DOJ sues realpage for algorithmic pricing scheme that harms renters | Hacker News Reader

DOJ sues realpage for algorithmic pricing scheme that harms renters

justice.gov

795 pointspseudolus625 comments

>Armed with competing landlords’ data, RealPage also encourages loyalty to the algorithm’s recommendations through, among other measures, “auto accept” functionality and pricing advisors who monitor landlords’ compliance.

I think the "private prices" + "autoaccept" + "compliance" is the key misbehavior that gets RealPage into legal trouble.

If competitors want to converge on prices in a legal manner, they have to do out in the open via "price signaling" via public posting of prices. That's how it's legally possible for competitors in other industries to do it:

- gas stations looking at each others signs of prices and quickly adjusting to match;

- e-auctions like Ebay/Reverb showing a seller what the previous range of sold prices were;

- Kelly "Blue Book" showing current used car market prices

- Zillow publicly showing rental rates, etc.

Neither the platform nor the sellers in those examples get in trouble for "price fixing".

In contrast, the privately shared pricing with compliance monitoring by the platform is too coordinated to avoid legal scrutiny.

The Blue Book is a great example because the number is so often discarded in almost all sales.

Another example would be stock trading apps, especially ones that give you forecasts and estimates as to when to buy and sell.

Many listings for apartments are on on-site.com (which is "a RealPage company") and are publicly available...

So it could be argued it's not

"private prices" + "autoaccept" + "compliance"

But rather

"public prices" + "autoaccept" + "compliance"

Still problematic behavior (and probably add "private knowledge of inventory forecast" on top of that), but I'd argue price signaling of the available inventory isn't the main issue.

>So it could be argued it's not "private prices"

I added "private prices" as one of the factors because the official DOJ wording in the complaint mentions "nonpublic/confidential/sensitive" prices in 3 different places:

>The complaint alleges that RealPage contracts with competing landlords who agree to share with RealPage nonpublic, competitively sensitive information about their apartment rental rates

>“We allege that RealPage’s pricing algorithm enables landlords to share confidential, competitively sensitive information and align their rents.

>Landlords agree to share their competitively sensitive data with RealPage in return for pricing recommendations and decisions that are the result of combining and analyzing competitors’ sensitive data. *

I don’t think they’re talking about the price they’re renting the apartment for; I can’t imagine that number is secret in any meaningful sense of the word. Who rents an apartment without knowing the price?

I think they’re talking about more sensitive internal numbers. What are the costs and margins on the unit? How quickly are units moving at a certain price? What’s the turnover at particular prices?

I think the core mechanics bear some similarities to insider trading, with a third party “washing” the non-public information.

Another big one is when do the leases end for inventory control. RealPage is why Apartment dwellers report getting options to renew at cheapest price for odd number of months like 17. Realpage is trying to prevent a bunch of leases ending and flooding the market.

> I think they’re talking about more sensitive internal numbers. What are the costs and margins on the unit? How quickly are units moving at a certain price? What’s the turnover at particular prices?

Yeah that's my understanding of it too "competing landlords who agree to share with RealPage nonpublic, competitively sensitive information about their apartment rental rates and other lease terms".

I.e. realPage has an oracle view of all the lease ending times etc, so it knows for instance, this next July there's going to be very few availability, so boost all the rents by X%

I guess there's a "private price" if the apartment complex share what, after all negotiations, the renter ended up signing for. It can be more than what was on the public website, if they ended up signing for a shorter lease, or less if the apartment ended up needing to throw in "first month free" etc.

There's also private price of lease renewals done before the unit is put for rent on the website.

There is more than just pricing at question here. If you go to your typical local gas station with a 5000 gallon tank and fill up the station will raise their prices above the other stations in the area because they will only have a small amount of gas in their tanks and so they want everyone to go elsewhere until the next delivery fills the tanks up again. (depending on when you fill up the station may not even have 5000 gallons in their tanks.) How much tank is left at any station is NOT public information shared with other stations in the area.

RealPage though has information on how many apartments are empty and uses that in algorithms even though it isn't public information.

>are publicly available

The list price is different than the final accepted monthly rate\term for the renter. Realpage is getting the actual rental information.

In addition, the occupancy of the building is also not public data.

The classic way that businesses openly coordinate their pricing is via price matching. Businesses advertise their preferred prices but also promise that they'll match lower prices from competitors. Competitors see these advertisements and set their own prices to approximately match.

The FTC does not consider this type of open signaling to be price fixing:

> Q: Our company monitors competitors' ads, and we sometimes offer to match special discounts or sales incentives for consumers. Is this a problem?

> A: No. Matching competitors' pricing may be good business, and occurs often in highly competitive markets. Each company is free to set its own prices, and it may charge the same price as its competitors as long as the decision was not based on any agreement or coordination with a competitor.

Source: https://www.ftc.gov/advice-guidance/competition-guidance/gui...

Price matching was something that really worked in the past, again in the days before mass digitization and cheap storage/printing. Add in there are only a few major retailers left, it becomes easy to make a product for each of them.

CostCow will have product 0ICU812a

WalWart will have product 0ICU812b

Then they don't have to actually price match because they are "different products"

Online stores seem to match prices; when I google for some electronic equipment (like headphones or MIDI controllers), many stores have almost equal prices for the same item. Of course there is a chance that all they are owned by the same entity, but it is not very plausible.

That's probably the MSRP for the item. (https://www.investopedia.com/terms/m/manufacturers-suggested...)

that's not really price fixing in so much that price matching in this manner is known to lead to a race to the bottom.

this is very different from, "leasing agent, set this high price or get fired by your employer."

The rub is that if store and store b got together and negotiated a price they would stick to and not try to undercut each other, that's price fixing, and that is what realpage is doing on a MASSIVE scale.

'Cartel/Corporate' owners own ~70% of the units in Seattle. 11 total companies (big names you should know like gray star and equity residential), to the one they all use realpage. That's 70% of the market price fixed, MINIMUM.

Before your second paragraph: I Googled about it and found this ProPublica story: https://www.propublica.org/article/yieldstar-rent-increase-r...

The exact quote:

    > In one neighborhood in Seattle, ProPublica found, 70% of apartments were overseen by just 10 property managers, every single one of which used pricing software sold by RealPage.

To be clear, that is "one neighborhood" in Seattle. Your second paragraph makes it seem like all of Seattle. To be clear, in neighborhoods with lots of new high rise buildings, this pattern seems normal to me: About 10 companies (or less) do most of the property management.

That neighborhood is the neighborhood amazon is in South Lake Union. But as far as I can tell every corporate building in town uses them which is a wild amount of buildings.

I think you're over analyzing and confusing things. Price fixing is when competitors work together to raise prices above what they would normally be in a competitive market.

Using your gas station example, a gas station isn't going to look at a competitor selling gas at $4.15 and decide to raise their price to $4.45. They would lower their price to match the competition, otherwise they'd lose sales and make less money. Price fixing would be if both gas stations decided to raise their price to $4.45 at the same time so that customers don't have a choice.

The analogy also works in the opposite direction. If a gas station is selling at $4.10 a gallon and another down the street is selling at $4.15, the first gas station could happily up their price to $4.14. 1% more revenue and they're still the cheapest on the block.

Competitive markets keep things within a tolerance, imo. If the average is $4.10 then you can expect the price to vary up and down by some amount depending on location and other things provided.

What RealPage does is distinct because it assures prices are always above and by orders of magnitude what they should be. It also achieves that through private communication which I think is generally accepted as a problem.

Order of magnitude is generally accepted as starting at 10x. Are you saying rents are 10-100x higher because of RealPage?

You're right, order of magnitude wasn't the right choice of words. They're 3-4x what they should be, and RealPage is responsible for a sizeable portion on its own, which is saying something.

And if there is a third also selling at $4.10? Unless they privately coordinate and collude, its hard for this to work for artificial price increases.

I think one thing that's weird to me is that Shell and Exxon or 76 or whatever all somehow got their gas to be somewhere in the same ballpark. You'd expect to see that some gas companies can't get their shit together and can't figure out how to extract, purify, and distribute gas at anything less than $500 per gallon. Now, naturally you'd expect those companies to just go out of business. And you'd also expect to see at least one that figures out how to do all of that for $1 per gallon. Yet, here they all are, selling it around the same price. It's too strange in my opinion. There is collusion happening in many markets. I suspect they are all producing it for way less which is why one of them doesn't suddenly go out of business, but the fact that they're not selling it so low that the competitors simply go out of business - again a collusion signal.

Relevant: https://www.reuters.com/business/energy/us-senate-committee-...

They are all selling the same gas from the same refinery. They might have slightly different additives but otherwise it all comes from the same place. you can't afford shipping costs to get gass from a different refinery (unless you are on a territory border)

the only question is how much profit to put on top and even then they have to be careful as if they go too low their competetors won't follow and then they have to pay extra for an unscheuled delivery just to fill their tank.

i'm reasonable certian that small stations are illegally colluding in some cases.

Many do go out of business, and many substantially undercut others. This is particularly true for the diesel market, where OTR truck operators are more price sensitive. Most stations are buying gas around similar prices at the terminal, but their overhead to provide the station can vary wildly between large chains and small, family owned stations.

“Skimmers” (drastically lower-priced diesel stations) are a real threat to larger chain stations. They don’t put them out of business entirely for a number of reasons, but one is because gas stations ultimately sell more than gas/diesel (e.g. a clean bathroom is often worth a few extra cents per gallon for me, but there’s a lot more than that too). Also any given station can’t sell an infinite amount of fuel. Beyond tank capacity, wait times are a real impact on sales volume, and so if a station offers a price too low (even if still profitable), it is just leaving money on the table.

So not to say collusion doesn’t happen, but one can also arrive at similar pricing with a commodity like gas without it. Especially since fuel margins are typically low.

The theory is correct, but the example is not the best: petrol prices are not as elastic as you'd think.

If I need to make a left turn across traffic or go around the block I'm not topping off at a station just for 5 cents/gal. (Tho, I might make a mental note & use that station when I'm coming down the other way, when it's easy to in & out.)

Los Angeles in particular is crazy. We have the equivalent to micro-climates with fuel prices. Stations a half mile apart can be 30¢ different. Stations a town apart can be 70–80¢ different.

And there are a couple of stations in Beverly Hills adjacent that are ~$2.50 more than the going rate (no surprise there, tho).

>, a gas station isn't going to look at a competitor selling gas at $4.15 and decide to raise their price to $4.45. They would lower their price to match the competition, otherwise they'd lose sales and make less money.

But the airlines are also doing the opposite of your scenario: they also raise prices instead of lower them via legal "price signaling" via publicized fares[1] in the global reservations system.

Competitors can converge on a higher price instead of a lower price. It's not just one direction. They just need to do it via public price signaling to stay out of legal trouble.

In 2022, Apple Music raised their subscription from $9.99 to $10.99. Spotify then followed them and also raised their price to $10.99. By 2023, they both converged on $10.99. I think right now in 2024, Spotify is $1 higher at $11.99. Nobody should be surprised if Apple Music also raises its to $11.99.

[1] https://www.google.com/search?q=It+is+now+common+for+an+airl....

> Competitors can converge on a higher price instead of a lower price. It's not just one direction. They just need to do it via public price signaling to stay out of legal trouble.

I don't understand what you're saying. Are you saying that companies are colluding, but not really because the prices are public? Most prices are public, just walk into any supermarket or open Amazon.com and you'll see public prices. If a company bases their price on a competitor's price, that's not collusion, that's just a pricing strategy. If a company is able to price a product above their competitors and still succeed (e.g. by investing more in marketing), that's legal too.

> In 2022, Apple Music raised their subscription from $9.99 to $10.99. Spotify then followed them and also raised their price to $10.99. By 2023, they both converged on $10.99. I think right now in 2024, Spotify is $1 higher at $11.99. Nobody should be surprised if Apple Music also raises its to $11.99.

Streaming is not an example of a healthy market IMO. I don't know the economics of it all, but I know all the streaming services need to pay the same record labels. Whatever is going on there, it's weird that they all cost the same. I currently pay $10.99/month for Tidal, which is the same exact price as most other services. I wouldn't be surprised if there was collusion going on there, maybe even something like RealPage behind the scenes. There's also the factor of Apple and Google's monopolies over apps, and I wonder if undercutting Apple/Youtube is bad for business.

> But the airlines are also doing the opposite of your scenario: they also raise prices instead of lower them via legal "price signaling" via publicized fares[1] in the global reservations system.

The link you posted seems to be a google search page? Not sure what you meant by that.

> If a company is able to price a product above their competitors and still succeed (e.g. by investing more in marketing), that's legal too.

Yes, but it also runs counter to the idea that free markets tend to drive prices down through competition. In reality, 1 of 2 things happens:

a) companies try to differentiate their products enough to not be direct competitors (e.g. exclusive content on streaming platforms, or platform lock-in), and both/all charge more

b) one company buys the other to kill their competition

No one actually lowers their prices to compete anymore, because we abandoned enforcing anti-trust and anti-monopoly laws decades ago.

Sorry, but that is nonsense and I have no idea what point you're trying to make. You're saying that competition doesn't drive down prices by giving two examples of how companies avoid competition.

> You're saying that competition doesn't drive down prices by giving two examples of how companies avoid competition.

The point is that the intuitive wisdom that free market competition lowers prices of goods is not now, nor has it ever been the truism that it's postured as, because the businesses within that market have a huge selection of tools and strategies at their disposal to avoid direct competition.

And this makes sense. Why in the world would you subject your business to the unmediated competition of a free market? Yeah, it's totally possible for you to create a product so innately better that you own the market by virtue of that, but that's like... hard. It's way easier to create brand-lock-in to incentivize your existing customers to stay in your "ecosystem," or to create an innovative unique feature and patent it so your competition can't use it, or use snobby/elitist marketing to make your product more enticing to people who seek status, or shit, go the other way, make it humble and down to earth, and appeal to a sense of "genuineness," or tie yourself to patriotism and put flags all over your product, whatever it might be. There's tons of ways you can make people want your thing that have fuck-all to do with the thing.

I think this is a serious fault in how pro-free-market people tend to think, which is this constant positioning of people as rational actors who will choose the best product for their needs, and it's utter nonsense. People buy stuff for stupid reasons constantly.

No, your time horizon is too short. Prices go up in the short term, which increases profits, which incentivizes competition, which brings prices down in the long term. A few years of increased prices is worth increased efficiency over decades. Prices are going in most industries, US markets are generally quite competitive.

Increasing profits often doesn't incentivize competition, especially when barriers to entry are high. Instead, it decreases competition by giving existing corporations even more money and power to use against newcomers. Look at what happened to Bandcamp: bought up by a music licensing company and gutted.

> which increases profits, which incentivizes competition

This is a fantasy. Give two examples of major markets where competition has increased recently.

The US economy has grown what, 4 times since 1990’s but the number of registered companies has fallen by half.

Does the sheer number of companies correlate with competition?

I can imagine simple hypotheticals like:

A. Two companies that compete with one another in each of markets 1, 2, and 3.

B. Three companies, each with a monopoly on a single market.

I know nothing.

Increasing profits just enables attacking competitors in other ways than via product competition. The narrative that profits get turned into RnD instead of executive bonuses and stock buybacks or acquisitions is a Econ 101 fantasy.

In the real world, Cisco, Meta, Amazon, and Microsoft don't make better products to win, they just buy Splunk, Insta, Whole Foods, and Bethesda.

I would also like to point out that the "long term" is just a collection of several "short terms", so if the short terms are only price increases (which they are), then the long term will also just be that.

This is oligopoly. If there are less than four major players, price competition seems to stop. There's a EU study on this, which I've referenced before. More than four, and someone will drop their price to $8.99, grow their market share, and make more money. When the number of competitors is very small, and you already have major market share, it's very hard to grow market share by lowering prices. So price competition stops.

It doesn't take collusion. It's a result of size alone.

> They would lower their price to match the competition, otherwise they'd lose sales and make less money.

- they could also see their competitor raise their price to from $4.00 to $4.15 (for whatever reason) and decide that they can raise their price as well without losing customers.

They can do both things, and both things are described by Edgeworth Price Cycles[0].

In gas prices, there's undercutting to draw business -- which seems natural in a free market. That's often smaller, local players who drive this stage, pricing things just below the nearby competition, but players of all sizes are involved.

But sometimes, the price jumps up -- often by a significant margin, and across the board. This is often at the behest of a big player; when company like Exxon Mobil seemingly-arbitrarily raises gas prices in an area, it tends to set a trend. The smaller players tend to raise prices in accordance with this higher baseline and are happy to see the financial relief.

This may seem counterintuitive in a competitive market, but it does happen anyway. And it's all temporary and cyclical, as we've all seen over and over again. Free markets aren't necessarily stable systems that are free of resonance.

[0]: https://en.wikipedia.org/wiki/Edgeworth_price_cycle

If instead the 2 gas stations were both selling at $4.45 and looked around and decided not to lower their prices to $4.15 even though they could, it's equivalent.

Or one of them could lower to 4.35 and take all the business. Which is normally what would happen without collusion.

I don't have a source for this, so take it as you wish, but as I remember what I read, duopolies can be quite stable. Three party cartels can go either way.

But with 4 or more participants, someone will inevitably betray the others out of greed.

Hence the other aspects of antitrust law. Albeit not enforced well of late.

Price fixing would be if both gas stations decided to raise their price to $4.45 at the same time so that customers don't have a choice.

Which was the case in this instance. RealPage required subscribers to use their price suggestion some percentage of the time or they'd risk losing their subscription.

"compliance" alone is a sufficient misbehavior. No matter how people get to a price number, you can't have a contract or any other mechanism for the competitors to try and enforce the coordinated price, that's straight out wrong by itself.

What I'm having a hard time understanding is why RealPage cared about "compliance" in the first place - do they charge as a % of rent? That seems nuts, I would imagine landlords hate that.

If not % of rent then I can't understand why the company would want rents to be higher across the board.

IMO, because that way they can claim to landlords they get target ocupancy rates with the higher price; if one landlord in the area knows the price others get, he could try to get higher occupancy rate by lowering his price, aka "competition", by requiring "compliance" to RealPage prices, they are effectively coordinating and price fixing the market, which is the ilegal part. After all, landlords could see regular posing on other channels and adjust their prices in the "normal" way.

Because then they can say “hey landlord, on average if you list through us you can charge X% higher rents than our competitors”

Maybe they want to attract landlords to sign up, and making rent raise works better than any advertisement.

I built software for this industry (not at realpage) for 10+ years and can explain why price compliance is a big deal.

The reason is that there is a fundamental principal vs. agent problem in the fee-based property management industry.

Usually an investor buys a building and then hires a separate corporation called a fee-based property management company to manage the property. The management company gets to keep 8-10% of the rents that come in exchange for doing all the management work. (there are situations where the owner and the manager are the same corporation but they are less common and are called owner-operators)

The fee-based management company and the building owner have different interests. The building owner wants to maximize net operating income, which usually means maximizing revenue. The fee based manager wants to maximize their earnings, which is the 8-10% of the rents minus paying for all the management work to happen.

On first glance you might think these are similar interests, but when it comes to choosing the price they are not the same. If a rental price is optimal, it takes a bit of work to rent it out. The housing unit will sit on the market for a little bit and be shown to a lot of people before you find someone willing to pay the price. If, on the other hand, the price is 10% below the optimal price, it will take very little work to rent out and will be taken by the first person who comes to look at it. In this case "little work" means the management company can save money by paying fewer staff members.

So, property owners want optimal prices and property managers want prices that are slightly lower than that.

Revenue management algorithm compliance is a solution to this principal agent problem. The building owner insists on it being used by the management company because he doesnt trust the management company to choose prices. He doesnt trust the management company to choose the price because they are motivated to lower the price in order to reduce their workload.

High price algorithm compliance is important to realpage because it is how the owner makes sure the manager is choosing prices that maximize the owners interests, rather than the management company's interest. And the owner is the person who chooses to enforce the pricing algorithm, and thus the true customer of realpage when it comes to revenue management algorithms.

Yeah, but listen brother. Do you want housing prices to be lower or higher? Do you want rents to be lower or higher? Which is best for you? What is best for the country? Your experience is really valuable in the context of what this action is meant to address, which is a potentially irreconcilable political interest in low rents for all, high prices for some, low prices for others, which could be achieved many ways.

> the owner is the person who chooses to enforce the pricing algorithm

Very interesting - I can't find anything about this on their website, but assuming that is the case I feel like this is the only explanation so far in this thread that makes sense. Other explanations in this thread (marketing, optimizing for all the customers) fall short to me because (as far as I can tell) there is no reward / punishment mechanism.

This is not to say that the effect isn't the same though, driving prices up. And the other quotes from internal documents certainly hint that there might have been some awareness of this as well.

To the best of my understanding I think the technology does drive up prices, but not in an anticompetitive way. I know people get really passionate about this, so I don't want to argue with people on hacker news about it, but to the best of my understanding this is what is happening:

Rental prices in the USA keep going up primarily due to a housing shortage.

Revenue optimization algorithms like realpage's do genuinely increase rents by about 2-5%, because without them fee-based property managers lower rents below market-clearing price in order to make it easier on themselves.

The increased rent that comes from using these algorithms is, in my opinion, not really anti-competitive. If you only used public information for the pricing algorithm, you'd get largely the same prices out of the system. In almost all rental markets, algorithmic pricing of any sort doesn't have high enough market share to see success by anticompetitive price-fixing, since most suppliers of housing don't use it.

Apartment rents are crazy high because there simply isnt enough housing, and we dont let people build enough dense housing near jobs. Going after Realpage, or blackrock, or landlords, or AirBnB is just trying to find a scapegoat, when the hard truth is we need to let people build more housing near where the jobs are.

do we know roughly how common use of this or similar technologies are in various markets?

I was under the impression this was quite common, though I have no evidence and would love to be shown otherwise!

If it is, they better be covering their tracks.

This definitely requires some citations. There is no evidence that you are presenting that supports the 2-5% claim. I don’t think you are fully understanding the impact of price collusion or the suit presented here. The DOJ very clearly thinks this is anticompetitive.

TBF your contention that the impact of price collusion also requires citations. And the DOJ has thought a lot of things, however their track record in court has been not exactly been stellar so I'm not sure how much of a signal that is.

I suppose only time will tell.

Honestly the strongest argument I've heard that these algorithms are anticompetitive is "The DoJ thinks they are". So maybe there's some non-public information of anticompetitive behavior.

