the price of this essential commodity. The only cap on the price of land is the amount someone is willing to pay for it.

To say that the advantages of location are not capital (or equivalent to capital) is just ignorant. There are plenty of pieces of land that act just like capital - access to natural resources, access to a coastline, fertile for farming, or in a location where a toll road or similar could be employed.

It becomes very difficult for someone to build and own a sapphire mine if they don't have the capital to buy the land that has the sapphires in it!

Also capitalism provides plenty of capital to bid up house prices.

There wouldn't be many $1 million ranch houses if there wasn't a bank that would give you a mortgage on a $1 million ranch house.

I think point of gp is that land is _not_ a commodity. It thus cannot be treated as capital, the way it is more traditionally understood. Supply/demand dynamics in a market does not make something capitalism.

That's exactly right. Land is not a commodity, in fact it is the absolute furthest thing from a commodity. Plots of land are different, and command different valuations based on location. It is not produced by anyone and has an unchanging supply. To call it a commodity is so completely backwards.

There are supply and demand dynamics in the land market. However much excess value you get from occupying a certain location on Earth, is how much people will be willing to pay for that. The demand will always be high as long as the value from the location is higher than the cost to occupy. This cost will soak up any advancements in society, which is why despite everything we have done to progress the state of man there is still a class of renters giving everything extra they make due to societal advancements to landowners.

Tell that to the Dutch.

It's not quite that extreme.

There are plots of land in random, remote places that continuously go up for sale for extremely cheap prices. You won't find these on NMLS listing services :-)

Also, modern local regulation (not capitalism) is largely to blame for housing prices. NIMBYism and similar attitudes are usually behind it, although distrust of potentially corrupt officials can also factor in. Smart city planning can help here. There are good developers out there with money to invest.

Finally, there are vast swaths of undeveloped, unused land, and not all of it is owned by the BLM. This represents an open opportunity for developing housing and townships.

All of the above are not easy to take advantage of -- there are significant hurdles involved. But having multiple clear paths forward does imply we're not under some thumb of tyranny with regard to housing and real estate.

(Edit: removed comment about homesteading; thanks for the correction!)

https://en.wikipedia.org/wiki/Homestead_Acts#End_of_homestea...

> The Federal Land Policy and Management Act of 1976 ended homesteading; by that time, federal government policy had shifted to retaining control of western public lands. The only exception to this new policy was in Alaska, for which the law allowed homesteading until 1986.

> The last claim under this Act was made by Ken Deardorff for 80 acres (32 ha) of land on the Stony River in southwestern Alaska. He fulfilled all requirements of the homestead act in 1979 but did not receive his deed until May 1988. He is the last person to receive a title to land claimed under the Homestead Acts.

If we were like the Soviet Union we might address the problem of coastal overpopulation by setting up a Gulag in Idaho or Wyoming.

Weirdly confident and passionate rant here about nonsense.

Capital is not defined by non fungibility. Land is not “monopolistic” by nature. Competition can exist for land. Monopolies don’t define free markets. Land is not capital but not being capital does not mean it’s unrelated to capitalism. You’ve described land as having inelastic demand but that’s not correct, it’s actually inelastic supply. Demand for land is definitely elastic even if you “must occupy some land”.

This is like a puzzle to spot as many factually incorrect claims as you can.

> Capital is not defined by non fungibility.

Correct. It's defined as wealth in the course of exchange, coming from labor. Whose labor created land? Nobody's.

> Land is not "monopolistic" by nature

Completely false. By definition, if you own a plot of land, you have a complete monopoly on that location. Nobody else can compete with the price you put on that slice of the Earth. LAND is defined by its non fungibility. A plot of land in the middle of San Francisco is not the same as a plot of land in the middle of Arizona.

> You’ve described land as having inelastic demand but that’s not correct, it’s actually inelastic supply.

You can clearly see how land has an inelastic supply, yet you continue to think of it as capital which can be produced. The demand to exist in a piece of land has everything to do with the rents of the land. If you can make $30,000 more a year in valuable land than worthless land, using the same labor/capital expenditures, the land rents become $30,000 a year. Land values have nothing to do with the cost of production, but with that value of location.

> Completely false. By definition, if you own a plot of land, you have a complete monopoly on that location. Nobody else can compete with the price you put on that slice of the Earth. LAND is defined by its non fungibility. A plot of land in the middle of San Francisco is not the same as a plot of land in the middle of Arizona.

A plot of land in the middle of San Francisco is very similar to another plot of land in the middle of San Francisco. People don’t describe ownership as a “monopoly over a specific object”. That’s just silly. Monopoly is a descriptor of a market. Not specific assets.