We don't know how many housing units use Realpage pricing algorithms in 2024, but in 2017 when Realpage bought the tech, it was being used in 1.5 million rentals (https://www.realpage.com/news/realpage-to-acquire-lease-rent...) and there were 43 million rentals in the US, which means nationally they had less than 4% marketshare.

Obviously, cartel behavior (raising prices above market) does not work if you have 4% of the market. Perhaps their sales have gone up 20X in 7 years and they have enough market power for cartel behavior (doubtful)? Perhaps they have a low marketshare nationally, but they have a high marketshare in a few specific markets? Maybe, lets see what the DoJ says.

From the press release: "The complaint separately alleges that RealPage has unlawfully maintained its monopoly over commercial revenue management software for multi-family dwellings in the United States, in which RealPage commands approximately 80% market share."

That’s 80% of companies who are using revenue management software are using Realpage, not that 80% of rental units are using Realpage revenue management software

... yeah that's pretty much all of them minus some mom and pops who manage themselves. And from personal experience those mom and pops are selling out to management companies now so a whole neighborhood of single family rentals might be actually controlled by just one or two companies.

That’s seems like an odd anti-competitive complaint considering the customer has the option to not use such software at all?

It’s like complaining about a monopoly on lawn mowing. Owners can always choose to mow their own lawns if they don’t like the cost of hiring it out.

The doj doesn't lose cases like these, and doesn't bring cases that are absolute slam dunks.

"The Department of Justice (DOJ) Antitrust Division — for the third time in the span of a year — recently failed to convince a jury that alleged agreements to fix or stabilize labor markets should be punished criminally."

https://www.skadden.com/insights/publications/2023/04/quarte...

>Perhaps they have a low marketshare nationally, but they have a high marketshare in a few specific markets? Maybe, lets see what the DoJ says.

I think it's very much this. National market share is meaningless. I live in Northern Virginia -- some SFH that rents in another market is meaningless for someone looking for an apartment here. In this area, it seems very much that all large multi-unit apartment buildings use RealPage. Individually owned condos that are rented out exist, but of course their quantity is very tiny compared to the number of apartment towers/complexes. SFHs, likewise, are poor substitutes, because someone in the price range of a studio, 1 or 2 bedroom unit isn't going to rent a SFH and splitting a SFH brings problems of its own.

If this source is correct it’s 7/10 in PHX https://www.thebignewsletter.com/p/antitrust-enforcers-the-r...

They’re also super glib about it online https://www.realpage.com/analytics/phoenix-apartment-rent-gr...

IMHO automated price raising should be considered problematic or at least suspicious.

False, you are wrong.

Corporate landlords use RealPage in Austin, Minneapolis yet rents fall there because of supply of new housing.

RealPage does impact rental prices, but only marginally, and the real impact to prices is from supply constraint + demand.

If there is enough supply, any realpage algorithm wont matter much because of market forces. Market forces trump everything

> Market forces trump everything

Unless a certain company interferes with market forces — aka the whole purpose of this lawsuit.

If you need a place to live, what’re you going to do, be homeless? They have enough of the market in some cities to impact the market in a way that distorts the prices for everyone. Market forces cannot operate when companies act anticompetitively

I agree that realpage is the villain here, but let's not distract from the real problem.

even if realpage disappears overnight, rent prices wont fall because the new construction is outlawed by the NIMBYs.

fix new construction via zoning reform if you want to actually help people

Supply will never exceed demand by very much because unlike a chair it's a very expensive good to sit on for long. Nobody profits by "overbuilding" so they won't do it nor defect on pricing given a collective target which benefits all owners.

People aren't pool balls bouncing around on a table they are fully capable of serving their interests.

Its weird to argue against the obvious conclusion that price fixing increases price

An anecdote does not prove that RealPage doesn’t have a greater impact in other markets… That’s just not how logic works. You also fail to consider that rents may have fallen further if RealPage was not in use.

Thank you for clear explanation, very interesting

That's my main argument against realtors too -- at first blush they look to have aligned incentives, but the vastly different scales and workloads tend to push realtors into trying to get you to sell for a lower than optimal price.

RealPage's customers are landlords who want to maximize their rent prices. If some landlords look at the data and offer lower prices, that takes business away from the rest of RealPage's customers-- it makes RealPage less valuable for landlords and makes buying into RealPage essentially paying to give up valuable data that other landlords will use against you.

Forcing compliance ensures all of RealPage's customers get to raise their rents while retaining their renters, which means landlords are making a safe bet when using RealPage-- and the only downside is real people paying higher rent.

They need landlords to stick to the numbers they pass on, in order that those numbers remain valuable to all of their other landlord clients.

Suppose that you're a big landlord in some area, such that your submitted prices can affect rents for that property type across the area. You might be tempted to submit high prices, wait for your competitors to follow suit, and then reduce your actual rents to undercut them. They (the competitors) naturally wouldn't be happy with this. So RealPage has to be able to show people that they know their numbers are the actual ones.

Compliance was important because the product (RealPage's AIRM nee YieldStar) works by holding prices higher for longer than the average manager would. The RealPage pricing software is eye-watering expensive and can only be justified if it results in significantly higher revenue.

I don't know about RealPage in particular. But the dynamics could be similar to (or an example of) a cartel.

Cartels generally don't tolerate a cartel member undercutting their prices. Cartels are effectively in a prisoner's dilemma situation:

* If no one defects (i.e. everyone sticks to the cartel price), the cartel members get the highest price, and get the most profits. * If one party defects and goes slightly below the cartel price, while everyone else stays loyal to the cartel pricing, the defecting party gets the most business at a price only slightly below the cartel price, and makes lots of profit. * If all parties defect, there is no cartel any more, and profits are reduced.

So cartel members do not want other cartel members to defect. Cartel organisers get paid because the value of the cartel is only there if defection (i.e. not sticking to the cartel price) is controlled - so it is also in the interest of the organisers to prevent this.

I think the major differentiator here is that in the examples provided, everyone has access ( even if it is for a price ). When it comes of equifac work number or realpage data, it seems to be available to only a subset of population, which is problematic. I want to know what a given corporation is paying.

Recently in used car shopping i've found KBB only gets used when they are pricing trade ins but the cars for sale on the lot have been much higher than the book value and they scoff when you ask them to come down to the KBB used car value that matches, no wonder so many car lots are closing shop.

Companies are culluding to suppress wages by algorithm, too. Look up a company called Aon, and their product called Radford Data & Analytics.

~2019 I led a team of highly qualified security R&D folks inside Cisco (we were part of an acquisition), these folks were effectively highly specialized SWEs. But because the title was something like "security researcher" it was compared against the closet Radform ladder which was closer to to compliance officer.

This meant the specialists were on a ladder with often lower pay than a standard SWE, and I couldn't shift the bureaucracy enough to change that. People left for all sorts of reasons but a big part was being able to get 2x-4x the total compensation at other companies.

Sounds like first hand experience observing wages being suppressed as a result of Radford/Aon.

If anyone else runs into this issue, typically the direct route for things like this is to get involved a discussion with someone in your Total Rewards / Global Compensation team. These are usually the people that confirm the mapping of internal positions to benchmarks, and there is huge between-organizations variability in the quality behind that process.

Many times normal managers or more generalist HR Partners (especially if more junior) may not appreciate that this is a data error vs. a frustrated hiring manager trying to tell you their subjective feelings are more correct than policy.

That having been said: I still think the whole thing stinks.

HR is not your friend. Corporate Confidential by Cynthia Shapiro is a recommended read.

My advice; get a better offer elsewhere, then see if HR wants to pay you your worth.

The comment you replied to seems to be targeted at managers trying to advocate for their teams, not at individual contributors trying to advocate for themselves. I agree that reaching out to the compensation team as an IC is generally not going to be an appropriate or effective way to get a raise. But for managers, working with HR on issues like that is just part of the job.

Thank you, yes. This is not an uncommon managerial problem that is often resolved (not always; I've had both experiences), though perhaps not in a timely manner.

I'm currently fighting this. The benchmark for my team is 10-15% lower than just our area. And 30-40% lower than the nation. And it's because we get lumped in with lower skilled titles because of the title scheme on our campus.

I can't get any traction with admin or HR, and we're both hemorrhaging people and can't bring in qualified new candidates.

It's very frustrating.

I just went through this last week and the trick was getting my finance director to tell HR that she approved the higher amount I wanted to offer. HR will play games with your budget until you take the excuse away.

The problem is the Dean for that area (is a college by the way) is a cowardly little chicken shit bitch who will not rock the boat for any reason.

We have history if you couldn't tell.

My company just googles the position title and slaps that number in the job description. Not going well.

> HR is not your friend.

Most people don't get this.

HR exists to protect the company from the employees, not protect the employees from the company.

+1 It's called "Human" resources not "Company" resources for a reason.

Or: it’s called human “resources” not human “beings” for a reason.

Idk how people can even work in hr. Like how dead does your soul need to be to have such a old job.

Because it is a job that needs to be done and someone is willing to pay for it. For some people it may be the best job they can get.

I understand why no one likes human resources. They are there to protect the interests of the business and it is in the best interest of the employee to interact with them as little as possible. On the other hand, they are a useful resource for managers. HR frees them up from many of the administrative tasks for recruitment. They are a resource for management when they need to know something about compliance with labour regulations. Whether it is a compliance issue or the desire to retain an employee, they may just save your behind. That isn't to say that you should approach them directly. You need an advocate, otherwise they will probably view you as a liability. If you don't have that advocate (e.g. a manager or a union representative), then good luck!

i mean if hr was just doing those things no one would complain. I get there's some nuance to the responsibilities of an HR department but interactions usually seem to be biased towards protect the company, not make peoples lives easier. So i think it takes a certain kind of person to actually be able to do that effectively.

The HR depts are usually pretty sizeable. It's a combined effort, for sure.

You do realize “HR” encompasses a wide variety of positions, right? They aren’t all stereotypically evil minions.

Somebody has to be a comp & benefits analyst.

Somebody has to be a recruiter.

Somebody has to manage the PIPs.

Somebody has to have knowledge of the legal obligations of both sides of the employment agreement.

Thanks for the interesting recommendation.

The book you referenced is from 2005, has the game evolved in the past 20 years? My friends who work in HR seem to think so.

The problem is, it can change rapidly on the ground. We actully had a good HR team in a previous role, that really did work to support the employees, would push back against the org etc where approripiate (including on things like salary).

Financials in our parent company dipped, and rather than address their issues they went to war with the acquisitions they had picked up over the last five years or so to try and squeeze blood from a stone.

Step 1 was to immediately replace local HR teams with a US based team who proceeded to weaponise the data that had been held by the local team.

So even if you think HR today is "pretty good", it could change from underneath you very quickly.

The change was actually wild, one of the first things they did was try to get us all to sign new employment contracts that calculated how benefits defined in law in my country apply in the hopes that nobody would notice. It was effectively a paycut they were trying to hide.

It would have reduced my salary by close to 20k had I signed it, some people did. They refused to acknowledge this sneaky change until a few employees took up legal representation and then magically we all had new contracts the very next day with the issue suddenly resolved. Prior to this they just spent weeks gaslighting people and threatening termination for anyone that didn't re-sign the new contracts.

Sounds like one or two startups I've worked for prior. Yikes.

the best way to see how companies respond to things is to see what happens during the bad times.

it's easy to be good when things are going easy. it's hard to be good when times are hard.

"HR" stands for "Human Resources".

Resources are exploited by companies.

QED.

The most profitable thing in all of human history has always been and will always be information disparity. Create systems to share information on your salary with other people in your field.

I have some insight into this space (compensation analysis) through a family member. Either the VP was incompetent, or the mismatched job situation was used as cover for the outcome they intended (people leaving). "The bureaucracy" exists to serve businesses interests, and legal risks to same.

Not just by algorithm. In the US, many large employers utilize 'The Work Number' by Equifax for employment verification services, and share details about individual employees as granular as individual paycheck disbursements. This information is visible to other employers that buy in to the scheme, and obviously favors the employer in salary negotiations with a candidate.

Right, this indirection seems to give them a "throat to choke" the next time this goes to court.

Opt out: https://employees.theworknumber.com/employee-data-freeze

I wish I could opt out. Unfortunately, my company refuses to provide such information except through The Work Number. So, the next time I apply to rent a home, I'd be out of luck with income or employment verification.

What I call opt out they call a freeze, a la a credit freeze. Perhaps it's possible to unfreeze/thaw/opt-in when you need the service?

I think it should be illegal to be registered for this by employer without explicit consent from the employee, forcing employees to opt out.

D'oh. In my tiredness, I misread it as freezing them receiving data, but now I see it's like the other firms, where they continue to receive and store data but stop honoring requests to share it.

Data brokers are a scourge. They should be illegal, or at the very least regulated.

For example, here's an idea for one such regulation:

    If the company purchases aggregated salary data, they must publish their own salaries for at least 1 year.

Possession of the data should be illegal. It can be enforced through statutory damages, similar to the damages paid for sharing copyrighted music recordings and movies.

Just make PII copyright of the person it identifies, similar to how a "likeness" is owned by a person.

Then sue for copyright infringement.

Then all the five page long boilerplate contracts for every service you use are just going to add another clause saying that they get an irrevocable, transferable license to the data they collect. Probably without telling you because there's already a clause saying they're allowed to change the contract without notice.

Regulations can and often do supersede contract clauses.

Sure, but unless the data is given some special new kind of copyright that can't be licensed or whatever, that wouldn't. Copyright just isn't the right tool for this job.

Honestly what you describe is less likely to run afoul of antitrust law than hiring some firm who has all that data to tell you what salary to offer. At least you are looking at data and competing, not just paying some consultant to tell you and every other company to lower salaries.

> This information is visible to other employers that buy in to the scheme, and obviously favors the employer in salary negotiations with a candidate.

Meanwhile, it is an employee-rights win that the employer can't ask for your prior salary. Which of course they now already know.

We need strong laws that protect people from companies using data. Similar to credit-data usage for loans, companies should be limited to information on an application and in an interview when it comes to making employment decisions. They shouldn't be allowed to use social-media or past employment salary, or similar. At least not without explicit legal requirements and laws governing usage.

Not just individual paycheck disbursements -- scans of the entire paycheck, any routing and account numbers, tax withholdings, medical deductions, ....

Applying macro data to micro use cases without appropriate carve outs is one of the greatest sins in statistics, and yet it happens everywhere.

You just sailed over managements and HRs heads.

This is why I love jobs where you get paid based on a sales commission rather than in mystical dollar-hours. Get 10x the results, get 10x the pay.

There is a ton of stuff businesses do to commission compensation too, like suddenly moving goals for bonus payouts, changing the commission formula etc.

It can also be manipulated to suppress being paid fairly

Similarly companies like Pave also do data collection and sharing to create “benchmarks” around salary and report out salary ranges for comparable companies and locations. I was wondering where the line is drawn between something like this and Realpage? Or even if you do some detailed survey about compensation and distribute it, at what point does this become anticompetitive? All of this does seem to rapidly be becoming the norm with regards to how companies set compensation levels. Curious if anyone with more expertise knows the answer.

Don't forget FunnelLeasing.com which funnels its victims into Finicity.com which is "consent based" financial surveillance where landlords can monitor the cash, credit and asset accounts of their customers using a pretty dashboard and receive alerts in advance of upcoming trouble (such as layoff by Google, Amazon, Facebook, etc. that facilitated the consumer mindset to "consent" to such madness). It allows the landlords to eject tenants before they default by proving that the tenants are already insolvent according to industry norms.

I think one of the biggest differences between comp benchmarking providers and RealPage is that two companies given access to the same benchmarks often make very different compensation decisions.

Some companies decide to pay at the 90th percentile of the market and some decide to pay at the 50th.

RealPage was much more proscriptive which is part of what tips the balance over into collusion vs just providing market statistics.

Zillow provides a zestimate for rents, which serves a similar market summary purpose but without the mechanism to enforce compliance and therefore is totally fine.

Genuine question: How do people on HN reconcile the idea that tech salaries are suppressed with advocating for remote work and opening employment to the global market where employees are often paid much much less than in the US?

Remote work and offshore work aren't inherently the same thing. If you're a company with offices in New York City and San Francisco and you hire someone in San Diego or Rochester, you're still dealing with the laws of the same states and federal government. Even someone in Massachusetts or Texas is probably not a big deal.

But if you want to hire someone in Poland or Korea, do you even know what their laws are? How much do lawyers cost there, and are they any good? Is the government adversarial, or could it become adversarial? Do they discriminate against foreign employers? Employees there are probably going to want to be paid in a different currency; are you interested in dealing with issues if the value of that currency changes? International banking rules? If the cheapest hires are in seven different countries, do you want to go through all this seven different times? The team you're managing now sees daylight in the part of the day when you're asleep, is that going to be any trouble? Are you ready to deal with reports being poorly written because their native language is different than yours?

The reasons companies are willing to pay more to avoid dealing with all of this have very little to do with whether you work in an office or in your house which is in the same jurisdiction and hemisphere as the office.

All these issues (except, perhaps, the need to switch to asynchronous way of working due to time zones) are these days solved by specialized services for a flat, and not too high, fee; honestly, if there’s a will to hire internationally, there is a way.

How is a third party service going to solve language barriers or prevent a random foreign government from having or passing new laws that cause problems for you?

I am very curious how this will play out.

On one hand, I have seen it first hand here in Orlando that EVERY apartment complex uses the same software, all of them. At the same time, rent has gone up 300% in 10 years, or around 10% per year.

FTA it states that it was the fact that they all shared all their pricing and inventory data with RealPage, which then determined the price using algorithms and therefore rental properties weren't competing against one another. When to me, there are simply no spare apartments, I've seen some complexes down to 1-2 units by the end of July.

Lots of systems using competitors data and algorithms to price items, so was it simply the fact that too many people used RealPage, what if nearby properties didn't use RealPage and the rents went up anyway?

I am not sure if this is price fixing, I don't know any landlords that use it, every home I've rented was with someone who owned 1-2 extra properties and just used Zillow or Craigslist.

That being said, I price my rental properties against what similar square footage gets at nearby apartments... Sooo if they are going up my rent is going up as well, and I bet most landlords do this.

So we've ended up accidentally price fixing the market I guess? I think it really depends on the internal communication and what they sold to landlords.

Yeah, there's nothing inherently wrong with algorithmic pricing. Issues would start to occur if the pricing was actively manipulated and RealPage was used by so many landlords in some geographic areas that competition broke down. That may be hard to prove.

So I worked for RealPage for a few years in the late 90s and again in the mid 2000s, and at the time they didn’t hold a majority of the market. But it would not surprise me now if they held a majority of the market in large complexes today. At the time they were growing mostly by acquisition of competitors.

A relevant excerpt from the complaint:

> RealPage-defined submarkets identified in Appendix A are relevant markets in which the agreements between RealPage and AIRM and YieldStar users to align pricing has harmed, or is likely to harm, competition and thus renters. In each of these markets, the penetration rate for at least (i) AIRM and YieldStar, or (ii) AIRM, YieldStar, and OneSite ranges from at or around 29% to more than 60%.10

The pricing is manipulated though. If you’re part of RealPage, it will “recommend” the prices to set for your apartments, except you as the landlord are only allowed to disagree a small % of the time, or else you can get kicked out from the apartment mafia.

So to keep their customers happy, RealPage will configure it to keep increasing prices, and it’s not really in any landlords’ interest to disagree.

I live in a building managed by a group that uses RealPage. They keep increasing prices and say “Computer says this is $X, can’t do anything, sorry”.

I think the major difference is price is set at the margin, so only the marginal renter has to use the software in order to move the market. Since rental owners, like wealth, exist on a power law curve large numbers of properties are owned by very few people. I.e. it is possible for both the average landlord to not be using the software but the average property is owned by a landlord who is.

The other thing is that normally there is an advantage to breaking the collusion which is what generally prevents them. AFAIK the software is capable of punishing people who break from the suggested price so this pushes the cost of maintaining the collusion onto the participants who have to put up with vacancies for longer than they would otherwise.

So in my view you can have an implicit collusion, or a collusion in effect even without an explicit collusion and with most of the participants not participating in it.

I also think this is one of the most important points of contention of our time. Our ponzi economy requires extracting monopolistic rents which is absolutely crushing the middle class and younger people. When I last visited SF downtown was a ghost town with many of the businesses that survived Covid being driven out by high rents - it appears that rental collusion has already been more damaging than a global pandemic.

Housing is pretty inelastic. I think people are just willing to suffer financially to avoid the fate of homelessness. Just because there aren't vacancies anywhere doesn't mean that the price is fully justified, because housing will take priority over groceries for a lot of people.

Housing supply is inelastic due to the time it takes to permit and built.

Housing demand is more elastic than you suspect. People have income on a curve, and at a certain point of price/quality will move further out and commute or move to a lower cost of living city entirely.

> People have income on a curve, and at a certain point of price/quality will move further out and commute or move to a lower cost of living city entirely.

This doesn't describe the major renter class who has few workable options to choose from. They take whatever they can get.

Once they manage a place to live, they're likely trapped there because they don't have a wad of cash on hand (required to move).

That's average renter difficulty. It can get far worse.

In 2021, the few rentals available here got 400 applications/day. We beat out 50 applicants for one that was advertised for 2 hours (offered 6mos up front).

We beat long odds and barely avoided homelessness (even tho we had good employment history + money in the bank).

Many, many others were less lucky. Every rent-by-the-week hotel filled up, typically with people exhausting their savings.

People also start to take on roommates or become roommates. People in general want a place of their own. However as rent goes up they will start to be willing to rent the upper bunk in a bedroom, and people who do have a place to live start to become willing to rent out part of their bedroom just to afford the rent. For most this is the last option they will take (homeless might be better if they can find a place to sleep the night outside)

In NYC, the typical non-negotiable broker's fee for a not-disintegrating apartment ranges from 10-15%. That's on top of a security deposit and all the other costs associated with moving. It's a cartel that can only be broken by collective political action.

Things are slowly moving in that direction, only because the pressure has been so high for so long. It almost boiled over during COVID in some neighborhoods. There are still works of "Abolish Rent" graffiti left over from that time.

Meanwhile, I know many people in NYC who spend ~60% of their post-tax income on rented housing.

Nobody is happy about it or thinks it's a good idea, but living further out is not perceived as a legitimate option because of the fear of being severed either socially or career-wise.

Whether that's a rational fear or not, it's a reality that allows housing prices to outpace wage gains every year. As somebody who used to think housing demand is fairly elastic: housing demand is much less elastic than you'd suspect.

Yes, living in one of the, if not the, most desirable cities on the planet comes with additional costs.

NYC has incredibly incredibly low permitted additional housing per capita last year

Hard to get much denser than NYC without massive capital expenditure.

NYC has been in that category for a long time.

The 60% of income on rented housing for people whose income would make them otherwise solidly middle class (to me, this definition includes ownership of real estate) is new.

Something else that's new: the prevalence of managing NYC properties through family trusts from a great distance while its members are domiciled and functionally unemployed in tax-shelter states. Hmm, I wonder if there's any explanatory power to that correlation?

> Yes, living in one of the, if not the, most desirable cities on the planet comes with additional costs.

Being housed is highly desirable and has sharply driven up the cost in places where people are housed.

Malibu, CA is very expensive to live in as well.

The NYT recently did a piece on how the tendrils of the housing crisis have made it out to places like Kalamazoo, MI that are not really traditionally high COL cities with booming economies. https://www.nytimes.com/2024/08/22/business/economy/housing-...

We are running out of cheap places to live in. Remote work has mostly pushed the crisis to other places without a corresponding pressure release in the high COL areas.

I can't read the article because of the paywall, but Kalamazoo is unique due to the Kalamazoo Promise, where college tuition (in the state of MI) is paid for if you attend Kalamazoo Public Schools. For me that was $60k of tuition I didn't have to take out loans for. Housing/grocery prices have gone up there but not nearly as dramatically as other places.

> Kalamazoo is unique

Our rents in Florida have doubled for unique reasons. My loved ones in VA, DE, MD, KY, NC and MI are seeing rents over 50% higher for reasons unique to each area.

It kind of feels like a pattern.

Half of builders went out of business in 2008 and 1/3 left the trades.

We only just recently reached the level of new home starts we were hitting pre great-recession.

We have a decade's worth of supply deficit and in most locale's aren't doing much to overcome this.

Wow, the Kalamazoo Promise has been going on since 2005. I wasn't aware of this program; that's very cool.

Housing can be very elastic. Humans can be very adaptive to compromises in living space requirements to fulfill the basic needs.

Part of the problem is that the lower end of potential inventory (pod apartments/SRO/etc) are essentially illegal in this country. So the barriers to entry make it seem much more inelastic.

> Part of the problem is that the lower end of potential inventory (pod apartments/SRO/etc) are essentially illegal in this country. So the barriers to entry make it seem much more inelastic.

This is true. A decade ago this area was among the cheapest in the nation but now is solidly in the expensive category.

In between were moratorium on apartment construction (the last non-premium housing still being built) and a sudden influx of CA & NY sized dollars. The never-stopping, double digit, yearly insurance increases - that just levels it all up.

I mean what can you do? The market is forcing you to raise rent. Your hands are tied.

Lots of people want to blame rising prices on price fixing, when there really is growing demand without commensurate increases of supply. They want a silver bullet to bring down prices, without tackling the underlying problems.

> That being said, I price my rental properties against what similar square footage gets at nearby apartments... Sooo if they are going up my rent is going up as well, and I bet most landlords do this.

This is essentially what RealPage does. It just automates calculating "what similar square footage gets at nearby apartments". It probably does other stuff like puts a premium on corner units or those with south facing windows.

> Lots of people want to blame rising prices on price fixing, when there really is growing demand without commensurate increases of supply. They want a silver bullet to bring down prices, without tackling the underlying problems.

Yup. The underlying problem is a single word: supply.

Build more supply, the prices come down. But of course, developers know that. They don't want the prices to come down, so they don't build supply.

Developers don't build supply because most US cities have made it de facto illegal to do so.

For the most extreme case, check out San Francisco, where as of June the city had permitted a grand total of 16 housing units. What developer is even going to bother trying under conditions like that?

I agree that the underlying issue is a lack of supply. However, if a landlord is commanding a 30% profit margin on a non-luxury apartment then I think they are contributing to the problem (to be clear, I'm not insinuating anyone in this thread is doing this). I think the only objective way to tell if it's priced too high is by the profit margin, but of course even that can be inflated if e.g. a developer took a huge margin on it before selling it to a new owner.

As to what an "ethical and not terrible for society" profit margin would be is above my pay grade, but I would estimate 15%. It also probably depends on how easily you can make money on the stock market as well.

You know what gets developers excited about building? Someone getting consistent 30% profit margins.

Now, government just has to get out of the way and let housing be built.

> You know what gets developers excited about building? Someone getting consistent 30% profit margins.

It's super subdued excitement.

> Now, government just has to get out of the way and let housing be built.

Homeowner voting blocs aren't commonly considered to be government.

Business arent charities. Almost every one is trying to maximize profits.

Landlords also aren’t businesses. They’re a class of parasitic rentiers who siphon off wealth from economic activity around them and use corrupt means to prevent competition (mostly bribing politicians to constrain supply).

> However, if a landlord is commanding a 30% profit margin

Landlords of properties paying 7%+ interest have negative profit margin and can't compete with 2-3% interest rates.

By some landlords having a 30% profit margin, other landlords can have a positive ROI (increasing rental supply)

No, many of these building are way under 80% utilization.

Can you reference where that figure is from? Because what I can find, SF has a single-digit vacancy rate: https://nainorcal.com/san-francisco-market-report-march-2023...

How many of those non-vacancies are corporate held air-bnbs where they can make more money for providing almost no service? Hint: it's not a handful. Landlords strategicly take units off the market in ways like airbnb to convince cities that their rents (and profits) are just.

> I've seen some complexes down to 1-2 units by the end of July.

And you're sure the building is actually occupied and the units haven't been strategically taken off the market?

> I am not sure if this is price fixing,

It is on RealPage's part. It's their stated _intention_. Whether cases should open against landlords who used it, I agree, I'm not sure, but it _is_ clear that RealPage broke the law here.

> I think it really depends on the internal communication and what they sold to landlords.

The real question is "does realpage charge landlords for it's service?"

What you are doing is just good business. You are not implicitly or explicitly colluding with other property owners to set you prices. You are simply doing market research based on publicly available data and making an independent decision.

Contrast this with a cartel that includes a significant number of landlords in your city (i.e. way more than just a couple of your buddies) that (1) shares non public info such as current occupancy rates, current lease terms and durations, etc., (2) sets prices as a bloc, and (3) enforces compliance on pricing targets.

It’s qualitatively different from how you described your situation.

    > rent has gone up 300% in 10 years, or around 10% per year

From an outsider's view, this is a huge failure of local planners. That said, Orlando is a huge city with a population 2.5 million. I find it hard to believe that your statement applies to the entire city. Rents rising 10% per year (incredibly, really) is surely the sign of a hot/hip neighborhood where planning is way behind demand.

In most places (middle class and below), it is hard to raise rent faster than inflation because the renter's income is the primary limiting factor. If their income does not rise fast enough, they will move away. If the area is not "premium" (attracts upper middle class and above), eventually units will sit empty for a long time, and rents will fall.

Algorithmic pricing that learns to tacitly collude is a hot area of study in computer science and economics. For example, if you train simple online learning algorithms to adjust prices, sometimes they can learn to keep prices high or to take turns winning customers, rather than just competing. People have found some empirical evidence of this on platforms like Amazon where a lot of small sellers use pricing bots.

However, it seems this is a more of a hybrid situation. A big part of the complaint is just all these incriminating emails and documents where RealPage appears to be coaching landlords to avoid lowering rents or giving concessions, independent of the software.

At the same time, there was an algorithmic component, which the customers appreciated: “I always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and term. That’s classic price fixing...”

Interesting as airlines have been doing this for a really long time.

Airlines do this internally all the time. However they do not share this information with each other.

there is concern about tacit collusion if all the airlines start using the same pricing algorithms based on the same historical data. it doesn't even take a very smart pricing strategy for them to naturally learn to collude with each other.

However I would guess you will never have an email from an airline CEO that says "I really like this product...That's classic price fixing"

They don't share how many seats are left publicly, but fare changes are shared real time in a platform that distributes them. And there's quite a lot of website scraping that goes on that mostly skirts around "how many seats are left".

not everyone is affected by airlines' pricing though as not everyone travels. everyone needs a place to live though

This gets into prisoner's dilemma though. If everyone but me is using the price fixing app, I have a strong incentive to undercut them, even by just a few dollars. So without a cartel-like enforcement mechanism, there is no reason it wouldn't just fall apart naturally in the long run.

In the complaint there was a mention of "compliance" which could get into that piece though.

>I have a strong incentive to undercut them

Not in a supply constrained market where your rental will be occupied either way.

If your rental is $2400, and it sits on the market for 2 months, you lost potentially lost $4800. It would take a huge rent increase to justify that.

It's one thing if the software is helping landlords jack up prices to the market rate. It's quite another to convince them to collude against their best interests.

It is a different unit every month though as renters are moving out all the time. This isn't about 1 unit that is empty or not. It is about 100+ units where it can be 89,90, or 91 empty - if the other units that are not rented pay enough higher rent because the empty is not on the market you are better off.

Sounds like removing the supply constraints would be a better strategy.

And supply constraints come from regulations on housing, zoning, and federal subsidies for "homeowners"

If all units are being rented there is no collusion as the market clearing price is being charged. Collusion requires taking supply off the market in order to raise prices.

> Collusion requires taking supply off the market in order to raise prices.

This is factually incorrect.

It is not possible to raise prices without lowering supply if the seller is already trying to maximize profit. Sure the seller could be undercutting the market but that has nothing to do with collusion. Apartments rent in an auction, each fills for the most anyone will rent it for. In order to raise prices landlords need to increase the competition for each unit.

I think you’re presuming elastic supply, where you can make up the lost profit from undercutting by selling more units.

Real estate supply isn’t very elastic, and demand already outpaces supply. Your units will likely get rented, as long as you aren’t in the top 0.1% of prices.

Therefore your incentive is to maximize profit per unit since you can’t move more units. Your incentive is to also join in on price fixing, because it’s the only way to make more money.

Supply outpacing demand would cause this to dissolve, as landlords actually have to compete for tenants and the highest priced landlords have empty apartments.

For the landlord units is elastic. If you have many units you can always not rent out a few, in fact you should always have a few units that you are remodeling and thus cannot rent out.

In general as a large landlord should have around 10% of units not rented, if you have more than that rented you should raise your rates until people go elsewhere thus bringing you down to 10%, while if you have less than 10% lower your rates until people start renting from you. Different landlords have different numbers, but 10% is a good starting place. 100 units at $900/month = 90,000, 90 units at $1000/month = $90,000, but you have a few units free in case someone desperate is willing to pay $1100/month (and of course you can remodel one of those empty units thus making it more desirable)

Supply was probably a poor term because it’s overloaded; I probably should have said stock. They cannot easily scale their stock of housing, so they can’t make up for lower profit with volume the way a grocery store or something might.

Just a note on vacancy targets, I worked for a MF REIT (~33k units) and pre-YieldStar their average target occupancy was around 97% for properties. After YieldStar was implemented the average dropped to more like 95%. As far as I'm aware, the other large managers also targeted the mid-to-high 90s.

90% is actually quite healthy. If all housing was always full, there is no slack in the system. We should always have some overcapacity in the housing market, just like we do for hospital beds, food, water, etc. If you're always buying the last loaf of bread at the grocery store, that means others don't get bread when they want to buy it.

Right, assuming there’s more supply than demand. In markets with low vacancy rates like Manhattan, landlords get away with murder (terrible maintenance, making renters pay for gatekeeping rental agents, high rent despite being shitholes, etc). In markets with higher vacancy rates, prices tend to be a lot more reasonable, and units tend to be somewhat better maintained, because they don’t have the same pricing power, and if they’re too bad, they won’t be rented unless they’re extremely cheap.

The Justice Department is being soft on corporate crime here. This is a willful Sherman Act violation. The Sherman Act has criminal penalties, but Justice is only filing a civil case. All that the complaint asks for is an injunction and costs. There's no disgorgement. No breakup of large landlords. No shutdown of RealPage.

This is worth publicizing during election season. Rents are going up due to collusion.

Criminal antitrust prosecutions seem to have stopped in 1977. Unclear why they never restarted.

There are criminal antitrust cases[1], but they are hard to win. From "Why Does the Antitrust Division Keep Losing Criminal Trials?"[2]:

> Even in the best of circumstances, prosecuting criminal antitrust cases can be challenging. They require a deep understanding of a particular market and proof beyond a reasonable doubt that the defendants entered into an illegal agreement. His- torically, the Division relied on multiple witnesses to testify that an agreement, or “meeting of the minds,” existed. There is often a thin line between lawful information-gathering and unlawful price-fixing, making it difficult for jurors to understand what, exactly, constitutes criminal conduct. One former Antitrust Division attorney went so far as to say that juries “don’t like to convict in antitrust cases” because they view violations as “technical.” Another recalled seeing jurors appear shocked when they learned during trial testimony that an antitrust conviction carries a maximum sentence of 10 years in federal prison. An attorney who interviewed jurors after one trial said that some jurors expressed anger that the Division was expending resources to prosecute these cases at all.

[1] https://www.justice.gov/atr/criminal-enforcement-fine-and-ja...

[2] https://www.americanbar.org/content/dam/aba/publications/ant...

That's a great article. Most of the problems mentioned don't apply to landlord price-fixing. That's an issue jurors can understand. There's a large class of identifiable victims. The collusion is easy to show.

It feels like antitrust law needs an update now that we have computers that let us move the collusion one degree away fairly easily. It's still price fixing even if you don't know the names of the parties you're collaborating with.

https://en.m.wikipedia.org/wiki/United_States_antitrust_law

You want the history section, “Rise of the Chicago School (1970s–present)”

Ten-to-one it’s connected to the postwar rise of and later diversification (into more narrowly interest-promoting areas with less concern about whether advancing those interests was good or bad governance) think tanks, too. Most bad economic policy, jurisprudence, and law from the ‘70s on seem to be.

Good.

There are two new aspects to RealPage in terms of being anticompetitive:

1. Using information from one customer to help set prices for other customers. Once you hit a certain market percentage, this effectively allows you to set prices; and

2. If everyone uses the same software that spits out the same results then this is effectively collusion even if it's not actual collusion, as in the trope of dark, shadowy figures meeting in a cigar-filled room.

Every aspect of our life is getting financialized as companies seek to extract every dollar from us. You see it with PE buying up vet clinics en masse for example. If you've wondered why your vet bills have gotten so expensive, that's probably why.

Anyway, using rent to squeeze every dollar from people in a way that raises everybody's rents with the blessing of the state (which has been the case until now) is state violence. It is using the necessity of shelter to cerce money from you.

People in general don't see this sort of thing as violence but it is. Just like polie crackdowns on protests are state violence.

Some quotes from the filing:

> Discussing a different RealPage product, another landlord said: “I always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and term. That’s classic price fixing . . . .”

> In fact, as RealPage’s Vice President of Revenue Management Advisory Services described, “there is greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down”

> Its executives are blunt: They want landlords to “avoid the race to the bottom in down markets.” Sometimes RealPage is even more direct, acknowledging that its software is aimed at “driving every possible opportunity to increase price”

> industry

The fact that providing people with housing is even seen as an "industry" is a big sign of what is wrong with the world right now.

It is essential to living a decent life.

It should not be a driver of lining the pockets of people who are already rich.

Do you want to invest tens of millions of dollars into building an apartment with zero expectations of making a return? If there's no profit to be made in building housing, why would anyone want to build housing? This line of thinking is what leads to situations like San Francisco, where price controls on housing lead to few developers willing to build there.

If it's proven that landlords colluded to fix prices, that should be addressed. But the reality is, prices are only going up in a select few metros. And it's because lots of people want to live in those areas, which leads to rising demand which has not been satisfied by new housing construction. People desperately want to believe that there's a silver bullet that will bring prices down without actually addressing the mismatch between supply and demand.

Profits are fine, excessive profits at the cost of people who need housing are not. There is no silver bullet, but increasing supply along with strong regulation to protect renters is welcome vs them being cattle to be squeezed by for profit entities. Human rights are a thing, there is no right to profit.

> The six largest publicly traded apartment companies in the U.S. — all of which are linked to an alleged rental price-fixing scandal — experienced profit increases during the first three months of the year, according to an analysis from left-leaning watchdog group Accountable US exclusively shared with The Hill.

> In the analysis, the companies earned a combined $300 million in profit during the first quarter of the year, in part, due to rent increases.

Lots of profit to squeeze out with regulation, based on the evidence. The Vienna model is a proven model if for profit enterprises walk away from housing.

https://thehill.com/business/housing/4718252-large-apartment...

https://accountable.us/report-top-corporate-landlords-see-pr...

strong regulation increases costs (see all the permits and surveys required in SF).

What are "excessive profits"? 10%? 15%? 25%?

> experienced profit increases during the first three months of the year

Does this even mean anything? This could mean their vacancy rate decreased and thus their business is more profitable. I don't see the issue with companies reducing vacancies and providing more housing to more people.

I cannot say, but experts can, and suggest to legislators and regulators implementation details. To operate a business in a jurisdiction is a privilege, not an entitlement.

I'd love to see the data on this. Usually when you increase construction costs, via additional regulation, you're going to increase the price of rent/sale.

What expert thinks increasing costs will lower prices?

It's the other way around. Regulation around pricing forces housing providers to provide housing within a constrained cost model (land + materials + labor + cost of capital + permitting/AHJ requirements [regulation]). If they cannot meet the market (or choose not to, for whatever reason), public housing is an option, with muni bonds issued to finance construction. This removes the profit component, which a for profit enterprise needs, but public housing does not.

where does the public housing come from? WA and CA can't seem to figure out how to build public housing. In WA, the best I've seen is the gov buying hotels and having the hotel sit empty for years [0].

If regulations make it impossible to build housing and public housing has the same regulations, who is paying that bill? The existing residents via sales and property taxes?

you can google construction costs in sf. how does regulations reduce any of those numbers?

[0] - https://www.kiro7.com/news/local/king-county-taxpayers-payin...

Washington has at least done a better job than San Francisco. Seattle has built over twice (IIRC three) times as many homes per-capita than SF over the last decade, despite lower population. The fact that rent control is banned statewide has a big role to play there.

It's not "despite" lower population. The thing that drives the costs up isn't evil landlords or the dreaded "profit motive". It's just demand massively outstripping supply, and high wages.

The natural interest rate plus a bit.

If you can earn 25% percent in profits in the current environment then it is a clear indication of an inefficient market - a market that needs to be regulated in order to create efficiency (like in this case as with many other cases: remove monopolistic behavior).

While it is problematic if you can't derive profits from productive activities it is also problematic when entities derive unsustainable profits - also for the party deriving the profits.

If there is not a bit middle class to consume products, then there will not be be a market to supply products to.

Targeting profit rarely helps. The big players can afford the financial engineers to make the profits negligible from an accounting perspective. Likely funneled into growth. The small players cannot, so you put them in a situation where selling to a big player is rational. And the oligopoly grows.

The current economic environment definitely over indexes on very abstract metrics to steer, which is problematic.

I am also not proposing any formal system.

I am saying that it is quite easy to spot profits that are too high.

I am also saying that the governments role is to ensure efficient markets.

In this case it is suing RealPage.

It could also be making it easier to make housing in a specific area to counter under supply.

it is all regulation.

The phrase "protect renters" is often used as a dogwhistle for price controls. For example, rent control and affordable housing mandates that require a certain % of units to be rented at below market rates. Can you elaborate on what exactly you're referring to here?

This would be an unproductive use of time. It is very clear you are pro "no regulation" around housing (based on your thread comments, "just build more"), so a heated argument with the potential for the subthread to be detached by dang does none of us any good. I'm not here to change your belief system, and to attempt to do so would provide no meaningful impact to macro outcomes.

All I'm asking you to do is list the specific laws or regulation you're referring to here when you write about the need to "protect renters". I don't know if we agree or disagree, because you haven't actually stated what your beliefs are.

I definitely support regulations around housing: housind needs to be safe (fire exits, sprinklers, etc.). Landlords can't engage in deceptive practices, like putting up ads for one unit and giving the tenant a different one. Units should be promptly repaired. Landlords shouldn't discriminate on the basis of protected class. I could go on.

Dynamic price control of rents to prevent them from accelerating beyond what wages can support (existing tenants win vs potential new market entrants, them the breaks when supply is catching up to demand or cannot meet demand), tenant rights with strong local regulatory oversight, government incentives to encourage a diverse ecosystem of suppliers bringing new supply onto the market based on forecasted market demand (cost of capital, regulatory streamlining support, construction labor pipeline, etc), upzoning whenever possible to encourage density as much as reasonable.

Supplier diversity is needed to prevent use of market power to restrict new supply coming online to hold rents higher than they otherwise would be (strong evidence homebuilders are doing this current state, restricting supply to juice profitability). The rest should be self explanatory. As you said, there is no silver bullet; it is various policy measures working in concert to attempt to arrive at a desired outcome. I am not anti profits, I am anti "gouge the human for basic needs for profits."

TLDR Some profits? Okay. Too much profit? Not okay. People living in constant fear of not having a home? Not okay. Build, build, build.

(am a landlord myself, do not raise rents unless actual costs go up, reduce rents when needed by tenants, keep my profits reasonable [~%6-%10], usually no more than $100/month/door)

Okay, so I was right: "protect renters" was indeed referring to price controls. Price controls coupled with what sounds like blatantly nativist policy:

> Dynamic price control of rents to prevent them from accelerating beyond what wages can support (existing tenants win vs potential new market entrants...

Can you elaborate on what you mean by "existing tenants win vs potential new market entrants"? Does this mean that landlords must rent at lower rates to someone who has lived in SF for some time, versus an immigrant that is willing to pay higher rents?

I think GP is pretty clearly implying more akin to Prop 13 but for renters (i.e. Prop 13 locks in increase in property taxes to 2% a year), this policy would do something similar for rent.

It benefits existing renters because new entrants (new renters) would have to pay market price, but existing renters might be behind market rent if market rents are increasing too quickly. Same way that Prop 13 works.

Dynamic in the sense that it's not fixed at 2% but tied to some sort of variable index (San Diego for example does CPI + 5% with a hard cap of 10% YoY increase I believe)

> I think GP is pretty clearly implying more akin to Prop 13 but for renters (i.e. Prop 13 locks in increase in property taxes to 2% a year), this policy would do something similar for rent.