> You can clearly see how land has an inelastic supply, yet you continue to think of it as capital which can be produced.

… no I was pretty explicit that land is not capital in those exact words

> The demand to exist in a piece of land has everything to do with the rents of the land.

No, rents (prices) are a function of demand.

> If you can make $30,000 more a year in valuable land than worthless land, using the same labor/capital expenditures, the land rents become $30,000 a year.

Idk how to parse this sentence.

You have a very weird grasp on economic concepts

Capitalism, as commonly understood today, by non-Economists, has everything to do with this. (Which, yes, is a major social problem.)

Vs. (IIR) Classical (Adam Smith era) Economics viewed rent as Feudalism - not Capitalism - and took a very dim view of all such "as much gold as you can squeeze out of others, without doing any real work yourself" schemes.

Capitalism is not centrist. It's not like the extreme right is not composed mainly of capitalists.

The amount of people I know with full time jobs (often very skilled ones, one person I know runs research projects studying cats) struggling to get by is pretty crazy. Working in software we can be really insulated from it. It's no surprise people don't feel like the current system is working when it isn't working for them.

Did you compare average jobs across time and place?

Ie, does your statement apply to everyone in the country? Some places have much lower cost of living but similar earning power.

Similarly, did you compare to the past? Average people used to be much worse off 20, 40, 60, etcetera years ago.

Also, should running research projects that matter little to the average person get large financial rewards?

I was just saying what's happening with my friends and why they feel disaffected. You're the one making a lot of claims with no sources.

For specifically about the research project (which is the only question really relevant enough to answer): no, I don't think someone running fully funded research projects at a top university in her field should necessarily be living luxuriously but I do think they shouldn't have to worry about making rent in the city the university is in.

Edit: to put it in perspective my dad was able to pay for college working part time on the docks. Nowadays it would struggle to pay food/rent, let alone get close to paying tuition.

"kids" => your bubble?

Then they were sadly misinformed. The need to prevent cartels and monopolies has been known since the notion of capitalism was conceived.

The issue isn't the need, it's the willingness/capacity to do so that's a problem.

Yes indeed, regulatory capture is a problem.

The US abandoned enforcing many of its antitrust laws starting in the late '70s, and is now reaping the long-term consequences of doing so.

It's odd to blame capitalism for these sorts of problems.

Real estate, property development, and property renting/leasing are typically some of the least-capitalist and least-free-market sectors around.

They all tend to involve extensive and very invasive government intervention that controls or even prevents when and how capital can be used. That's the opposite of capitalism. That's the opposite of a free market.

Government-imposed zoning regulations, onerous development planning and approval processes, rent controls, licensing requirements, and other forms of interference severely inhibit the ability of the market to function properly.

As government involvement in such sectors has increased over time, the situation has gotten worse and worse. Of course, inefficiency and problems are exactly what we should expect to arise due to government interference with the market.

Competition becomes limited, which causes supply to become artificially constrained. This distorts the pricing, which may include collusion becoming possible. Incentives that would help drive down costs, while simultaneously increasing quality and availability, no long exist.

Those calling for even more government intervention than there already is are only making the situation even worse for themselves and others.

If I remember right, the very beginning of "capitalism" was in companies like

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

which was granted a monopoly in the Asia trade by the state. In general "capitalists" like "free" markets when it means they can do what they hell they want, but they very much like regulation when it is in their favor.

Capitalism as it was initial proposed was an explicit rejection of mercantilism, the guiding light for how colonial companies worked. You are mistaking the beginning of shareholder based ownership, which is not an intrinsic part of Capitalism, with the core concept of Capitalism.

I'll grant that Adam Smith made a strong case that free trade makes people richer, that's one part of the story, but it's not the whole story. Note Wikipedia shies away from making a definition

https://en.wikipedia.org/wiki/Capitalism#Definition

"There is no universally agreed upon definition of capitalism... some doubt that the term "capitalism" possesses valid scientific dignity, and it is generally not discussed in mainstream economics... understanding of the concept of capitalism tends to be heavily influenced by opponents of capitalism and by the followers and critics of Karl Marx."

I'd argue that the shareholder based ownership makes possible the vast expansion of scale which makes "modern" systems so productive. e.g. in "capitalism" somebody can accumulate capital and invest it.

>But a lack of supply doesn’t tell the entire story.

No, it does.

Depends on how you look at it. Simply adding supply doesn't really address the underlying problem if you don't look at the rest of the context. If any freshly built housing is bought up by landlords who can afford to outbid ordinary people, then adding supply doesn't alleviate the problem. We're seeing this in many capitals across the world. Realistically I think any solution must start with making real estate a non-feasible investment vehicle, otherwise you're always going to bid against the ultrarich of the world either directly or indirectly, no matter how much supply you add.

Supply is supply of sellers, in this case. A market works best with lots of sellers and lots of buyers.

No, the article clearly talks about the supply of housing in the quote the above comment has outlined.

The point is supply of housing units is moot if there is only 1 seller or cartel of sellers (barring land value taxes or other sufficiently large penalties for vacant housing units).

> If any freshly built housing is bought up by landlords who can afford to outbid ordinary people, then adding supply doesn't alleviate the problem.

Can you explain a little bit more about how this situation is supposed to arise? Perhaps you're saying that regardless of how much new housing is built, landlords will always be able and willing to buy it for a higher price than "ordinary people"? That sounds quite implausible to me. Landlords don't have infinite amounts of money. Maybe you're saying something else.

The problem arises when you have long periods of either zero or near zero interest rates and no policy guardrails to regulate the market. The implausible scenario has played out in many cities in Europe, sometimes even to the extent that companies aggregating landlords started to build their own real estate that would never be sold, only let, because they ran out of real estate they wanted to buy. This left behind only low quality or poor condition housing, but at extremely high prices because everything else is gone from the market.

The issue here is essentially a cash flows problem, once you're a landlord that has a sizeable portfolio of real estate, you can use that as collateral and offload the extra expense to renters. In a healthy market, renters can turn around and buy their own homes if the rent gets too high. Where this doesn't work is if housing is too expensive for the average buyer so they're forced to rent, come hell or high water.

The Netherlands is a good example of this. While the problem has a lot more nuance and historical context to it, the state of affairs is the Dutch are short somewhere between 300k and 400k homes while two people earning the median wage can not afford an average home because the price is too high to obtain a mortgage. Meanwhile nearly all rental homes are owned either by companies or whale land lords.

Rereading my comment now I'm not sure if I was able to convey what I mean well enough, sorry about that. I'm happy to answer any questions should you have them.

What I don't understand is that you say "the Dutch are short somewhere between 300k and 400k homes" when you previously said "Simply adding supply doesn't really address the underlying problem if you don't look at the rest of the context. If any freshly built housing is bought up by landlords who can afford to outbid ordinary people, then adding supply doesn't alleviate the problem".

What does it mean to be "short of 300k" homes if not "adding supply of 300k homes will address the problem"?

In this specific example it means the Dutch have built a considerable amount of homes in the past few years, but the number of homes the supply is short has increased, not decreased. Simply adding more houses alone is clearly not going to solve the problem.

I don't think I understand why not ... Presumably there has been a lot of immigration to the Netherlands in the same time. Naturally building needs to keep pace with immigration, so (300k + net migration) homes sounds like it should resolve the problem. If not, why not?

There are two key points you might be missing here. One is affordability. Landlords buying up housing to let pushes the prices up for everyone. In the Netherlands this has reached a point where two people living together and both earning the national median wage cannot get a mortgage for an average price home because they don't meet the minimum income requirement. This in turn means they're effectively forced to rent, barring outside intervention such as social housing programs etc, which creates more cash flows to landlords.

The other issue is time. Building new housing takes time and even though new housing enters the market, companies and landlords with large portfolios have ample time to build up capital to buy it. They can afford to bid considerably more than starters who are buying their first home.

To maybe exemplify what I mean, the last time I rented a home in the Netherlands, my landlord was a family estate that owned hundreds of apartments. At Dutch prices this means they can afford to put in a down payment for a mortgage for a number of newly built homes every single month, and they aren't even a big player in the local housing market.

Thanks, I take the point that housing is expensive and two people pooling their median wage can't afford an average price home, and in the meantime they're paying rent to landlords. I also take the point that whilst paying rent to landlords, those landlords are increasing their wealth and this contributes to them being able to buy more homes. What I don't get is how you can conclude:

> If any freshly built housing is bought up by landlords who can afford to outbid ordinary people, then adding supply doesn't alleviate the problem.

Assuming house building is economically viable (and if it's not all bets are off anyway) then isn't it equally plausible that building masses of housing means that

1. There will be simply too many new houses for landlords to buy them anyway. Their capital isn't unlimited! And,

2. House prices will drop, forcing landlords who are holding housing for the appreciation will exist the market, further putting prices down.

Landlords may have much more capital than the average person, but they don't have an infinite reserve.

Investment opportunities compete with one another for investor dollars. If the yield on housing goes down, then investors will shift their money to (non-REIT) stocks and bonds.