It's called rent control. That's literally describing the existing rent control policies in SF: rent is fixes save for an extremely minor increase around 2%. Allowing a fixed price increase is still a form of price controls.

I really want the previous comment to elaborate on this:

> existing tenants win vs potential new market entrants

>Dynamic price control of rents

How many economics studies, from all schools of economic thought, across 100 years of research need to prove that price controls don't work before people start accepting that fact?

I mean dynamic price control works in most French cities. The exception is Paris, but they tried a static price control for no reason (also, non-market housing supply is diminishing, which is a bad thing. Capitals with 30 to 40% non-market housing are doing extremely well usually)

> prevent them from accelerating beyond what wages can support

In practice what does this mean? If landlords raise rents beyond what people can pay... doesn't that mean they lose tenants? If they do not lose tenants, then by definition doesn't it mean they have not raised rents beyond what people can pay?

> For example, rent control and affordable housing mandates that require a certain % of units to be rented at below market rates.

The issue that we have here - market rates controlled by RealPage. Since everyone uses RealPage, in terms of price for renters it's essentially the same as if every building was owned by the same company.

I'm appalled how long it took for this lawsuit to be filed. We knew about this price fixing for quite some time.

Apparently, RealPage only serves 10% of the rental market in San Francisco: https://jacobin.com/2024/08/realpage-software-housing-landlo...

> The company has reported that it provides these services to 10 percent of the rental market in San Francisco.

RealPage doesn't have nearly enough market share to engage in price-fixing. If it tried, its units would stay vacant as other renters flock to the 90% of units that aren't using RealPage.

Sure, but what matters is what percentage of the apartments with vacancies RealPage controls. Many apartments don't turn over year-to-year, so that 10 percent might or might not be misleading.

Yeah, aside from privately owned properties (comes with its own set of issues), every company managed property I've rented was priced by RealPage.

I know it's a very anecdotal and non-scientific.

Excessive profits are actually the catalyst for competition. THe cycle of capitalism and free markets looks like this: earn excess profits -> people build more supply -> prices come down and excess profits dry up -> people stop building -> earn excess profits. When you fix the 'prices come down and excess profits dry up' all you get is people stop building.

That works in a well functioning, liquid market. If there are barriers to entry for new competitors (like regulatory hurdles, or zoning), this free-market theory falls flat on its face.

The free market theory still works with the barriers, it’s just that the “excess profits” have to get even higher before someone steps in to build.

> If there's no profit to be made in building housing, why would anyone want to build housing?

To live in it.

You want to live in an apartment complex by yourself?

You’ll need a construction cooperative. IDK if those can compete with large construction companies due to the economy of scale. The construction cooperatives were a staple of late Soviet and post-Soviet Russia, but were essentially outlawed later to make way for large construction business and mortgages-backed construction.

I'm not against them, but they are not the right answer for everyone. They are great if you want to live in the same apartment for a few decades, but if you move they become tricky.

It's called cooperative. If I'd like to live in apartment complex, I'd post an ad like "Buy an apartment in a future complex for a low price of X! Move in in only 2 years!". (Cost to build Y, number of apartments Z, X = Y/Z).

And it's not something new. When price is lower than market, people do buy it.

What if I only want to live someplace for a couple years? Building a house that I want to live in for the next 40 years makes sense, but if you have no reason to think life will keep you in the one place for 40 years renting may be a better deal - let someone else take the risk of building a house and hoping someone comes to live in to.

There is a lot more to San Francisco's housing crisis than price controls: lengthy permitting processes, environmental reviews, NIMBY community outreach, etc.

San Francisco has always been a crooked city.. fleecing newbies is sport.. they have jokes and murals and parties around it and always have.. in the American era.. source: personal testimony by someone born and raised there around 1900

If price controls on housing exist in SF but not elsewhere, and this causes developers to not build there, then the issue is not that price controls exist in SF. The issue is that price controls do not exist elsewhere.

Set the same price controls across the entire nation, suddenly there is no disincentive to not build in any one area.

Suddenly there's no incentive to build in all areas.

You appear to be making an incorrect assumption that there is some consistent amount of housing which will be built each year, and the question is only how to distribute it among different localities.

That's not the case. If you add the same price controls everywhere, then the same near-zero housing gets built everywhere.

Construction companies will shut down, they will not continue paying people to build housing at a loss.

You appear to be making an incorrect assumption that price controls must be so onerous that they will result in zero new housing being built.

I'm not trying to be snarky, I'm genuinely curious. Have you ever read the economics literature on price controls?

They have not... and unfortunately this viewpoint is shared by too many these days.

Removing the profit-motive from the equation does not magically net increased benefits for everyone. It's usually the opposite in reality... landlords end up doing the absolute bare minimum because sinking a bunch of money into renovating the bathrooms or kitchen will not yield increased rent under these proposed policies. Or people looking to invest in housing/apartments for rental income decide it's ROI is far too low to be worth the hassle and risks... so less housing is built.

This line of thinking looks at some minority of people living in slums, and assumes every rental owner is actually a slumlord. So, the solution is obviously to degrade the situation for everyone because some small minority of people have it rough...

I mean, did you read Diamond, McQuade, and Qian? Or newer studies? It should be the minimum to read before talking about rent control effect (with Autor, Palmer, and Pathak) because people tend to cite 'Friedman', who _never_ empirically worked on this subject. I mean, I understand liberals/Libertarians seems to love pure reason, but I hope people on this website are more scientifically minded. Experience is always better than models, no?

[edit] anyway, rent-control on market housing do not work, but limited non-market housing do apply downward market pressure, even when done poorly and unplanned (as shown by AP&P study)

You appear to be making an incorrect assumption that I said "zero new housing". I did not. I said near-zero.

In your comment you explicitly specified that the whole country should adopt the same price controls as SF.

SF's price controls are sufficiently onerous that nearly no new housing is built there.

> In your comment you explicitly specified that the whole country should adopt the same price controls as SF.

I absolutely did not say this.

I said "Set the same price controls across the entire nation", which means one set of consistent price controls for the country, not the existing set of price controls that SF currently has.

Perhaps I should have worded it as "Set a consistent set of price controls across the entire nation".

That's fair. The wording of your comment (heavily, honestly) implies setting SF's policies nationwide, but rereading I can see how it can be read the other way.

You're correct, "Set a consistent set of price controls across the entire nation" is a much better wording.

Set the price controls across the nation, and developers will redirect their money towards something other than residential real estate. It's frankly disappointing to see this faulty thinking on HN. Price controls fundamentally disrupt the feedback loop between supply and demand. If you limit the profit to be made on building housing, you're disincentivizing it from being built.

Imagine a county is in the middle of a famine, and the government in a few provinces set price controls on food. The famine worsens in those provinces. Is the problem helped by setting price controls nationwide?

I agree with most of what you said, and do think supply is ultimately the fix, however, we also have to acknowledge the extreme inelasticity of demand for housing, and the massive shoe leather cost, both of which leave consumers at a massive disadvantage in price discovery.

How are consumers at a disadvantage in price discovery? Hop on Zillow, craiglist, FB marketplace, etc. set your filters and sort by price.

Price discovery as in the market converging on a price, not as in an individual seeing how much something would cost at present.

https://en.m.wikipedia.org/wiki/Price_discovery

Since the good has very inelastic demand, suppliers have an easier time influencing the market. Small changes in supply should cause big changes in price, in both directions. However, prices go higher much faster during high demand than they go lower during low demand.

Realpage is involved in a vicious loop, not a virtuous loop. Even in the Bay Area, corporate landlords jack up rent like 10% every year, whereas small landlords are happy to raise rent by 3%. That's the difference due to algorithmic collusion set and controlled by RealPage.

How are the corporate landlords able to rent their units if the small landlords are selling equal quality units for substantially less? Wouldn't everyone just rent from the small landlords while the corporate apartments stay vacant? This is the hole in the price-fixing argument: price-fixing only works when everyone is onboard, otherwise the parties not involved in price fixing will gobble up the market share.

I wouldn't be surprised if corporate-run apartments are more expensive. They're are usually renting much nicer buildings with amenities like air conditioning, parcel delivery rooms, gated parking, etc.

> Wouldn't everyone just rent from the small landlords while the corporate apartments stay vacant?

If there was enough supply, they absolutely would.

> They're are usually renting much nicer buildings with amenities like air conditioning, parcel delivery rooms, gated parking, etc.

It sure sounds like you've never rented. This is, in the vast majority of cases, not reality.

Exactly: prices are rising because there isn't enough supply to satisfy demand.

I have, in fact, rented in San Francisco. I rented from a small landlord in a building that had no A/C, no package room, no parking. I had to fix my refrigerator and shower mixer myself because she barely spoke English. But it was a cheap apartment! I also rented from a corporate landlord. It had a lot of amenities like a gym, a package room, and parking. But I paid a lot more for that apartment.

Because there's a shortage of units overall. All units get rented; the corporate landlords just make more profit, and a lot of people are priced out of the market, including many existing residents.

Small landlords who didn't use RealPage didn't struggle with occupancy. Large ones "fired" renters and warehoused apartments, meeting debt obligations at occupancy rates even below 80%.

And most amenities are bullshit. They've taken ordinary, expected services and privatized them, externalizing the costs to residents for kickbacks, and made elective services like cable and internet mandatory through exclusive provider agreements to inflate revenue.

In aggregate, squeezing older properties subsidizes newer properties by equalizing returns. They're making just as much or more off of cheaper properties as newer "premium" ones.

> This line of thinking is what leads to situations like San Francisco, where price controls on housing lead to few developers willing to build there.

Not sure what "price controls" you're talking about, but the reason it's expensive to build in SF (which reduces the appeal for builders) is zoning, the byzantine planning process, the ability of local residents to effectively block or delay projects, and weaponized environmental review.

> Do you want to invest tens of millions of dollars into building an apartment with zero expectations of making a return?

Building housing doesn't need to be an investment opportunity. In a better world, I'm sure there would be plenty of people who would be happy to build housing with only enough profit to pay employees a comfortable wage. These sorts of people don't have the ability to break into the industry, though.

Policy restricting housing is indeed another factor impeding housing. The price controls I'm referring to are rent controls (which applies to ~70% of apartments in SF, and the threat of reintroducing rent controls looms) and affordable housing mandates. The affordable housing mandates require that a certain percentage of units are rented at set prices.

Again, if housing isn't an investment opportunity, then why would anyone build new housing? Sometimes people get together and build co-ops. But those are rare, and it's only available to people with a lot of capital on-hand. Plus, it runs the risk of the project going over-budget.

Lots of businesses make less than stock market index returns. You can be a builder that doesn't want to beat the S&P and still support your family doing it. Not everything has to be about massive accumulation of wealth or "growth at all costs". Plenty of people are OK doing a day's work for a day's creature comforts and leaving it at that.

Sure you can deliberately invest in a way that doesn't generate the best returns. You can be a philanthropist and build housing for free! But the vast majority of people are indeed looking to maximize returns.

In San Francisco, rent control doesn't apply to new construction as I understand.

Correct. With one major exception (that is, a dozen or two of the couple-hundred units in Trinity Place on Market Street) SF's rent stabilization ordinance does not apply to buildings constructed after ~1979.

So, it would be good for GP (PP? family trees are hard) to consider the implications of the fact that ~70% of the rental apartments in SF were built BEFORE 1979.

price controls is rent control. SF. see also: NYC "you can raise rent by X% per year AT MOST, no more than that" if inflation / supply/demand is >X%, the landlord eats it. Thus landlording might be for some, more appealing elsewhere.

Cali also has prop 13 i.e. rent control on real estate taxes. So if I bought my house in 1955, I might pay $100/year in property tax, the guy who just bought a completely identical house next door this year might pay $15,000 a year in property tax. On basically the same house. How is that fair? kinda a boomer "I got mine" type mentality. Also part of the bay area real estate problem, in addition to zoning/byzantine planning, borken process - why would anyone want to move out?!? Moving out would mean +$15,000/year tax, every year. Just stay put.

Of note in Singapore there's not really the concept of "apartment building" business and it works fine (very dense NYC tier housing there). The reason why is the more "units" you own, taxes become progressively more brutal, an apartment building would be tax armageddon. So most rentals are a person who owns a few condo type units and rents them, few enough that taxes aren't bad. Most people aim for owning, and for owning there is a private sector but a public government sector that provides home at more reasonable prices with various perks and incentives. That's how to handle housing when you've got tons and tons of people and almost no land.

> So if I bought my house in 1955, I might pay $100/year in property tax

Ok it's fine to point out drawbacks of Prop 13, but making up stuff doesn't help.

Prop 13 baseline assessment used 1976 values, so buying in 1955 doesn't make any difference, it still started on 1976 valuation.

It goes up 2% every year, so for this scenario we're talking about a house that was worth well under 10K in 1976. The median house price in the US in 1976 was 48K (so surely higher than that in California).

> ...but making up stuff doesn't help.

Eh, the order of magnitude difference is pretty spot-on.

Housing prices are absurd, and their rate of increase massively outpaces the rate of increase for pretty much every other thing a person would purchase.

Like Manhattan? They've built a lot, and it's getting cheaper every year

Manhattan rents tanked during the pandemic, but rebounded pretty quickly after covid subsided. Supply and demand is such that prices may rise even if you build a lot of housing if there's even more people that want to live there. Big supply coupled with even bigger demand will still see prices rise.

This is not a binary situation. There are plenty of reasonable approaches that help limit abusive landlord behavior without damaging the prospect of profitable real estate development.

I wholeheartedly agree that landlords should not engage in abusive behavior: Landlords should not discriminate on the basis of protected class. They should keep units safe and up-to-code. They should not engage in deceptive practices like advertising one unit and selling a different one, or falsifying facts about the unit.

But where I'm not going to agree is the notion that setting rent above a certain threshold is "abusive landlord behavior". If a landlord is setting the rent too high, the consequence should be that the unit stays vacant. If someone is willing to pay that rent, then evidently the rent wasn't too high.

Except that there are significant switching costs. A person moving has to pay moving costs, might have to replace furniture that doesn't work for the new place, can affect your children's schools etc. This means the value of a unit to someone living there can often be significantly higher than the market rate.

This can led to situations where the most profitable move for landlords is to take advantage of the discrepancy to regularly raise the rent for existing renters by more than the market, in attempt to maximize profit. Sure they might have to deal with the hassle of finding a new tenant every couple of years when someone gets priced out, but if it leads overall to slightly higher profits it's the winning capitalist move.

The rentiers are ostensibly following the law, but the overall cost to the population and quality of life loss to renters can be significantly outsized compared to a sliver of additional profit for the rentiers. This is a great example of externalized costs in a free market and exactly where government should generally be attempting sensible regulation.

> Do you want to invest tens of millions of dollars into building an apartment with zero expectations of making a return?

No, but this doesn't change the fact that housing is a basic good like gasoline and insurance. Controls in those industries don't prevent companies from investing. Profit regulation doesn't mean no profit.

> price controls on housing lead to few developers willing to build there

Because there are alternate places without those controls. If housing were treated like the essential good that it is, there wouldn't be any ROI havens, and developers would adapt (or die if they can't accept reducing the typical ROI, which averages around 15%)

> rising demand which has not been satisfied by new housing construction

There's plenty of demand, just not for the houses that are being built. (That's not to say there aren't specific cities where there is no supply). Based on most affordability standards, many can't afford the typical rent or mortgage. If those prices can't come down, or income can't go up, then new types of much cheaper housing must be built.

Gasoline isn't subject to price controls, though! They were in the past, and the results were disastrous. This is what price-controls on gasoline look like: https://www.federalreservehistory.org/-/media/images/essays/...

The way that the government influences gas prices is that they stockpile or release oil from the US strategic reserves. They don't regulate prices. They influence supply in order to influence prices. The analogy would be building public housing.

I'm not sure what you mean by treating housing like an "essential good". Most essential goods aren't subject to price controls. There aren't price controls on food, for example. Most countries that set price controls on food experience famines (or the price controls are widely ignored and the black market becomes the normal market).

You can be prosecuted for price gouging of essential goods.

"price gouging" is not the same as price-fixing. Price gouging refers to raising prices in response to natural disasters: https://www.cato.org/blog/anti-price-gouging-laws-entrench-s...

> Texas’s APGL kicks in when a disaster is declared by the governor or the country’s president. Under the law, merchants are not allowed to sell or lease fuel, food, medicine, lodging, building materials, construction tools, or other necessities at “exorbitant” or “excessive” prices, with those caught facing civil penalties of up to $10,000 per violation, rising to $250,000 if elderly consumers are affected.

There's very specific, and very short-term windows in which prices cannot be raise excessively. It's not even remotely comparable to price controls on rents.

It's called 'dynamic price control' and is present in most cities in my country. My landlord cannot rise the rent at weird levels, which is based on the selling cost of the unit. Basically if her unit appreciate 5% yoy, she won't be able to rise the rent higher than 5% yoy.

So it's exactly the same thing as SF rent control, albeit with a higher allowable year-over-year increase. There's nothing "dynamic" about it, it's just textbook rent control.

Reads to me like the rate’s dynamic because it’s indexed to something else (potential sale price) that floats freely, rather than being a fixed value.

>> leads to rising demand which has not been satisfied by new housing construction

we seem to accept this at face value, but there's lots of evidence that supply is not the only issue, or even the biggest. Example: in Toronto this year there's been over 220 large real estate projects go insolvent. There's clearly a limit on the demand side.

So you would be ok with contractors who are building the houses (often as subcontractors) coordinating their prices for the work to maximize the cost to the developer?

Sounds like a union

You're missing that they didn't use this to build or expand housing, but to limit it. Just look at the occupancy rates.

They colluded with property management companies to capture 80% of existing multi-family dwellings and raised rents to inflate hard asset values of PE owned properties nationwide. Just because this is the closest that homeowners have had to a bailout in their lifetimes doesn't mean they didn't profit even more.

It was a scam.

Well, housing needs to mostly be handled by the private sector if we want high quality.

Government housing should absolutely exist, but only as a safety net as their management is incredibly inefficient.

Private housing isn’t the issue here: collusion is. Collusion should generally not be tolerated in a well regulated capitalist system.

there are massive and documented scandals at the US Federal level with the departments assigned to regulate and serve those markets (HUD etc).. an easy and relevant start is the Savings and Loan collapse of the 80s, directly on top of mortgage monies

I don’t disagree but not sure what point you’re trying to make here.

Problems with regulation are the expected consequence of living in the real world and not a model. They should be fixed and we can do better.

I just don’t see how any of this leads us to more regulation. More government control means less efficiency and likely MORE corruption.

I don't see why this is an important point: food is an industry and it's never been cheaper in human history than in developed capitalist countries with vibrant agribusiness.

True but, look up the price fixing that's been going on in big AG via AgriStats. Similar story as OP.

yup. Cartels always bad!

Modern housing is a direct development of the industrial revolution. In that sense it is an industry.

You could provide housing like undeveloped nations do, where large families live in cramped hovels without electricity or running water.

In the sense that someone should want an apartment with 2 bathrooms, a fireplace, and a pool - it's easier to treat housing overall as a consumer good.

This is quite the straw man you've constructed.

You seem to be suggesting that either housing must be exploitatively expensive, or people must live in squalor.

You are strawmanning me. Nothing in my statement suggests that treating housing as a product means it has to be exploitatively expensive or given away for free. If anything, most industrial products are supposed to get cheaper over time.

> If anything, most industrial products are supposed to get cheaper over time.

And yet the cost of housing more or less always increases. Isn't that enough to suggest that there's something about this "industry" that doesn't quite make sense the way it's handled?

...vs "providing" housing like developed nations in cramped shelters, in cars and on the street? FYI: multigenerational households are a cultural artifact, not an economic one. As one might assume, hovels without water or electricity don't break the bank, they aren't "provided" by anyone either. Yours is a false dichotomy, and is easily disproved by examples in other developed countries where shelter is considered a right.

I grew up in tenements in Romania. So I can tell you from experience that building the bare minimum shelter for the most amount of people is possible (if less enticing than you may think). But the idea that they were anything other than "industrial" housing as OP states is ridiculous.

Regardless of who pays for it, housing modern peoples is an industry.

"Hovel" is the opposite of industrial housing, etymologically, and evokes the images of ad-hoc slums rather than soviet-style brutalist blocks. Industrial housing is a step up from what OP described (no running water or electricity).

I will also note that the currently in-vogue 5-over-1s lean heavily towards "Industrial housing". Funny how diffent economic systems both with a captive market converged towards no-frills housing.

> it's easier to treat housing overall as a consumer good.

But it doesn't function like that.

Building the house isn't even the part that is the problem. It's land/space and how some people maintain monopolies on those.

A free market might make the materials and construction of a house cheaper. It address that space is limited and that most expensive space is often where there are more jobs.

> The fact that providing people with housing is even seen as an "industry"

> It is essential to living a decent life.

What troublesome phrasing. "Provide" implies people should get housing for free, and "decent" implies getting "decent" housing for free...

Well, so who is actually paying for it then? Magical handwavy "government" money? Everyone knows where government money comes from, right? Right?

Do we want more printed money and uncontrollable inflation? No? Oh so we should just steal this money from people who worked hard, because some others didn't?

> It should not be a driver of lining the pockets of people who are already rich.

Ah yes, the ol' "rich people bad" whipping horse. Despite the tens of millions of jobs created by "rich people" and the millions and millions of people who live in actually decent housing in exchange for market rates.

The fact that some people actually truly believe "free government housing" is going to be "decent" is absolutely tragic. Yes, let's doom millions to the "projects" because it makes us feel better knowing those darn rich people aren't making money!

If anyone wants a porthole view into what government housing looks like - take a look at the plethora of stories and pictures from our military barracks, across all branches. Mold, bugs, broken appliances, holes in walls, locks that don't work... and nobody cares despite the very vocal, highly visible complaints. There's a reason our service men and women scramble to off-base housing the moment they are allowed.

I'll totally accept you're speaking just in the context of the USA but...

> The fact that some people actually truly believe "free government housing" is going to be "decent" is absolutely tragic

Council houses are fairly highly regarded in the UK (i.e. the property, in terms of space, light, build quality. The estates/tenants, not so much...). They also have a track record of maintaining them far better than private/social landlords - I can personally attest to that.

It is the large homebuilder companies that build truly awful, "tragic" homes, cutting every single possible corner imaginable for an extra penny of profit.

Wikipedia indicates most of these Council Homes were built in the early 1900's - and are not modern construction. An additional average of a around 100 homes total were built per year from the 40's through 1980. So these don't appear to be helping a significant portion of the population.

Wikipedia also indicates in the 1970's the UK government dramatically and suddenly cut back on funding for these homes (among other things), which led to some very poor living conditions.

Your quality of life being dependent on the whims of politicians and budgets outside-your-control seems awful...

I note you don't link to your sources. You need better sources and/or better research skills. 100 per year is way off. Have you confused 100 with 100,000? I think even that is low

Yes the Conservatives stopped building council homes, mostly through neoliberal ideology that the government shouldn't provide housing. The private market houses are far worse quality

The number of new council house starts dropped in the 70s, before thatcher.

The trend continued into the 80s but blaming thatcher and neoliberalism is simplistic at best.

https://www.ons.gov.uk/peoplepopulationandcommunity/housing/...

Table 2A, housing starts by FY.

1970 185k. 110k in 1978/79 before thatcher’s landslide. By 1980 (so before the 1980 housing act came in) down to 58k.

The starts are what’s important as those are the ones impacted by new legislation and policy.

From your source, this is the number dwellings "Completed - Local Authorities" from 1979 to 1997:

89,630 (1979)

88,540

68,330

40,080

39,170

37,580

30,410

25,380

21,820

21,450

19,350

17,870

11,230

5,700

3,360

2,880

3,440

1,740

1,550 (1997)

You're going to claim the Conservatives of that era didn't stop building council houses?

Compare with the 18 year period before Thatcher:

119,350 (1961)

132,070

126,240

156,830

167,300

179,170

202,860

190,670

182,380

179,280

157,380

122,360

104,570

124,140

152,470

153,750

145,070

113,660 (1978)

> By 1980 (so before the 1980 housing act came in) down to 58k.

I don't recognise this 58k. What is the exact cell of that number?

Starts are important, not completions, when looking at policy impact. I added local authority and housing associations together as they are basically the same concept.

Oh you moved the goalposts. Got it.

Council houses and housing associations are completely different. Have you ever lived in either? I have

Fine, just have local authority numbers then which halved from 175k in the decade before thatcher was elected, let alone had any chance to implement policy.

She didn’t reverse the trend, but she didn’t start it.

> Your quality of life being dependent on the whims of politicians and budgets outside-your-control seems awful...

More or less awful than being dependent on the whims of rich rentiers and impersonal market forces? At least politicians have some accountability to the poor who can vote them out.

It being an industry is what allows people to live a decent life.

Just like farming being an industry allows you to sit at a desk all day instead of being out there foraging.

My concern with this is that it fundamentally undermines competition, which is a promise of the markets. Being more efficient means delivering products more cheaply than your competitors, which is good for the market. This sort of collusion completely undermines that and holds back innovation in the market.

How would real estate developers feel if construction companies / subcontractors had a similar product for pricing their labor? Or how would any company feel if employees worked together to set the price of their labor? That sounds kind of familiar, and doesn't sound like something most companies would be happy about.

Some Related recent discussions:

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

Algorithmic price-fixing of rents is here

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

I am a small-time landlord. There's no "marginal cost" to determine how much to charge for rent. The only thing I use to determine the price is the current market rate. And all I have to do is open up Zillow or Craigslist and do a search on similar properties with similar characteristics. It only takes ~5 minutes of research to get a competitive market rate.

While RealPage might command 80% of the market for this type of software, they only have 12,000 clients. There are over 5.2 million multi-family dwellings in the US. It's only a monopoly in that they offer a very niche product. So I doubt the implication the justice department is making here - that RealPage is having a significant impact on market price through widespread collusion.

Furthermore, housing is a market - nobody is "competing on merits". There's limited inventory, and it goes first-come, first-serve. Realpage advertising that it gets the best dollar for its clients isn't that much different than your Schwab account letting you know you shouldn't sell your MSFT share for $50. I suspect the DOJ may have trouble actually proving that landlords held to the price recommendations to their own detriment to keep them high.

While I appreciate the breaking up of a potential cartel here, and this is a software I would never use, I would hold my breath if I was expecting a sudden change in the rental market because of this. Inventory is still fundamentally limited, and unless the DOJ bans all market research, the going rate is still the going rate.

> While RealPage might command 80% of the market for this type of software, they only have 12,000 clients. There are over 5.2 million multi-family dwellings in the US.

That reveals a startling statistic that 80% of the market is controlled by only 12,000 users. That's 433 units per user on average.

I think the better implication is that the vast majority of apartment owners don't bother paying for pricing software.

It's worth pointing out that third-party tools like 6Sense assess RealPage's customer base as much, much lower (around 6000 paying customers).

> I think the better implication is that the vast majority of apartment owners don't bother paying for pricing software.

I don't think there's anything so far to indicate this or that; there's still a reasonable possibility that 80% of the market is controlled by large property management businesses.

This is easy to look up. There are approx 300,000 property managers in the US.

Assuming RealPage isn't lying about their number of active customers, they would only account for 16% of the industry. Obviously the numbers could be skewed wildly but it's still far from a monopoly.

The allegation would be that they have a monopoly over rental pricing, in which case the relevant metric is the percentage of rental pricing they control, not what percentage of landlords use RealPage.

If Kroger, Walmart, and Safeway decided to collude, they’re probably less than a percent of grocery store brands. They are like 95% of the grocery supply, though.

There's two major companies in the area that rent out apartments.

I rented from one a few years back. In my unit, there were 12 apartments (I think). IIRC, four per floor, with three floors. I believe there were 8 to 12 units surrounding a common area in our "block". Then this "block" was a part of a larger group of complexes and in the area, they had five or six of these groups.

That's around 50 - 100 units.

They also had other locations. They probably manage at least 1000 units.

The other company manages fewer, but not by much.

If RealPage gets both of them, they've effectively set the prices for all apartments in the area.

> That reveals a startling statistic that 80% of the market is controlled by only 12,000 users. That's 433 units per user on average.

This conflates the market for this type of software with the larger housing market. Presumably, this software is only used by some large (probably mostly hedge-fund or REIT funds) apartment complexes. So, yeah, 80% of that market, but that's only a tiny amount of the overall market.

The DOJ chose that number (almost certainly out of a hat, because there's no way to actually identify all of them) of 80% in order to make it seem like it's a monopoly, but proving at trial that RealPage or its clients controls prices over more than a tiny fraction of the market will be incredibly difficult (actually impossible, because it's obviously not true).

However, given the DOJ's limitless funding to pursue this, clearly it's not after actually winning at trial; it's after a consent decree.

RealPage works by collating private competition data from all of their clients, running models to determine the highest possible vacancy rate for an area that will lead to the highest possible market rate, then telling their clients to set at that price and never offer discounts or reductions.

In a fair market, landlords with vacancies would want to fill them — they have tons of fixed costs and they can't leave money on the table like that. If you had trouble filling, you'd look at the market and adjust downwards, or offer better amenities, or do whatever you wanted to attract customers. The tension between demand and supply leads to market equilibrium.

RealPage tells its clients that if they all work together to set their prices higher than market equilibrium, hold out for far longer than they normally would want or what a free market would lead to, then the simple inelasticity of housing demand — everyone needs a home! — means that customers will eventually have to give in to the higher price in order to live their lives, and landlords will rake in the profits over time.

They use the data and actions of their clients working in concert in order to manipulate a fair market into a deeply unfair one which does not properly adjust to market forces.

> running models to determine the highest possible vacancy rate for an area that will lead to the highest possible market rate

In my view, holding units vacant intentionally in order to increase profit should be illegal. Vacancy taxes don't go far enough; landlords who do this should be forced to sell any units they've decided to keep vacant, or see their properties seized.

Optimizing profit around providing people shelter (or avoiding doing so) is evil.

That is very easy to cheat though. Two obvious ones: a different unit is held open every month; or these units are closed for remodeling. Until you get to long term 40% vacancy it is really hard to tell - and be careful not to kill rural small towns that no longer have demand and so apartments that will never be full anymore get torn down thus harming the few renters who remain (since it isn't worth replacing the building at current rents and many cannot afford the rent that a new apartment would need just to be worth building)

Allow up to 1 apartment or 3 separate units of house ownership per person. And only allow 1 unit vacant per apartment after the initial year after the construction, or multiple units up to 3 months per 5 years (must be simultaneous in all affected units with a tolerance of 15 days from either side to the simultaneity, no tolerance to the per-unit duration, or should be considered intentional vacancy) for maintenance and remodelling.

Again, I have experience in this market so I have first hand experience.

I understand the cartel allegations here, but I think people are vastly underselling the competitive forces at play. If you are not filling your unit immediately, you are losing thousands of dollars a month.

Cartels break down because of the incentive to undercut (prisoner's dilemma). But in this case, it would be very, very profitable to undercut RealPage's prices and get your units filled before them. So their compliance and enforcement mechanisms of RealPage would have to be extremely robust to get corporations to willingly lose tens or hundreds of thousands of dollars a month to collectively collude on prices.

How are the forces being undersold here? A large-scale property management company can drastically influence the market without needing to fully capture it or even hold a majority.

Let's say of a given market, 30% of all units are owned by a large-scale property management company using this software.

If the prices of the 30% of those properties was artificially kept high, it would push renters to look at the 70% of other landlords whose prices were kept low as a result of not using this software, causing a demand on that part of the market.

As demand rises in the 70% of open-market-priced apartments, I would expect these property owners to see that there's a bump in demand and would understandably see this as an opportunity to nudge prices up a bit.

If your property only received 10 potential tenant candidates a month a year ago, and you're now seeing 14-15, you might be leaving money on the table.

Removing the cartel claim for a moment:

Say I'm at a farmers market with 4 produce stands. If one stand hikes their prices 40% for whatever reason, presumably people would start to consider visiting the other 3 produce stands.

Why wouldn't the other stands consider raising their prices with the increased attention?

> If you are not filling your unit immediately, you are losing thousands of dollars a month.

This is false. If you have 100 units with monthly rents at: 100x$900 = $90000, 90x$1000 = $90000. 85x$1100= $93500. Of course we have no idea how many people will decide to not rent from you at different rates, but it should be obvious that the numbers can work out to it being better to not rent a few units if the price goes higher by enough as a result.

You are correct that a cartel has incentive to defect, but is it enough? You are correct that this is prisoner's dilemma, but it is a multiple round game which has very different incentives from a single round. You are better off in a single round defecting, but you are better off in repeated rounds if everyone plays with the cartel and so they are not defecting. (or at least not too much)

It’s enough if there’s enough inventory. The only reason it functions is because there’s not enough inventory in many of these markets.

> 85x$1100= $93500

And don't forget that you get to write off 15 empty units at the presumption of a $1100/mo rate. Or Airbnb them.

I worked for a public REIT that started using YieldStar when I worked there. Once they changed to YieldStar, all pricing came out of YieldStar. Rental quotes for prospects were only generated from YieldStar. Any deviation from the YS price had to be approved by the regional VP and they were not common.

They did this because RP was able to demonstrate that accepting a bit more vacancy in the very near term meant higher rents (thus higher renewals) which more than paid for the additional vacancy.

What about the counter incentive, that lowering rents lowers valuations, which affects creditworthiness and financing by lenders?

I generally agree with your assessment. As someone mentioned above though, I think the emails where RealPage is telling landlords not to lower prices are much more damning. It puts RP as the locus of collusion.

> they only have 12,000 clients

When you perform said Zillow or Craigslist search, do you settle for the higher end of the range of prices or the low end? Realpage only needs to manipulate a relatively small number of listings to have a huge impact in all rent prices.

The lower end! I usually undercut the market rate by ~$50.

My house rents for $2400 a month. If I leave it on the market for just a month I would lose more money than I would gain in 2 years at a higher rent! So the incentive is to get it rented out as quickly as possible and get it booked before the other guy.

So my incentive is to be just a bit lower than the other guy so mine goes first.

I will not deny that the market rate for housing is absurdly high, but it is still a market and incentives still matter.

That is because you only have one or a few units. When you have many units the numbers work out very different for empty units in exchange for higher rent.

> While RealPage might command 80% of the market for this type of software, they only have 12,000 clients. There are over 5.2 million multi-family dwellings in the US.

Those statistics don't tell us enough to see if this is a problem, though. In the extreme case (obviously this is not true), everyone uses pricing software, so RealPage's 80% is 80% of all dwellings, and those 12,000 clients own 4.2M multi-family dwellings.

Also what matters is number of units, not number of multi-family dwellings. Owning a duplex does not give you the same clout over local rentals as, say, owning the only large (at say, 500 units) apartment complex does.

> While RealPage might command 80% of the market for this type of software, they only have 12,000 clients. There are over 5.2 million multi-family dwellings in the US. It's only a monopoly in that they offer a very niche product. So I doubt the implication the justice department is making here - that RealPage is having a significant impact on market price through widespread collusion.

Well, given your only justification for your doubt is that you compared clients to multifamily dwellings, I gotta say, your doubt is pretty not founded in reality.

> Furthermore, housing is a market - nobody is "competing on merits".

Oof, bro.

"Competing on merits" is the entire justification for why free markets are important. If you're arguing that nobody is competing on merits, then that starts to sound like you're arguing that competition isn't working here.

> Realpage advertising that it gets the best dollar for its clients isn't that much different than your Schwab account letting you know you shouldn't sell your MSFT share for $50.

The difference being that Schwab doesn't have the pull to price-fix MSFT. In cases where a single coordinates to control 80% of shares of a stock and then price-fix it, that is, in fact, illegal.

> While I appreciate the breaking up of a potential cartel here, and this is a software I would never use, I would hold my breath if I was expecting a sudden change in the rental market because of this. Inventory is still fundamentally limited, and unless the DOJ bans all market research, the going rate is still the going rate.

I agree with you that housing prices are not likely to drastically change as a result of this, but my reason is that this isn't the only price-fixing mechanism in place.

Competition clearly isn't working for housing. Because it's not a competitive market. I am just skeptical to the extent it is due to pricing cartels.

It is a competitive market. However supply is often supply constrained (both by bad zoning and that some places are just better than others). The cartels only work because supply is constrained enough that they have power, if supply was less constrained the cartel could not raise prices as much (when supply is constrained you need less members in the first place).

I support looser zoning rules as reducing supply constraints is the only long term way out of high rents. However some places are better than others and there is a limit to how much looser zoning can reduce prices. (I wouldn't live in a tiny mud hut even if it was cheap and legal)

If we loosen zoning, and a half-dozen skyrises go up that are owned by a ~cartel~ group of friendly property developers, with X% of housing required to go to low-to-middle income households with a govt-required vacancy rate on that segment, do you think that would make rental prices go down?

Because we've run this experiment in Downtown Brooklyn for the last ten years, and rent has only gone very significantly up.

I think, at some point, you have to begin asking questions of the concept of nonresident landlordism and privately-owned massively-multifamily housing, rather than zoning, when changes to zoning don't actually make a difference to residents.

A half dozen isn't much. The real question is how would it be different. I contend it would have been worse but we cannot know.

I guess it was closer to a dozen if you add up all the smaller ones. City tower, the Death Star looking one, the Alexa looking one, the 3 or 4 medium sized ones on Gold St, the Brooklyner, the 5 or 6 medium sized ones on Hoyt, the One with the Apple Store, the three or four around Barclays Center.

We’re talking about residential space for 10s of thousands of people that completely changed the vibe of the neighborhood for better and worse.

You don’t need the counter factual to look at the prices they’re leasing for. Or to understand that the wealthy folk in these buildings look down at the cutesy brownstones and think to themselves “oh it’d be nice to live in one of those next!”. To realize that the influx of monied people and the accompanying influx of goods and services to pander to them induces top-end demand for the neighborhood and inflates rent.

The kind of high-density housing we build in this country does not deflate housing prices.

To clarify, it might be different if the neighborhoods surrounding this area were not majority owned by nonresident landlords, often the children of the original purchasers.

Increased supply solves pricing when you have a competitive and free market, but the point people in this thread are trying to make is that housing (especially in urban areas) is not at all a free and competitive market. Landlords can afford to let an apartment lay fallow. However, people not only need places to live, but they believe that they can’t afford (socially, career-wise, whatever) to leave a set of zip codes. It leads to rent being a one-way ratchet that dramatically outpaces wage growth and inflation.

> While RealPage might command 80% of the market for this type of software, they only have 12,000 clients. There are over 5.2 million multi-family dwellings in the US.

This is pretty misleading.

"Greystar was the largest apartment manager in the United States, with over 726,826 units/beds..." - https://en.wikipedia.org/wiki/Greystar

That's one client. (And yes, they are a client. https://www.realpage.com/case-studies/greystar-optimizes-sub...)

They should take a page out of the FBI's book: leave the software up as a honeypot, sue the users into oblivion, and use the proceeds to fund further antitrust operations.

Otherwise we're just going to end up with the same software back from the grave, but with no company behind it to sue this time.

This is probably the best thing the justice dept can do to help promote a competitive market for renters.

Also…we need the government to encourage housing policy which produces a lot more housing stock.

The long-term reason housing is expensive is because there aren’t enough good houses and zoning has a lot to do with that.

> we need the government to encourage housing policy which produces a lot more housing stock.

It’s really not “the government” but existing homeowners and especially old ones. Many politicians would love to add housing and especially density because that boosts businesses, tax revenue, use of local services, etc. but the idea that your house is going to pay for your retirement has a lot of people afraid of changes which could lower their valuation, and that makes it extremely hard to get things like zoning laws changed.

A key problem with rent pricing is that a form of price fixing is imposed by fair housing law in a way that educated folks know how to circumvent, but many do not.

When a lease is advertised at X price, it is not legal to offer one monthly price to one tenant and a different one to another, so no negotiating can occur. This also allows smart landlords to price fix without software because all rates are known since the posted rate is the rate. This inhibits true price discovery.

The cheat code is to ask for free months and spread that discount over the lease term. However, this creates a situation where, at the end of the lease, the landlord has you set at the regular month price (or higher), and you have little leverage. Also your good deal is unknown to others who will continue to overpay.

Attacking a software is an easy out, attacking the system that artificially increases rents in the whole system by outlawing more aggressive tenant negotiation is the hard problem.

> This also allows smart landlords to price fix without software because all rates are known since the posted rate is the rate.

The rates change monthly though, and smart landlords were already changing their rent every month.

Hopefully the DoJ (metaphorically) puts the company’s head on a pike, as a warning to others. Businesses that use technology to make life worse for the public should tread cautiously.

Not just the company. Also all of it customers who have followed their recommendations. All of them should be hit extremely hard.

So companies in the future will not be able to subscribe to another companies algorithms? How is this a lot different?

Tons of companies use credit bureaus to get the sameCredit data for pricing loans to people. Remove this and companies will charge consumers lots more since they'll have to face more risk.

Tons of companies use prices when setting contracts in a ton of products (metals, food, stocks, and on and on) and those prices are aggregated and curated and that information is sold to all the other companies, thus setting prices. Stop companies from being able to access this pricing, and again consumers will face more costs as each company has to gather/curate it's own pricing.

Central banks set prices from which tons of the market sets downstream prices. Is this going to be illegal? Again, blocking this, markets and consumers will face higher costs, same reasons.

There are so many companies whose sole purpose is to set pricing so other companies do not have to do it in house that picking out this one seems ludicrous.

I fail to see how this is much different except that it's politically popular. Rental property owners are not forced to use it, and even have the traditional market forces not to use it: undercut the algo prices and get more business.

It is in fact illegal to collude when setting commodity prices, yes. Having market prices is not the same as colluding.

Differences here include a system where landlords are contractually required to supply all their rent data to RealPage and are only allowed to set their own rents if they apply for exemptions first. It's very much designed all the way through to have every effect of mass collusion with the technicality of landlords not directly making agreements with each other about rental prices.

I think if you read into the details you wouldn’t make such an obviously naive argument.

The services provided by companies like realpage remove the ability to negotiate.

More importantly, they explicitly manipulate supply coming into the market by removing competition.

Take this example: a lease renewal offer is made available, the price is actually higher if the termination date corresponds to relatively high levels of expected supply influx within the existing property (assuming multiple units) AND across other properties in the same geographic area using realpage or its ilk.

This allows landlords to theoretically offload the collusion onto companies like realpage, for a price.

In a properly functioning market, price discovery is a function of the market, not artificial control exerted by a centralized power with one-sided incentives.

Collusion As A Service

And I can undercut those using the service to attract more tenants.

It's still a properly functioning market. Same forces to get tenants vs what tenants will pay.

Your arguments apply to nearly every single function one business offloads to another. However that merging of skill has resulted in lower costs, since every vendor doesn't have to pay to gather info from scratch, and can focus on specific value add.

Next you'll tell me landlords shouldnt be allowed to use credit reports, since that largely affects price or denials. And that will simply add cost as risk gets pushed back onto consumers.

This is no different than lots of existing services, such as credit reports.

> So companies in the future will not be able to subscribe to another companies algorithms? How is this a lot different?

A lot different... keep reading more.

> Tons of companies use credit bureaus to get the sameCredit data for pricing loans to people

Except credit bureaus (1) are a regulated entity. You can't just use credit data freely, and you can't use any data to write loans. Loans can only be priced using approved credit data from a credit bureau.

(2) Credit bureaus don't price loans. Full stop. Credit bureaus provide risk analysis, it is up to the underwriter to price that based on the provided risk. They provide a score and details on lines of credit. They don't tell you how to price your credit product, nor if you should provide such a service.

> Tons of companies use prices when setting contracts

Yes.

> in a ton of products (metals, food, stocks, and on and on)

Not all of those are "products", some of them are "securities", but yea. Notably, everything you mentioned is a clear commodity.

> those prices are aggregated and curated and that information is sold to all the other companies

More or less.

> thus setting prices

Sorta... thus influencing prices but not directly setting them.

> Stop companies from being able to access this pricing

Companies won't be stopped from accessing pricing data about the market.

> consumers will face more costs as each company has to gather/curate it's own pricing.

The act of gathering and curating data to make pricing decisions is the exact role of a business. Each business. Except basically under the American image of what communism is, I guess. But every business is responsible for their pricing.

> There are so many companies whose sole purpose is to set pricing so other companies do not have to do it in house that picking out this one seems ludicrous.

I'm not sure I agree with any of this statement. Few companies dictate pricing to other companies. Everything about this sentence screams collusion.

> I fail to see how this is much different except that it's politically popular.