Let's do a thought experiment and imagine the worst-case scenario for the "build baby build" camp.

1. We build a ton of new housing, more than we need.

2. Landlords snap all of it up immediately.

3. They collude to keep rents steady despite the massive oversupply.

4. So now most of the housing is rented out at artificially high rates, and some housing is extra and thus empty. However, a ton of capital is locked up on the empty houses.

5. The more housing we overbuild, the more investors' yield on housing goes down - they have to invest more and more to snap up all the houses, but the number of houses that's collecting rent is steady.

6. The rational subset of housing investors pull their capital and buy stocks and bonds instead. Housing prices fall.

7. The irrational subset of housing investors hold out, hoping to keep collecting high rent or sell the housing on to a "greater fool". Housing investors lose some of their capital, and the worst ones are cycled out of the system as poor capital allocators.

This whole idea relies on the prerequisite that you're capable of overbuilding desirable housing though, no? It's reasonably straightforward to overbuild housing, just look at ghost cities in China, but building housing that's desirable enough that someone actually wants to live there is a different matter entirely.

I agree with the rest of your comment that the issue largely boils down to making real estate an undesirable investment class. I think where we diverge is that I think legislation and building is the most feasible way to achieve this, not just building.

Fair points, another difficulty up here in Canada and probably in the States as well is that there are shortages of people who can build houses. But that's no excuse for giving up on the problem.

I will also add though that even though it's physically hard to add housing to a place like Manhattan or politically hard to do so in the Bay area, there are tons of mid-sized cities all over the continent with lots of room to grow. With remote work and an army of millennials reaching house-buying-baby-having age all at the same time, there's no reason these cities can't be desirable and cheap places to live.

> Fair points, another difficulty up here in Canada and probably in the States as well is that there are shortages of people who can build houses.

That didn't stop them before.

Joking aside, I find the build quality in the US quite poor overall (even in the north, in Ohio). We have the same issue in continental Europe (France-Germany at least) with new-ish, low-end stock (late 90s-early 2010s at least), but we're not nearly as bad (I'm mostly thinking of windows and electricity, but even carpentry is approximative from what I've seen).

Which is weird, because I've seen / talked with skilled tradespeople in West Virginia, and saw the most impressive house in the middle of nowhere, Lincoln County.

It's always been hard and expensive to build anything right. The only surviving old buildings were the good ones.

Yup, the law of supply and demand does tell the important parts of the price story. Using software to help set prices lets suppliers converge on the market rate more swiftly, but doesn't change that rate by a lot. It's the same when a buyer uses software to see a long list of market prices. It helps them determine their demand price, but doesn't do a lot to move it beyond the supply and demand story. Banning such software would reduce the efficiency at which we arrive at those prices on both the high and low side. It's not clear that demanders would benefit more than suppliers.

Value/Price of commercial real estate are significantly determine by theoretical rent, so are the commercial loans.

It’s a positive feedback loop of high rent. There is no theoretical abstract proper rent just waiting to be discovered like that comment seems to think exists.

They want us to believe the problem is the greedy landlords, and not the incompetent, greedy, and entitled politicians.

Every time they "allow" more housing they weigh it down with petty pet requirements.

This is correct. The big picture is supply and demand. RealPage won't let you charge LA rents in Houston, because Houston has a different mix of supply and demand that is better for tenants.

That said: if this system lets landlords eke out even 1% extra compared to the status quo... well 1% of a lot of people's rents adds up to a lot of money and I won't be sad if the company gets sued and loses.

But what you can't do is let your eyes off of the local NIMBYism that so often is the root cause of supply issues:

https://bendyimby.com/2024/04/16/the-hearing-and-the-housing...

I think it is a little more complicated. The actual native population in the US is shrinking so demand and thus cost should be shrinking.

Sometimes it feels like the easiest way to make money with a new business today is to build something that helps another person make money.

I'm sure it took work to build a database of rents in America for RealPage. But then they got customers to contribute their own data too, per the article

That's always been the easiest way. You can employ someone to work for you, but then you have to pay them, it creates a cashflow issue and you're assuming larger risk. It's much more efficient to structure your business to take a cut of someone else working for themselves as it trades a lower profit margin for a larger base and lower risk.

During a gold rush, sell shovels.

> Sometimes it feels like the easiest way to make money with a new business today is to build something that helps another person make money.

Isn't this exactly what all B2B businesses do?

I more meant that they probably have enough of the market now to stop collecting information. They can just charge their customers to access what's already there and offer a small discount if those customers contribute their new data

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