Everything about everything is political. The laws are political. The justice system is political. The issues the government fights are political. What would politicians do but politics?

> Rental property owners are not forced to use it, and even have the traditional market forces not to use it: undercut the algo prices and get more business.

And yet it's quite popular in certain markets, and has demonstrated raising prices. The problem with this assumption is the housing market isn't a great efficient commodity market. Moving has extremely friction cost, supply isn't elastic, and a supplier can't easily make more housing units to trade margin for volume. Some housing markets are extremely tight and expensive.

This case is basically text book collusion, wrapped up in a politically relevant bow. As other commenters described, this company requires you to collude by forcing you to use their pricing.

Or I simply stop using their pricing, undercut my competitors, and gain tenants. Same as before.

The US has around 15million landlords, 20+ million units. RealPage has ~6000 customers.

It's pretty hard to set market prices with literally millions of competing landlords.

> Or I simply stop using their pricing, undercut my competitors, and gain tenants. Same as before.

Except the landlords signed a contract... they legally bound themselves to using their pricing.

Also the market keeps changing, so you'll need their pricing in the future (so you can't break your contracts), or you'll need to do your own independent market research without access to their data.

> It's pretty hard to set market prices with literally millions of competing landlords.

What's the most important rule in real-estate? Location. Location. Location.

"Market" prices, obviously, apply to a "market". There are not millions of landlords in any given real-estate market. You can't compare a studio in Manhattan to a townhome in SF and a ranch house in Houston. No one is actually shopping for a rental and considering all those options. The entire US is not one market.

The housing market in many parts of America do not operate like a traditional commodity market. Demand outpaces supply, and landlords can't just make more units to compete on margin - most landlords have very low vacancy rates already. There is no incentive to undercut your competition when you can fill units at higher prices with no drop to vacancy rates through cooperation.

If it was this easy, the company wouldn't exist and the suit wouldn't be moving through the courts.

> signed a contract

Contracts aren't infinite. And contracts have to follow the law.

> so you'll need their pricing in the future (so you can't break your contracts), or you'll need to do your own independent market research without access to their data

>The entire US is not one market.

Are you trying to claim that of the millions of landlords, somehow they are clustered away from bigger markets and that RealPage controls all in any given area?

Here's an idea: demonstrate that in some big market that RealPage controls the majority of the rental units, otherwise it's ludicrous to say they are setting prices somehow arbitrarily. You can't since it's not true. I think not.

> Contracts aren't infinite. And contracts have to follow the law.

Yes! And the RealPage contract broke the law. It prevented landlords from competing as you suggest they compete, breaking the law. It enabled landlords to collude and prevent prices from dropping.

Landlords are part of larger markets, but it’s ridiculous to think the market is “all of America”. It’s very regionalized and segmented.

> Here's an idea: demonstrate that in some big market that RealPage controls the majority of the rental units, otherwise it's ludicrous to say they are setting prices somehow arbitrarily. You can't since it's not true. I think not.

You absolutely can claim they are setting pricing arbitrarily… why are you defending a company whose business you seem to know nothing about? Again, their entire business model is a subscription to collusion pricing. Collusion is illegal event without a monopoly.

They are price fixing. They are not alleged to have a monopoly over housing units. That said, they are alleged to have a monopoly power…

According to the DOJ:

> The complaint separately alleges that RealPage has unlawfully maintained its monopoly over commercial revenue management software for multi-family dwellings in the United States, in which RealPage commands approximately 80% market share.

> ts monopoly over commercial revenue management software for multi-family dwellings in the United States

Yes, if define a market small enough, then you can try to claim monopoly (which, of course, is not illegal). Apple fixes prices of it's goods across all retailers, as do many manufacturers. Is this illegal? They control the market for apple good, so why don't the retailers compete on price?

Because it is legal for somone to set prices across retailers. It always has been. And in the case of landlords, the sheer number of options for consumers most likely means this DOJ action, like many, will fail.

You forgot to reply to:

> demonstrate that in some big market that RealPage controls the majority of the rental units,

I'll wait. Unless you care to answer this basic question there's no reason to continue.

Looking at your competitors' or suppliers' prices to set your prices is not illegal.

Looking at the same inputs that your competitors' are using in order to set your prices is not illegal.

Purchasing metrics based on those inputs and using those to set your prices is probably not illegal, depending on what goes into those metrics.

Coordinating with your competitors to set your prices is illegal.

The line between that is not necessarily a super bright line, but some cases are extremely obvious.

One key test: if you undercut your competitors' prices, will you get punished for defecting, other than your competitors potentially lowering their prices in response? If so, you or your competitors or both are probably doing something illegal.

This phrase, "I fail to see"

> So companies in the future will not be able to subscribe to another companies algorithms?

I imagine only the anti-competitive ones.

I can only hope they go after RealPage as vehemently and doggedly as they went after Backpage.

Hi. Anyway to get ahead of this? Letter to apt. Manager. "Hi, I just rented here. Did you use this software? Please knock 10% off the price in my lease." Nail this to the door or 100 others in the complex? Or too late now? Any suggestions? Thanks in advance.

They need to put them in jail. In the 1990s, Archer Daniels Midland (ADM) did price fixing and they sent Michael D. Andreas, Terrance S. Wilson, and Mark E. Whitacre to jail. They need to do that here.

This is definitely one of those companies I would love to see be completely taken down. We need to revise monopoly and cartel laws because I suspect the current Supreme Court will not see eye-to-eye with the DOJ on this as they are strict textualists now. If the law doesn’t say “cartel by intention of digital equivalency” or something else descriptive I don’t think SCOTUS will bite any longer or apply common sense interpretation as any good judge should.

Of course, there not thing wrong with algorithms, until you go above and beyond and try to force everyone to obey it's recommendations.

Which they did.

They need to go after the landlords as well. If they just go after RealPage there is nothing stopping landlords from doing it again with different software.

Only if the software exists. By going after RealPage they ensure nobody else is stupid enough to write software this way. They might use software, but that software either will not have as much information, or it will have different information that they will try to claim doesn't violate the rules. The first is legal, but makes the cartel much harder for form. The second is illegal, but it is harder to figure out how to get information and make it seem like you are not violating the rules.

Concentration is more likely problem. When there are only a handful of competitors in a geographical area they'll find a way to collude one way or another, even if it's just a signal group or staring at each out while slowly raise prices. I think >=6 is probably the point where you might start to see defectors.

Yeah. It seems like antitrust in the US will happily let competition consolidate down to 2 or sometimes even 1 viable provider, and the only react later once evidence of consumer harm can be shown via higher prices.

At that point a lot of the damage is already done, and trying to reverse it is more complicated than preserving a competitive market to begin with.

CaaS - Collusion as a Service

Related. Others?

San Francisco seeks ban of software critics say is used to inflate rents - https://news.ycombinator.com/item?id=41227792 - Aug 2024 (185 comments)

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)

IANAL, but I am not sure that RealPage is actually violating the first two sections of the Sherman Anti-Trust Act. It definitely seems RealPage may be assisting in organizing price-fixing, and the word 'contract' in section one may get them in trouble, but they do not seem to be doing it "in restraint of trade or commerce among the several States, or with foreign nations", as rent is local, and I'm not sure that their contract with clients actually forces the clients to accept 'recommended rents'.

https://www.law.cornell.edu/uscode/text/15/1 https://www.law.cornell.edu/uscode/text/15/2

Meanwhile, Bilt is sucking Wells Fargo dry by yuppie renters who can afford to spend $75k/yr dining out and paying $8k/month in rent.

PS: I can't wait to delete the ActiveBuilding by RealPage app.

How are the two related?

They're not, "millennials eat out a lot" has become the new avocado toast. Like yeah when student loans, mortgage/rent, car payment, and bills are 6-8k out the door monthly it turns out a $40 night out stops moving the needle. If you eat out fri/sat every week that'll be 5% of your mandatory expenses. No one should be surprised folks don't give a shit.

I use the Chipotle burrito index to help folks understand the non-cost of eating out. My student loans are 120 burritos, my rent was 261 burritos. Getting a sub-pump installed is 952 burritos. Three cheers for prices of things rising non-uniformly.

I am excited and optimistic that we appear to be applying economic principles to housing! Now that we're getting rid of centralized price controls / collusion, next can we do supply/demand?

On the demand side it would be nice to keep PE firms from hoovering up all the single family homes.

https://www.thesling.org/are-hedge-funds-and-private-equity-...

Would be interesting to see what would happen if renters had the option to buy the underlying property/unit somehow after being a tenant for a certain time.

The goal should be ownership for folks who want it, not a nation of renters.

You can rent your home with x% profit, but after x # of years the home sells to the renter.

I like it but that seems like a system VERY susceptible to abuse.

You can bet landlords would be doing everything possible to force renters out just before the purchase window comes open.

That's definitely an issue, even if constructive evictions can be prevented, landlords would also have to be forced to renew leases (at limited rent increases).

One small catch, maybe even a constitutional hold up?

It's not really your home if you are obliged to sell it after x years.

The traditional societal compact with private property is that the property is yours for as long as you choose to keep it. (Providing you pay the taxes covering the costs to provide municipal services to your property.)

This kind of changes that, and I'm not sure it would stand up to constitutional scrutiny?

No one is forcing you to rent it

Again, traditionally, renting your property on terms an owner unilaterally determines was seen as a right of owning private property. Provided you're able to find a renter who agrees to your terms, and provided your terms are legal, you were allowed to rent your property, again, forever. For instance, it was perfectly legal to rent your apartments for USD1500 per month, and at the same time, allow your kid to stay in one of the apartments for free and give a USD500 a month break to a long term renter who maybe lost his job. It was your property, so whatever terms you had with each renter was very much considered to be your business. (Again, within the bounds of legality. You can't be asking for a cut of the drugs dealt out of your apartment as a condition for instance.)

Unless I'm misunderstanding the proposal, this would change that practice. You would be told how much you could rent the property for, as well as the date you would need to sell the property. (Which, I'm guessing, would be based on the rent amount?) So a radical change from before in terms of private property rights.

Forcing people to sell private property against their will is generally a pretty bad economic policy.

All they have to do is offer the owner an adequate price.

The problem is they can't give the owner an adequate price when they're paying for the owner to grow more equity in the property while also needing to save at a faster rate to afford a downpayment on a mortgage.

Then they are renting something they can't afford, if ownership is their goal.

When I was saving for my first house I lived in a crappy little 1 bedroom apartment for a few years so that I could get a down payment together. I had the income to afford renting a larger apartment or a house in a nicer area but I would not have been able to save anything.

When was this?

Have you paid attention to the percentage of wages required for a unit nationally? In your area?

> Have you paid attention to the percentage of wages required for a unit nationally? In your area?

Roommates.

I too had roommates coming up. People today have roommates coming up. That doesn't change the fact that even with roommates, the burden is disproportionately higher than it was for the last generation, particularly with housing.

Median household county in my area is about $55,000 a year. The median price of a house is $450,000. Assuming two people, the 50th percentile wage is equivalent of $14/hour. (This as an eyeball looks pretty close to a median wage.) Fair market rent for a 2 bedroom apartment (40th percentile) is 1500, or 32% of income.

If you let everyone get their own bedroom? For a below median two bedroom apartment, they will barely be able to afford the place.

A 4 bedroom place is $2500, so you're going to get about 100 dollar discount, but that all gets wiped out if one of your roommates leaves and you can't find a replacement. The more people sharing a space, the more risk there is.

It's tougher out there right now if you're not on an engineer's wage.

> doesn't change the fact that even with roommates, the burden is disproportionately higher than it was for the last generation, particularly with housing

Oh totally agree. Just pointing out that a straight comparison of wages to home prices doesn't dictate unaffordability.

If you are saving a down payment for a house you need to be spending far less than "32% of income" on your current rent. You need to move farther out, find a smaller/shittier place to live, be frugal with everything else, and/or increase your income. This has always been the case, unless you are earning well above average income.

each successive generation shouldn't have to endure more and more hardship to achieve the same standard of living, especially if it's due to previous generations imposing regulatory barriers

That's a very different situation than the one you initially replied to. It's also not something everyone can do.

There's nothing actually wrong with renting, if there's enough supply to stop profiteering by landlords.

What's frustrating is when (as appears to be obnoxiously common in the UK) affordability requirements for mortgages mean someone "can't afford" to buy even when their mortgage payments would be less than their current rent. While the landlord probably has an interest-only mortgage and doesn't pay tax on their mortgage payments.

Here's a thought: tax landlords based on their self-assessed property value, but make it so that the tenant has the right to buy the property for that amount.

You can't just ban them. Where there is profit to be made, they will find a way around any regulation.

You have to change the structure of the market so they no longer see these investments as profitable.

One way local areas do this is by "homestead tax exemption" which reduces property taxes if you live in your own home, but this is binary and punishes small landlords equally as big ones.

> which reduces property taxes if you live in your own home

My town is experimenting with allowing this exemption if anybody claims the address as their primary residence, whether it is the owner or not. The main purpose is to cut down on people keeping vacation homes, but it should also make things more expensive for flippers and speculators.

Small landlords are no better than big ones if they’re keeping properties empty.

Those taxes just get added to the rent charged.

Indeed they would, however, the underlying asset value would drop to allow for market rents. That's the point.

In a free market, yes. But not when the demand is so artificially constrained. Rents go up and people are forced to either pay a higher percentage of their income to rent, or move farther away.

Housing is not a free market by any stretch of the imagination, so if you just move one lever you don't always get the response you would in a true free market.

It's a complex problem. Some landlords are great, keep nice homes, and take care of the property. Some homeowners are absolute slobs, and don't take care of their properties. But, in general, "landlord" quality is considered the lowest level of effort/materials for maintenance.

Once an area reaches a certain % of landlords (no idea the actual %, but it's low), it leads to a general decline of the neighborhood. These landlords are buying starter homes (apartments and houses) whether they are PE companies or individual landlords, driving up the cost of "cheap" housing.

It has to be binary, doesn't it? If it's some sort of progressive scheme with tax brackets based on number of properties owned then PE will find a way to structure their holdings so that each legal entity only owns a single property. The only way to prevent that is to mandate that the owner of the property be an individual (not a business or trust) who resides on that property for more than 183 days per year.

Lots of profitable activities are banned and the bans are generally quite effective. For instance, selling cigarettes and liquor to children.

Now you might say those bans aren't 100% effective, but why do they need to be 100% to be justifiable?

can we please.

These PE firms specifically say in their SEC filings that the most credible threat to their business model is municipalities removing restrictive zoning regulation and allowing the natural rate of market-rate housing to be built (0, 1). You can foil their schemes and bankrupt them by electing officials who are pro-development.

[0]: https://d18rn0p25nwr6d.cloudfront.net/CIK-0001687229/a154763..., "“We operate in markets with strong demand drivers, high barriers to entry, and high rent growth potential, primarily in the Western United States, Florida, and the Southeast United States.”

[1]: https://www.sec.gov/Archives/edgar/data/1562401/000119312513..., "The continuing development of apartment buildings and condominium units in many of our target markets increases the supply of housing and exacerbates competition for tenants."

You do that by building enough houses to make housing unattractive to investment firms

There is never enough houses, or they are located in the middle of nowhere thousand of kilometers from nearest subway station or supermarket.

You're assuming everybody wants/needs a single family with a yard.

SFHs should be expensive and considered a luxury. At least in a desirable urban/suburban location.

We could/should/must provide more housing in those desirable areas, but it likely should be a mix of high-rise, mid-rise, small apartment units (which could be owner-occupied or rentals), duplexes and triplexes, and row-homes/townhomes.

Alternatively, we adjust the tax code to reflect the instinct that people should deserve to keep a larger percentage of money when they actually worked to earn it, and that income that's essentially free to people who already have lots of money should maybe be taxed at a higher rate.

I realize this is a spicy take, but we've really got to get away from this thing where we advantage passive income for wealthy landowners. It didn't work out well for society in enlightenment-era France, it didn't work out well in Victorian England, it didn't work out well in Tsarist Russia, and I'm not convinced that removing birthright qualifications and primogeniture makes all that much more equitable in the modern USA than it did in any of those periods that we tend to look back on as being indefensibly elitist.

Or stop stealing everyones money through inflation?

All models are wrong. But the model that suggests that inflation is directly controlled a knob that policymakers can turn on a whim is incredibly useful to the people who stand to profit the most from deflationary policies.

And the opposite has been the excuse of every abusive government in history.

To be fair, the income isn't "free" and the margins are basically zero for small-time property owners on the rent itself. The bulk of the income comes from appreciation in value of the real estate, and when you sell you owe capital gains taxes (which are exempt on sales of a primary residence). And in most places the property taxes are higher, for my home it's about 15% higher.

I only know this because I have been preparing to rent my primary residence to see if it's more economical to sell today or hold and sell later, while renting. The answer is the latter, but in terms of real cash I will be in the red for about 2 years until the (very small) difference in mortage + insurance + taxes + upkeep and the rent will be profitable. And even then, it's maybe $150/month.

All told it's a slightly better investment than S&P 500 index funds, but resistant to downturns. But it's not a real source of passive income, you don't get your cash out for years.

It sounds like you're looking at it from the perspective of someone who's wealthy enough to take on a few rental properties of their own. The economics start looking rather different from the perspective of a real estate speculation hedge fund. The same forces that make it such easy money for them are also the ones that make it not such easy money for you. When they drive up prices it curtails any more liquid form of asset growth you might have by pulling all the money over to the on-paper value of the property. That's fine for them because real estate is still pretty darn liquid from the perspective of hedge funds and REITs. But it's not very liquid at all from the perspective of a small-time landlord who needs to actually look their tenant in the eye and tell them they're facing eviction because the owner of their home needs to free up some spending money. This, in turn, helps them by creating barriers to entry that push smaller competitors out of the business and securing their place in the oligopoly they're trying to engender.

The actual number of residential properties owned by hedge funds is a pittance compared to the number owned by individuals and small time land lords. So I have a hard time seeing how they're pushing smaller competitors out of the business when the smallest competitors aren't even doing it as a business.

> All told it's a slightly better investment than S&P 500 index funds, but resistant to downturns

This is incredibly bad for society. Investing in businesses that hire people and make goods and services should never be disadvantaged relative to hoarding a plot of land, and it is the folly of the anglosphere that we've allowed land hoarders to siphon so much money from people doing actually productive things.

I think you're making broad statements about macroeconomics without thinking too hard about it.

If you're spending $X in rent and have $Y in cash, whether or not it's better for you personally to put that money into equities, treasuries, or real estate depends almost entirely on the current interest rate.

So while to me personally, it makes more financial sense to rent the property, the same could not be said of anyone that would purchase or rent the property today.

The market rates for housing, either for sales or rent, is pretty much the same when looked at as a monthly payment. The only question is whether or not one has $Y in cash for a downpayment and if they will come out on top if they use that money for a mortgage instead of putting it into the stock market. Owning your home is not always better than renting, it depends entirely on your situation and the current market.

Yes a Land value Tax also would be great

While we are at it, make it easier for mom-and-pop landlords to rent out their homes so that they can compete with the resources of PE firms. Too many renter protections where I live and the consensus is don't ever try to be a landlord here. One bad tenant/squatter can bankrupt you.

Let's find a solution that doesn't poke even more holes in what little social safety net the US has.

One could argue that a owner of one single family home that could be turned into a rental loses out on the social safety net of diversified income and someday retirement, and is subsidising renters on the government's behalf.

Most of us are a couple events of bad luck away from homelessness. Mon-and-pop landlords included.

Land Value Tax[0] is the way. It strongly incentivizes the following:

>The owner of a vacant lot in a thriving city must still pay a tax and would rationally perceive the property as a financial liability, encouraging them to put the land to use in order to cover the tax. LVT removes financial incentives to hold unused land solely for price appreciation, making more land available for productive uses. Land value tax creates an incentive to convert these sites to more intensive private uses or into public purposes.

The entire purpose of a land value tax is to encourage the productive use of land, which boils down to either building stuff on it to make it more productive or selling it to someone else so they can largely do the same.

Otherwise it is a simple tax burden to hold. While extremely wealthy individuals may choose to do this, its unlikely that businesses (like PE firms) are going to let their tax obligations stack over time and hold empty land / buildings etc. Same goes for individuals who are taxed at wildly different rates (like in California with Prop 13) simply based on time of sale

[0]: https://en.wikipedia.org/wiki/Land_value_tax

This has already failed. The bay area is full of empty land and buildings owned by firms and a horrific housing situation. Doesn't stop the statists from proposing yet more tax for every single problem though.

California doesn't count because they have a de-facto landed gentry.

In 1978 they passed a ballot initiative[0] that locks in property tax rates until a home is sold or renovated. This was further amended[1] to allow generational transfers of those rates. The end result is an extreme disincentive to sell land and a class of homeowners with favorable tax treatment who want the state to be coated in amber. Any market intervention is useless without addressing the harms caused by the current property tax regime and the people who benefit from it.

[0] https://en.wikipedia.org/wiki/1978_California_Proposition_13

[1] https://en.wikipedia.org/wiki/1978_California_Proposition_13...

California does not have a land value tax, even attempting to study the effects of a land value tax failed[0]

[0]: https://www.billtrack50.com/billdetail/1555689

Getting rid of the law of supply and demand is like getting rid of Boyle’s law. Legislate whatever you want but the behavior those laws model will still exist.

I prefer to think of it this way. I like my markets free as in GPL, not free as in BSD. That is, I want the market itself to be free with limitations on the participants that keep them from taking it for themselves.

Uh, you're reading the wrong thing about it. Fixing supply and demand means things like punishing vacancies with taxation, promoting construction with tax breaks, and removing the demand by severely limiting rent seeking real estate investors.

Are you sure that’s what they meant? I’m completely on board with everything you describe (and liberating the market from the people monopolizing it for their own benefit). I’ve heard way too many people arguing that we should do away with supply/demand, as though it were a regulation we should repeal, and didn’t understand it as an inherent property of the system.

And promoting construction by making it legal to build housing. Probably the biggest, most direct action that could be taken.

Amen.

I follow the RE space, and have done some RE investments (albeit mild ones - I don't own homes to rent or anything like that).

> punishing vacancies with taxation

Outside of tourist spots, this will hurt more than it will help. Most RE investors lose money on vacancies (it's literally a line item in their expenses) and work hard not to have them. They definitely do not make more money by artificially limiting supply that way. I assume you're targeting rich folks who own multiple homes (and do not rent them)? They're what - less than 5% of all vacancies? Perhaps less than 1% in many cities?

Almost everyone I know who purchases houses/apartments to rent them would get out of the business if vacancies were taxed - they operate these properties on a narrow margin - most of their "profit" is due to depreciation benefits and gaining equity from the payments the renters are making (and in a minority of cases, property value growth).

It may sound like if they sell, that's a good thing (more people can buy their offloaded property), but a lot of houses would also go out of circulation, because these people often buy distressed homes that banks won't give a loan on - and they renovate them, bring them up to code, etc.

I suppose if you could tax vacancies only for those that are not trying to rent them - sure. I'm on board.

> promoting construction with tax breaks

There are plenty of these, although it varies from location to location. But it's a pretty common RE investment strategy to go for these, as the tax savings can be very significant. People pool their money for a down payment on a construction loan (be it for an apartment complex or office building), build it, and are required to hold it for a number of years to get the tax breaks.

Of late, the push has been in the other direction - states/cities are removing some of these tax breaks - not sure why - perhaps they weren't as effective as they thought?

> and removing the demand by severely limiting rent seeking real estate investors.

There are ways to do this that may not be popular. The main one would be to remove fixed interest mortgages. Most developed countries don't have them - that's why plenty of foreigners buy in the US market.

Another is to allow property taxes to track actual property values (i.e. remove the cap on increase in property taxes). You can imagine how unpopular this will be for SF residents.

Remove tax benefits like bonus depreciation or accelerated depreciation.

Remove tax benefits that allow one to count RE losses against their W-2 income (it's tricky to do it, but possible for AirBnB investors).

Basically, just remove most tax benefits :-) The majority of RE investors get in it for tax benefits, not appreciation, and not that much even for cash flow (cash flow is fairly pathetic in most cases - getting $200/mo is considered good).

> because these people often buy distressed homes that banks won't give a loan on - and they renovate them, bring them up to code

There could easily be exemptions to a vacancy tax to allow for, or even encourage, renovating a home.

Taxes on vacant rental units means they'll be sold sooner, and increases the odds they'll be sold to an occupant instead of a speculator. I am a capitalist above basically anything else but that sounds great to me (and I already own a home and will likely never move again).

> Almost everyone I know who purchases houses/apartments to rent them would get out of the business if vacancies were taxed

Yes, you've successfully articulated the point. In an actual free market where supply can be added easily with minimal headache, buying an asset to rent it back is perfectly fine. In something like the housing marketing, buying a home specifically to rent it out is bad whether it's one unit or one thousand because supply is already artificially constrained. The end of that line is BlackRock buying up thousands of homes and materially hurting Americans. The fact that some random person with a few million in inheritance can make money in the interim is irrelevant.

> but a lot of houses would also go out of circulation, because these people often buy distressed homes that banks won't give a loan on - and they renovate them, bring them up to code, etc.

It's pretty easily to exclude vacant homes with open permits that are actively being renovated or with 203(k) loans, or to provide revenue-neutral tax breaks. This is a legitimate criticism but it means you address the criticism, it doesn't mean the original goal is bad or impossible.

> There are ways to do this that may not be popular. The main one would be to remove fixed interest mortgages.

We should definitely remove fixed-interest mortgages for non-owner occupied purchases.

>> Almost everyone I know who purchases houses/apartments to rent them would get out of the business if vacancies were taxed

>Yes, you've successfully articulated the point.

And the goal. Why raise taxes on vacancies? To push out owners whose primary goal is to leach out a few percentage points above loans they can get or to sit on property while it appreciates in value (while harvesting tax benefits on the depreciation of the structures they maintain to a minimum because _margins_)

There just shouldn't be a class of people whose business is harvesting tax benefits and arbitrage of trust by banks.

> We should definitely remove fixed-interest mortgages for non-owner occupied purchases.

Just as with single payer health care: While it works very well in other countries, people in the US will insist it will fail here. :-)

There are legitimate concerns or arguments against a single national government-run healthcare system covering 330 million people in 50 different states (medicare/caid notwithstanding, basically all healthcare is regulated state by state and not federally).

I don't know anything arguing that adjustable-rate mortgages will "fail" in the US (we have them already), especially focused specifically toward/against non-owner occupied properties, just that it would negatively affect them and they don't want to do it.

> Most RE investors lose money on vacancies (it's literally a line item in their expenses) and work hard not to have them

Plenty of landlords would rather a unit in a building go empty for longer than compromise on rent in a way that weakens their negotiating position with the other units. (Also, with lenders.)

The argument for taxing vacancies is city taxes are often set on the assumption of occupancy. A vacant unit doesn't contain a tax-paying worker. The vacancy tax adjusts for that.

> Remove tax benefits like bonus depreciation or accelerated depreciation

Agree.

>Also, the argument for taxing vacancies is city taxes are often set on the assumption of occupancy. A vacant unit doesn't contain a tax-paying worker. The vacancy tax adjusts for that.

Also important for commercial vacancies. The rent is too high, costs for commercial goods and services (and especially food and entertainment) is inflated by inflated rent so restaurants and consumer businesses can't stay open because they can't afford to pay the rent and lower prices to attract customers at the same time. And yet a huge proportion of the commercial space is just empty.

A vacancy tax makes up for that missing tax revenue from a running business and also just raises the quality of life for the people of your city by giving them opportunities for things to do and lowering the bar for entry into running a business.

>Plenty of landlords would rather a unit in a building go empty for a little longer than compromise on rent

Yep, I watched my last apartment (which I left partially because the rent went up to an unreasonable price) sit vacant for several months and laughed at how he could have made much more money if he compromised slightly on rent (which he seems to eventually given in to, so his greed only served to lose him money and not get the price he wanted).

Our previous landlord evicted us to "rent it to her sister". We saw it listed for rent at a higher price soon after, and then it sat empty for 4 years. That did my heart good.

> Plenty of landlords would rather a unit in a building go empty for longer than compromise on rent in a way that weakens their negotiating position with the other units. (Also, with lenders.)

In my experience: A tiny minority (for housing - not sure about commercial). This is one of those cases where selection bias applies. As most landlords really hate vacancies, the ones you do see are the tiny few that don't. And because they let them be vacant for months, it adds to the selection bias. They perhaps own most/all of the property, so the vacancy cost is miniscule (only property tax).

I do know the bulk of landlords are fussy about the type of consumer they get (e.g. decent credit rating, etc), and will allow for longer vacancies to get them - the rationale being that a bad occupant costs more than the vacancy charge - especially in tenant friendly states like California (extremely expensive to evict).

Keep in mind - the bulk of them don't own the properties outright - they are paying a loan. In a place like where I live, they may need to pay $2000/mo on a property that they rent out for $2300/mo. That $300/mo is a very slim-to-nonexistent profit margin once you account for costs. If it goes vacant for a month, they are losing over 6 months of net revenue. When you factor in the costs, it may well be closer than a year's worth of gain. The property doesn't appreciate much here, so they're not gaining in that fashion. Now when an eviction takes 4 months to execute, you can do the math on how they may prefer a 1 month vacancy to a bad tenant.

Really: Get rid of fixed interest mortgages and you'll discourage rent seeking behavior. Most are playing the long game: They'll accept a net loss of, say, $100-200/mo because they know their costs are (relatively) fixed, and in, say, 5 years the rents will have gone up enough to break even or yield a small profit. Keep it up for the next 30 years and they've made good money (and had a tenant pay for all the equity).

If you want to discourage rent seeking, discourage the main incentive: The cheap loan.

> A tiny minority

Of landlords altogether, sure. Counting by unit in high-demand locations, unclear.

> property doesn't appreciate much here

You're describing a stable housing market. Those aren't where RealPage is accused of making mischief.

This is moronic. Economic theory is a self-reinforcing veneer of soft science studying observed human behavior with wild variance between different cultures, geographic markets, and individual people.

The "laws of supply and demand" are not empirical laws of physics. They are general principles with well-known exceptions and flaws of their own. You should lay off the microdosing.

to anyone even remotely studied in economics - this is astoundingly ignorant. And the hubris is incredibly cringey. Please provide a counter example to the soft science law of supply and demand?

Giffen goods

Nope

> "laws of supply and demand" are not empirical laws of physics

Game theory is mathematics, not science. You can derive the basics of supply and demand from game theory.

Economics is a soft science. But so is history and, I'd argue, a good deal of computer science.

> You can derive the basics of supply and demand from game theory.

You can derive supply and demand from game theory once you make some assumptions about preferences, costs, rationality of players, etc., all of which are non-mathematical, mostly empirical concepts.

Supply & demand is such a basic emergent property of, well, anything involving life as we know it, that I have a hard time imagining opposition to it.

If a vendor anywhere in the world has more stock than their customers want, the price goes down. If more people want it than the vendor can provide, the price goes up. If there's more food than animals that want to eat it, animals eat their fill and the rest rots. If there are more animals than food, each spends increasing effort developing strategies to get more than their neighbors.

Now, if someone claims they can prove that demand increasing by X results in prices increasing by exactly Y, I'm with you. There are too many variables to make that predictable. But the basic idea behind it? That's pretty fundamental.

Emergent property != laws of physics yet to be broken. All I meant was equating economic principles to empirically proven scientific theory is deeply misleading. I agree with your last paragraph. I liken it to the saying, “all models are wrong, but some are useful.”

Microeconomics (including supply, demand, elasticity, etc) is pretty reliable. Macroeconomics has a lot of uncertainty and social science squish.

On the supply side Strong Towns is pretty interesting: https://www.strongtowns.org/housing

I live in a town where all the officials express politically popular laments about the affordability of housing, but every time a developer wants to build apartments or tear down some old run-down post-war cookie-cutter houses for modern duplexs or tri-levels these same officials run them through a gauntlet of demands and then often as not end up denying the permits.

They say they want dense, walkable, core neighborhoods but when people actually try to build denser housing it's like pulling teeth.

There actually is some building happening but the demand is so far ahead of the supply that it's not nearly enough.

> I live in a town where all the officials express politically popular laments about the affordability of housing, but every time a developer wants to build apartments or tear down some old run-down post-war cookie-cutter houses for modern duplexs or tri-levels these same officials run them through a gauntlet of demands and then often as not end up denying the permits.

Hah, in my town, the developers and officials are all best friends, posts all over Facebook, going to each other's kids soccer and football games, going on vacation together, going out fishing together...

Which state is your town located in, out of curiosity? I'm trying to build a mental rolodex of which states have towns that are development-friendly.

Washington. But it also I think depends on which developer you are - seems like two developers here have 90%+ of the new developments.

That's not most municipalities though.

There are a lot of places, particularly the high demand places, where the cost of acquiring the houses in the first place is the hang up. Everyone is certain they can get half a mil minimum. That drives costs considerably when you need 1/2 a block, or a full block for high density development. It's not easy. You could even have to end up giving the current land owners some preferential share of the finished development. Which, of course, means there's less profit for other potential partners at the end.

People ask, why are apartments so expensive? In high demand areas, that's a big part of the reason. Land acquisition costs were so high that it precludes building anything that can offer that <USD3000 a month price tag. (And to be honest, that's not even all that affordable really. But it illustrates how the numbers on a lot of these new developments work out.)

Usually the municipality or the state has to step in with some kind of break in order to make the numbers work out. And that's when we get to the step you're talking about where the state or the municipality demands this or that or the other. But the politicians have to demand something for the break, or it's seen as just having handed over taxpayer money to their buddies in construction. ie - corruption.

So from beginning to end, it's a tough problem.

EDIT:

It seems before I even finished typing my message, sibling messages appeared illustrating the point I was making in the last paragraph. There is no way in today's environment of completely broken down professionalism and trust, that a politician can give a concession without getting something for his/her community that s/he can use as justification for the concession. Otherwise, people, rightly or wrongly, just see it as handing free money to a politician's friends.

> Land acquisition costs were so high that it precludes building anything that can offer that <USD3000 a month price tag

"The median time for securing approval to build in San Francisco is 627 days" [1]. Land-development loans cost between 8 and 12% [2]. The financing cost alone of that delay thus adds 15 to 20% to the cost of any housing in San Francisco. At the median.

Add the risk of not getting approved and the cost of the lawyers and lobbyists and I wouldn't be surprised if these officials bump real estate costs by 50%.

[1] https://www.sfchronicle.com/opinion/openforum/article/sf-hou...

[2] https://eyeonhousing.org/2023/05/rates-on-development-and-co...

Land value tax would fix this in a hurry. Land owners would be incentivized to sell or make more productive use of their land, which adds enough positive pressure for them to go to market and make a deal. The biggest flaw in US housing is the ability to hold out at effectively no cost even as land value skyrockets. The taxation does not keep pace with the actual value. This allows stubborn sellers who want above market sales to hold out, potentially for years, until someone buys at an inflated price, with no real downside.

Combine with upzoning and it would really stimulate the housing market in short order without subsidy.

Land, being largely finite - especially when you start considering how communities make land more valuable etc - shouldn't be treated as a manufactured good. A land value tax is the only way to bring market incentives to real estate, because otherwise there is no pressure on owners to sell or otherwise make more productive use of land. Our current policies from local to state to federal, all incentivize holding land regardless of its utility.

It's death by a thousand cuts. If it takes an architect working 10+ hours a week for 2-3 years get permits, that sets a fairly high floor on the cost for new development.

YIMBY policy was the biggest issue at the DNC. Most of stars spoke of it in their speech and it was part of the first policy speech Harris gave. Dems are at least acknowledging the issue, but the enumerated powers clause may make it difficult to enact federally. We need to get YIMBY politicians elected locally.

Yes, one way we could fix supply/demand is by scaling up the density of detached and semi-detached neighbourhoods. This means mandating narrow one-way streets (6m wide) and banning wide two-way streets (15m wide), forcing smaller front yards (reducing setback distances), eliminating garages and driveways in favour of street parking, allowing narrower properties and smaller homes overall. Furthermore, we should be allowing mixed use zoning so that small shops, restaurants, cafes, and bars can serve these neighbourhoods and promote a walkable lifestyle.

These neighbourhoods can be served by light rail / street cars allowing more distant travel via rapid public transit, further reducing the need for cars. Look at a lot of the older neighbourhoods in big cities such as Riverdale in Toronto [1] to see what streetcar suburbs look like.

[1] https://www.youtube.com/watch?v=MWsGBRdK2N0

We should build large numbers of commie blocks until PE firms regret buying residential properties.

Better yet, we can just copy Singapore or Vienna's public housing systems and actually have desirable public housing.

Arguably, the reason we don't already have this is because a large contingent of the voting public has been conditioned to believe that if the government does something well, it's communism, so the government should do anything well.

It's less a belief that the government shouldn't do anything well, and more a belief that it can't.

Right, and I'd argue that the belief that it can't do things well frequently comes from the government being deliberately handicapped by those who believe it should't do things well. For example crippling (or outright trying to destroy) the US Postal Service out of the belief (or vested interest) that private delivery companies shouldn't have to compete against a publicly subsidized service.

There are plenty of motivated actors that are terrified that the government will do a good job, and so they work to sabotage it so it won't be effective competition.

The reason we don't have it in the US is that many cities tried and failed to make it work in the 50s and 60s, to the point that we have a slang term "projects" memorializing the failure. Public housing can't be desirable unless it's safe, and it's not clear whether anyone knows how to run a crime-free public housing project in the US.

If you fail a test and the rest of the class doesn't, it implies that you were just unprepared for the problems the test is not in fact impossible.

Just because the US made some poor decisions (e.g obviously cramming 100% poor people into vertical concentration camps doesn't work, you need to have mixed incomes to have a healthy community) in its rollout of public housing many decades ago doesn't mean it's an unworkable idea. Singapore and Vienna are two examples demonstrating this point.

Sure! But the fact that it's possible in principle doesn't automatically prove that you should trust your local city planners when they say they're totally gonna get it right this time.

It's not like public housing has gone completely extinct in the US. Chicago is working on a couple of mixed-income projects, and if they succeed at creating safe units where people who have a choice might like to live, presumably that will boost the popularity of public housing. But given the historical track record, I'm not holding my breath.

Part of the problem, I should note, is that the "100% poor people" thing is very much a live issue. Many American advocates of public housing continue to argue that housing developments _should_ contain 100% poor people, arguing that mixed-income developments are gentrification and/or a handout to developers. In San Francisco, for example, both locals and government officials routinely insist (https://missionlocal.org/2022/06/plaza-east-residents-demand...) that mixed-income projects don't make sense because the market rate units could instead be given to a poor person.

> In San Francisco, for example

Haha, yeah let's exclude SF from any cities we're going to use as examples of good planners, unless we're talking about "How to slowly convert a city into a giant museum." 99% of the city's purist concern trolling is purely to prevent development, not about doing it equitably. Indeed, any city that's setting unrealistic development goals in the name of equity is likely doing it as an excuse to block development/solicit bribes/transfer wealth to existing property owners.

We don’t have it because we aren’t a city state. In Singapore, you have a few choices, but they are all in Singapore. If the public housing system came to the USA without any local residency requirements, everyone would want to live in a few hot cities and the system would just fall apart. Not only that, once residency restrictions are in place, people will be stuck in places due to their public housing, they won’t be able to just move to Seattle for better job opportunities.

This is bizarre reasoning.

It really isn’t. It’s simple game theory. People want to live in nice places. So they will all want their public housing in a nice place, but people generally like the same places, and that doesn’t really work for 380 million people. Someone will have to live in Mississippi, but then that also locks them down since we aren’t using market anymore to determine who gets to live where.

Public housing doesn't have to mean free housing for everyone, it can merely mean subsidies are in place to ensure that real estate market failures like the ones that exist nationwide today don't result in extortionate housing costs and growing slums.

Subsidies without new supply mean we can just throw even more money at existing housing stocks. We could also go with the current system in place now where some people win the housing lottery and get an affordable place to live, but it doesn’t really scale.

When I say subsidies I'm talking about new construction that is funded by subsidies, not merely throwing more money into a supply-constrained market.

a large contingent of the voting public, the same contigent that support public housing and are against private housing, see enforcing nuisance and public order laws as (race|class)ist. until enforcing laws against disadvantaged minorities in their own homes and neighbourhoods becomes acceptable again, public housing with under-market tenants will continue to rapidly degrade into hovels like NYCHA.

I don't think anyone beyond extreme outliers is 'against private housing,' and disadvantaged minorities themselves want police protection in their own communities. What they don't want, and what nobody wants, is bad policing. So if you build mixed income public housing and do policing right, it just might work. We should try it.

Commie blocks don’t work, just ask China who has an even more messed up property market than we do.

The chinese property bubble was created because of the lack of equity markets for chinese investors to dump money in. Without good investments to be had the chinese turned to pure speculation in the real estate market. Their housing market is actually quite good at providing housing, in fact theyve lifted 800+ million people out of poverty in the last 80 years. Just the crappy financial regulations that caused the problem.

The American housing market does not seem to have much speculation right now. Houses actually provide utility around equal to what they cost here, theres just a big enough wealth disparity combined with not enough housing that a huge number of people cant afford that price.

The construction industry really is a jobs program for rural surplus labor, they’ve optimized their construction techniques for that with the same 30 story blocks with slightly overbuilt concrete walls and floors. But they have surplus units and even in hot cities like Beijing or Shanghai you’ll find empty apartments that haven’t even been renovated yet. It’s not clear where this will end.

The American market has lots of speculation. Many landlords are just in it for the appreciation given that they can’t even make a mortgage payment with rent, I know of multiple homes in my (Seattle) neighborhood owned by Chinese investors that are barely lived in.

They build the same building over and over again because theyve had to create litearlly a billion units in the last 50 years and it's faster that way.

There are unsold units because the price went crazy due to speculation. Empty housing is one of the main indicators of a real estate bubble. American vacancy rate has slowly crept up but is still extremely low outside of manhattan. Americans tend not to believe housing will appreciate faster than the stock market, so housing speculation is limited, although of course not unheard of. We'd need LVT for that.

The empty houses are definitely sold. They are just being held since the return on an unrenovated unit is higher than a renovated one. They are speculating long term, and being landlords doesn’t give them much. There are also apartments that have been sold but are never being lived in before the building is torn down and rebuilt, but they’ll still make their return regardless.

As for the USA, yes it isn’t as bad here yet. But it’s getting there.

We could also ask the Soviet Union which despite being an authoritarian shithole, did not have homeless people.

In any case, most cities in the US have obvious supply side issues with housing. It doesn't matter who builds it, we need more supply. Why shouldn't it be the government?

Soviet Union had a residency system also so everyone didn't just move to Moscow.

Can we build enough housing in SF, Seattle, LA, SD to satisfy demand? Keep in mind that as soon as housing is affordable in these cities, even more people will move to them...so how much is enough?

Clearly more than right now given that all of those cities have a severe housing affordability crisis.

They do, but they are also growing, some rapidly. We know that building more freeways induces demand, I why wouldn’t building more housing induce demand also?

>>Now that we're getting rid of centralized price controls / collusion

>give me a dossier on BlackRock's holdings in real estate, go into detail on their holdings in residential, get as much real financial from their filings and reports. Give me a markdown table and an instaml/instaql schema for the data model

* Blackrock would like a word

https://i.imgur.com/PLwQ6sa.png

https://i.imgur.com/1oAdbdC.png

https://i.imgur.com/nH0Vzf8.png

    Fund  TotalAssets ResidentialAssets #units

    BRGIF      $14.8B  $10.3B 43,000+ units

    BREIT      $12.2B  $6.5B  25,000+ units

    BREIT II   $8.5B  $4.8B   18,000+ units

You and what I assume is your AI companion are victims of some viral misinformation about BlackRock. BREIT and BREIT II are managed by an unrelated company named Blackstone - the fund names in your third image are incorrect. BRGIF does not, as far as I can tell, exist at all.

Do you know the history behind both BlackRock and BlackStone?

Same DNA:

>>he business that would become BlackRock started under the umbrella of Schwarzman’s firm in 1988. “They used to be called Blackstone Financial,” Schwarzman said. “We started in business together. We put up the initial capital.” Schwarzman started Blackstone three years earlier in 1985.

>>When Fink decided to branch out on his own, he needed a new name for his asset management operation, Schwarzman said. “Larry and I were sitting down and he said, ‘What do you think sort of about having a family name with “black” in it.’”

Thanks for the input though - I am working on figuring out how to document all these entanglements - there are a lot of others also attempting to do so, if you have any links to such, I appreciate real data that I can trust (I am mapping out The Oligarchs, their entanglements, and what/who they are/actually own.)

>43,000+ units

That... seems like a drop in the bucket in terms of housing supply?

But thats a lot of power over rent cost 'normalization' given they can set the prices on a large # of units and pretty much all real estate is driven by "comparables in the area/market" thats an awful lot of "comparables"

Also these are basically fake numbers.

Unit could be an entire complex with hundreds of actual apartments.

---

EDIT:

They dont own any direct units, apparently, but they own a large percentage of the companies, developers, funds that do.

It a far more nuanced issue and hard to get a true understanding of, as money is the grout that fits everything together - its hard to see how it all works.

>But thats a lot of power over rent cost 'normalization' given they can set the prices on a large # of units and pretty much all real estate is driven by "comparables in the area/market" thats an awful lot of "comparables"

If their ownership is a drop in the bucket on a national level, then what you're proposing would only make sense if they're heavily concentrated in a few cities. Is there evidence this is happening?

>Unit could be an entire complex with hundreds of actual apartments.

Dividing the total asset value by the number of units gets you around 300k, which seems in the price range for a single family home. That doesn't entirely rule out what you're describing is happening, but if it is the effect must be low.

I think RealPage foot-gunned their corporate structure and marketing by being so blatant about it. If they had set up a separate structure that offered "benchmarking" like what is used in healthcare[0] and other industries, they could have performed the same service but avoided legal trouble.

0. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5379508/

Howmuchrent.com is trying out rental transparency to show rental prices historically, cout cases plus reviews by tenants etc. For Ireland currently, which has most of the populated areas under rental control

Market competition is essential for a functioning market. Eliminating software whose purpose is to prevent the market from competing on price is a huge win.

We won't miss them.

Does “Model Governance” help stop this in AI with Financial Service companies?

Reading this is depressing. The best decision I ever made was talking to a realtor, who connected me with a good lender, and buying a place. It wasn't easy but continuing to assume ownership was out of reach, and throwing money away on a rental, in hindsight would have been far worse.

For some people this is the right answer. However owning has a set of downsides that make it worse for some people. Most people get too dogmatic that their situation and choice is the right one even though there are many different situations, and some people are making the wrong choice. Right vs wrong choice can often only be seen in hindsight as well.

We’ll try anything to lower prices except building more

There needs to be serious consideration on actually enforcing and even straight up shutting down companies if found guilty regarding these topics that harm the lives of millions of people.

I don't think this particularly will fix housing prices however (even though they're scummy), I think housing prices are a bubble that will eventually burst Japan style, even in the best case scenario you have a new population that is historically earning less than the population they (due to birth rates, not some conspiracy) are replacing, so while it won't crash as much as Japan's (out of tokyo), it will certainly not hold its million+ pricing when nobody is able to afford that anymore, and rents are based on salaries just like property pricing, if renters cannot afford to pay anymore what is asked for then prices will fall, it'll take ~10-15 years more but the market will inevitably start falling.

Housing prices are publicly available information, rents should be too.

In most of NYC that’s the case

> Housing prices are publicly available information

Dont look at utah

None of these states mandate disclosure of real estate transaction details...

Alaska, Idaho, Kansas, Louisiana, Mississippi, Montana, New Mexico, North Dakota, South Dakota, Texas, Utah, and Wyoming.

Shooting fish in a barrel.

DOJ need to crackdown on all of this collusion as a service nonsense

part of the issue is that Americans don't haggle prices.

my municipality has yet another rent control ballot measure upcoming

my stance has always been to go after these kinds of frictions towards accurate price discovery more

Now can we do airlines and hotels?

While I can appreciate your frustration with the airline and hotel industries, I have to pay rent a lot more often than I have to buy plane tickets or hotel rooms, so I'd be glad to start with this one.

hooray! took them enough time. someone please do realestate.com.au in australia too. knowing australia though it will be 50 years or never. real estate is one of australias biggest problems.

"Over a century ago, Congress passed the Sherman Antitrust Act to protect competition in the marketplace. As the Supreme Court has explained, the “central evil” addressed by Section 1 of that Act is “the elimination of competition that would otherwise exist,” including competition on prices.

When the Sherman Act was passed, an anticompetitive scheme might have looked like robber barons shaking hands at a secret meeting.

Today, it looks like landlords using mathematical algorithms to align their rents."

https://www.justice.gov/opa/speech/attorney-general-merrick-...

>Today, it looks like landlords using mathematical algorithms to align their rents."

It's unclear how that can ever be outlawed though. Given the classic supply/demand curve, everyone can theoretically independently derive the optimal price. Doing so would arguably be basic business acumen, and I'm not sure how the government can ban that without banning any sort of pricing research, or preventing businesses from setting prices. Realpage goes beyond this by pressuring landlords to accept their recommended price, and that's probably what got them in hot water, but they could probably have gotten away with it if they didn't do that.

It seems like you're saying "I don't know how they'd do a thing they're not trying to do." I wouldn't read too much into the slight vagueness around the distinction between just setting prices with the information available versus what Realpage was actually doing (as you describe) – I'm sure the case itself will draw such a distinction pretty well.

>It seems like you're saying "I don't know how they'd do a thing they're not trying to do."

because the commenter I was replying to was characterizing what realpage was doing as "using mathematical algorithms to align their rents", which isn't illegal in and of itself. I specifically acknowledged in my previous comment that realpage was doing more.

That wasn't the commentator here, that was a quote from the opening (verbal) remarks. I.e. commentator + DOJ + you + I all know the distinction being drawn by the case, the AG just didn't dive into it in the first 3 sentences of his opening remarks on the case.

The optimal rent for who? The point is that if Everyone has higher prices, because you can't not have a place to live people will be forced to pay more

The market clearing price on supply-demand curve.

No, the highest possible price that anyone would be willing to pay.

There's a huge difference between researching your competition and coordinating with them. In effect, Realpage is acting as a mechanism for landlords to coordinate prices collaboratively rather than competitively. It just hopes to get away with it by having them outsource the analysis part of this to a third party. It likely would have gotten caught sooner if it weren't for the nonsensical attitude regulators have taken toward software products, where using a computer to do something is treated as somehow different from simply doing it

>There's a huge difference between researching your competition and coordinating with them

If you read my comment carefully, you'd see that I was specifically talking about "independently derive the optimal price", not any sort of coordination.

If you read my comment at all, you'd notice it leads with drawing a distinction between your hypothetical scenario and the actual case at hand. If you read my comment carefully, you might also notice that I'm being extra charitable by not pointing out that your hypothetical relies on oversimplifying how pricing signals operate in the real world. Of course you can make the problem seem to go away if you demand a simplification that elides all the details relevant to the problem.

>If you read my comment at all, you'd notice it leads with drawing a distinction between your hypothetical scenario and the actual case at hand.

And that distinction was specifically acknowledged in my original comment.

"Realpage goes beyond this by pressuring landlords to accept their recommended price, and that's probably what got them in hot water"

>If you read my comment carefully, you might also notice that I'm being extra charitable by not pointing out that your hypothetical relies on oversimplifying how pricing signals operate in the real world. Of course you can make the problem seem to go away if you demand a simplification that elides all the details relevant to the problem.

How does "how pricing signals operate in the real world" prevent my model from working? All you need is some sort of market research firm to provide key statistics like vacancy rate, disposable income, and average rent, and every landlord can arrive at approximately the same same rent.

Right, I think that's not the only distinction here. Yes, Realpage pushes its customers to accept its recommendations. But by centralizing where this research is done, it doesn't have to do that to be engaging in anticompetitive behavior, because it also aggregates data volunteered by other organizations you might be nominally competing with, and the more people are using this service, the less likely a competitor might have some information that's not publicly available (or even that is available but isn't part of some standard method of analysis) they might be using to compete on price. The centralization of this service across competing organizations unto itself is a form of price-fixing, regardless of whether the company also demands that you use its estimates

> unclear how that can ever be outlawed though

There are certain categories of information that you are legally prohibited from sharing with your competitors. How you will set prices in the future is one of them [1].

Whether competitors agree on a specific price or a system of pricing (e.g. X per square foot, or raise rent 1% every year except prime numbers when rent goes up 10%, or raise rent by the last number of the month's lottery number) is irrelevant. A landlord looking at RealPage's YieldStar price could be confident they wouldn't be undercut in the same way someone who's made a handshake deal with their competitors would.

Where this crosses into liability for RealPage is if they knew this was how their tool was being used, or worse, marketed it as such. From what I've read, that seems to be the case.

[1] https://www.justice.gov/archives/jm/antitrust-resource-manua...

>There are certain categories of information that you are legally prohibited from sharing with your competitors. How you will set prices in the future is one of them [1].

Right, but if you read my comment more carefully, I was specifically talking about the case where everyone derives the optimal price independently. Nowhere is sharing the price with your competitor mentioned.

> I was specifically talking about the case where everyone derives the optimal price independently

If you're using the same model you know your competitors use it isn't an independent derivation.

What if there's only one plausible model rent valuation, or there's multiple plausible models that spit out basically the same number? For instance, options are widely priced using the black-scholes model, because that's basically the state of the art. Is everyone using that model engaging in price collusion as well? Sure, there might be a bunch of parameters that are adjustable that each landlord has to come up with themselves, but with access to enough data each landlord crunch the numbers and converge on what the optimal values are. Better yet, an academic could do the work for them and publish a paper telling everyone what the optimal values are. Now what, are they supposed to be banned from engaging in research on what the optimal price is?

[1] https://en.wikipedia.org/wiki/Black%E2%80%93Scholes_model

> What if there's only one plausible model rent valuation, or there's multiple plausible models that spit out basically the same number?

Then we'd have a different situation.

> options are widely priced using the black-scholes model, because that's basically the state of the art. Is everyone using that model engaging in price collusion as well?

Options dealers would absolutely get smoked if they all started using the same model to increase spreads. As for the base pricing model, everyone is constantly iterating and adapting it. Because they're competing. (Source: former options market maker.)

> Realpage goes beyond this by pressuring landlords to accept their recommended price, and that's probably what got them in hot water, but they could probably have gotten away with it if they didn't do that.

Yes, but it seems like that would miss the point of Realpage entirely. Which is that if all landlords pay for it and are pressured to follow its recommendations they all make a lot more money.

Using algorithms to set your prices is fine. Using a shared algorithm to align your process is not. That's quite easy to outlaw. The "pressuring" part here is extremely clear.

>Yes, but it seems like that would miss the point of Realpage entirely. Which is that if all landlords pay for it and are pressured to follow its recommendations they all make a lot more money.

This would entirely hinge on what you think "the point of Realpage" was. Some argue it's collusion as a service, but it's also plausible that they're offering pricing research.

> but it's also plausible that they're offering pricing research.

It's not plausible when they strongly pressured landlords against accepting rents lower than suggested.

That pressure wasn't an accident, and it wouldn't make any sense in a product that was merely pricing research.

Now RealPage has been around for 26 years and didn't start out doing that. But at some point they transitioned into illegal price fixing as a service, because their pricing determinations were not treated as optional recommendations.

Or, do the opposite, and force everyone to publish (not privately share!) their pricing strategy well ahead of time, but prohibit including competitors' prices or proxies thereof as decision variables. The most resilient strategy possible is the one that works even when everyone else knows and everyone else also publishes theirs but still engages in competition.

We need a total revision of the antitrust act to respond to all the ways in which mega corp distort the market and limit competition with it being a full monopoly.

This case -like the Sackler case- I hope they burn the company down with malice to make an example.

I have similar feelings about Airbnb. I think they caused a good deal of harm, but I'm more kind to the argument they are allowing market forces to act. People are priced out by mid-level wealth holders in nice locations who rent out to tourists; homes young families could have enjoyed. Airbnb could be a net harm on society ~30 years from now. Still too early to tell imo

  I hope they burn the company down

Will probably just be a "fine" (got caught tax) and nothing changes. It's an explicit signal to keep doing it unless the punishment is worse than the profit.

In the case of RealPage that doesn’t seem like the most probable outcome. They’ve been caught red-handed engaged in blatantly illegal price-fixing conduct that has harmed millions of American families.

They’re up against the DOJ and plenty of red state AGs too, all signs point to them being nailed to the wall. At least at a corporate level, we don’t have a good track record of sending execs to jail of course.

They'll make a big show for the headlines "record breaking $50 million fine for evil bad company" and it will be 35% of profit made on said practices.

Worse, the real profits made were by the individual landlords, so there's no incentive against a similar enough service to emerging instead.

I could definitely be wrong. But that seems unlikely here.

The entire basis of the company is illegal, it's hard to see any settlement here that doesn't involve them completely ceasing to exist and having to pay fines.

it also feels like it has no meaning unless they magically roll back rent prices by 50% or more... which isn't going to happen

I don’t know much about the company or situation, admittedly. But this wasn’t the strongest claim:

> they said their probe involved data scientists who dug into computer code to understand how these algorithms set prices

FYI the way you get around this legally is to set up a nonprofit and funnel all your pricing information to that nonprofit.

Then everyone uses the non-profit's data to set prices.

You can also use aggregator websites to check pricing. I know of a bunch of small hotels that use expedia/booking.com/etc to do this.

You cannot do that without completely publishing the price. It will otherwise be caught.

Law or otherwise, I don't see how this would have a big impact on rents. The landlords can't declare themselves immune to supply and demand - there is a market price and if their rents are too high the housing will be empty. They can't form a big monopoly by talking to each other, because the cost of having empty properties will fall on specific landlords who then have incentive to defect and go towards the market price.

I'm sure the scheme is helpful to landlords at some level, but it'd be a bit weird if it was more than a marginal difference in rents.

Curious where the line is supposed to be for gathering market information and making pricing decisions.

Surely it would be legal if I had an employee scour all the rental listings in my area and use that to give me price distributions for similar units to the ones I’m advertising.

But according to the DOJ if I hire a company to do this, it’s not?

What if I have two units to list and it wouldn’t make sense for me to hire a whole employee for this purpose? I can’t share the cost with other small players by paying a company that specializes in this task? The big companies get this benefit due to their scale and the little guys don’t?

If I wrote a program to do this for me, would that be legal?

Could I sell the program to others?

Could I open source it?

Could I sell a hosted version of the program?

> But according to the DOJ if I hire a company to do this, it’s not?

That’s not what was happening. Your understand of the suit is missing the real problems.

They had a program for automatic rent increases that were calculated based on data that would have been private in normal markets (rent being charged for units not on the open market). There were a lot of factors beyond simply informing people what could be found in public data.

You can do those things. What you can’t do is acquire a huge chunk of the market and require your users to accept the prices you “suggest” to them based on your knowledge of what their competitors are charging.

That's not what RealPage did. RealPage (in landlord's terms) "uses proprietary data from other subscribers to suggest rents and term"—not just publicly available data. Additionally, there's a market impact level to this. When you control 70% of the market, you're a monopoly, regardless of whether you're controlling market prices because you're a landlord or because you're just telling the landlord what price to use. The law ~says that you cannot control 70% of the market.

So, yes, if you sell a hosted version of your program that sets prices for 70% of the market and then use you contracts and incentives to police landlord's compliance with your program (another key feature! if RealPage was just providing the data, they would have been less of an issue, but they were also using financial kickbacks to ensure landlords kept their prices high), you are forming an illegal monopoly or price fixing cartel.

In other contexts there’s no problem with using proprietary data to set prices, so long as you don’t run afoul of insider trading regulations.

Landlords also don’t have monopoly pricing power, they’re making tradeoffs. They can’t list their unit for a million per month or else it would never sell. They can’t list it for a dollar because they would lose money and be flooded with applicants.

They’re trading between the highest price they can charge and the unit sitting vacant. AFAIK this is the value RealPage adds, it predicts what the optimal price would be.

If it were instead doing something like predicting the market price is X, but telling landlords to set it at 1.3X and stick to their guns while units sit vacant and that eventually renters would have to give in, then it would be a price fixing scheme.

Discovering the market price is not a price fixing scheme. Otherwise the NYSE is a price fixing scheme, far more than RealPage.

> In other contexts there’s no problem with using proprietary data to set prices, so long as you don’t run afoul of insider trading regulations.

I believe the parent comment mentioned proprietary data for accuracy, since you had only mentioned publicly available data. Parent comment then goes on to describe various ways Realpage does violate monopoly power.

They also (as I understand it) have landlords sign an agreement that they will charge RealPage's suggested rent and not undercut it. This is the collusion part. It's not just a market research service, they are manipulating prices.

Reading through the details on the lawsuit now: https://www.documentcloud.org/documents/25060739-us_et_al_v_...

It is alleged that they use proprietary data, and it looks like they definitely do.

RealPage doesn't appear to police landlord's price setting decisions. I see how you could get this from the first paragraph here, but the paragraph immediately after dispels it:

> 28. In addition to agreeing to share nonpublic, competitively sensitive data with RealPage, each AIRM and YieldStar licensee agrees with RealPage to use the AIRM or YieldStar pricing software as RealPage designed it. Landlords are expected to review daily AIRM or YieldStar floor plan price recommendations and use the programs to set scheduled floor plan rents or even unit-level prices > 29. While landlords may not accept every price recommendation, they use AIRM or YieldStar as their pricing software, regularly review AIRM or YieldStar floor plan recommendations, use AIRM or YieldStar to set a scheduled floor plan rent, and use AIRM or YieldStar to set unit-level prices.

I think "expected to review... use the program to set rents" must be a description of how the software is designed, not some reward or penalty scheme for setting recommended prices.

There's a whole section starting on page 54 that details how RealPage encourages landlords to converge on price, and there's no enforcement mechanism mentioned.

The law also does not prohibit a company from dominating a market. It prohibits using monopoly power to engage in certain practices. And monopoly position isn't an input to the price fixing function: it would be illegal even if between two self-employed plumbers.

> There's a whole section starting on page 54 that details how RealPage encourages landlords to converge on price, and there's no enforcement mechanism mentioned.

I mean, not sure what else I'd call something like this:

>If a property manager disagrees with the direction of a recommended price change—e.g., the manager wants to implement a price decrease when the model recommends a price increase—the RealPage pricing advisor escalates the dispute to the manager’s superior.

It seems to me like there are two significant factors in this case which likely cross the line: using private information from competitors (inventory, actual current prices) and clients being penalized for not sticking to the recommended prices. The latter (enforcement of cartel pricing decisions) makes the former more effective, and seem particularly egregious.

I would agree that having a price enforcement mechanism crosses the line, but I can’t find evidence that they do.

I think you're missing that in order for your employee to do that work they would have to access public information, which is also available to renters.

If on the other hand, you got an employee to call up landlords and get the rental pricing for every one of their units in exchange for the rent of all your units, and then agreed to set your pricing together - that's textbook price fixing.

There's nothing illegal about collating publicly available information and selling it to others as a service. There is something illegal about collating private information and using it to advise many competing businesses what their prices should be.

I think the issue is with RealPage, they all use it's algorithm for automatic pricing adjustment. It's not the hiring of a company, it's the collusion of the company to artificially inflate and manipulate pricing across multiple locations, under the auspice of "increasing rents and owners value".

You absolutely can "share cost" publicly, but colluding on pricing is where it get's questionable.

The platform itself by itself to analyze pricing isn't a problem, where I think the problem arises is when the contract for you to use the platform tie you and your properties pricing to the platforms suggestion. Thus making the platform the deciding factor.

It's dicey and will be an interesting read. Rentals are an interesting industry as is, many will sit 80% full rather than 100% because of platforms like this that can squeeze more out of them. I've rented from apartments that use this platform and it's wild. Every renewal was either same or cheaper rent for moving across the hall vs staying for a 20% increase in the same apartment. It's designed to squeeze and put pressure on you. Shady.

From an "outside the black box" PoV of the rental market, there is very little difference between:

(1) 95% (say) of landlords secretly meet somewhere, conspire, then set their new rent rates together

(2) 95% of landlords secretly meet somewhere, conspire, then all set their new rent rates based on the "individualized" advice of Rent, Loot, & Pillage Consulting Co.

(3) 95% of landlords listen to marketing pitches from RealPage, understand the between-the-lines message that using RealPage's software would be a great "all the added profits, but none of the legal exposure" alternative to a price-fixing conspiracy, and decide to buy & use the software.

I recommend reading the filing since the DOJ isn't saying this.

The main differences is that RealPage collects and digests nonpublic information among competitors.

The DOJ also has a lot of evidence that RealPage knew that this would increase prices and prevent competition.

RealPage itself is also a monopoly. There are strong network effects with the service, and RealPage's willingness to allegedly anticompetitively raise prices means a another more scrupulous competitor is unlikely to succeed.

after at least a year of regular posts on real page, where all the articles I’ve seen here specifically cite how real page enforces their pricing, why are there always posts that lead off with an entirely incorrect understanding of what real page does?

Anytime a real page article is posted, a bunch of people come out expressing confusion and defend real page, asking why it’s illegal to look up competitor pricing…

Then they express surprise when told that real page does more than that - that it actually sets the prices and makes the price onerous to change and applies penalties if landlords still does change the price.

But this info is always stated in the articles, so what how or where are the posters getting their initial incorrect info on real page? It seems they must be getting bad info somewhere because it doesn’t seem plausible to guess at how real page works without even reading anything.

And all of the incorrect understandings are always generous to real page.. is real page putting out a lot of fud somewhere that’s getting to people who then come here after being misled?

This is not appropriate for the DOJ to be taking up. They have nearly unlimited resources and have far bigger fish to fry.

The appropriate enforcement agencies are the States' Attorneys General. If they feel that their constituents are being harmed, they can take it up with the courts.

There is certainly zero evidence that RealPage has any sort of monopoly. The DOJ would have named that evidence in their press release if they had any evidence at all that RealPage possessed any sort of monopoly power. This isn't the National Assoc of Realtors (which obviously does actually have strong monopoly power), and where is the DOJ when the NAR lawsuits have been going on for the last several years? So, the Sherman Antitrust Act claims are tenuous at best.

As it stands, this seems to be a ham-handed attempt to seek a consent decree for clumsy price-fixing, setting maximum rent prices, nationwide, without any appropriate legislation, as an end-run around Congress. And that will actually harm consumers.

>> this seem to be a ham-handed attempt to seek a consent decree to create minimum rent prices, nationwide, without any appropriate legislation. And that will actually harm consumers.

Where does this contention come from? What makes it “seem” like this is the goal of the DOJ to you?

The DOJ has not a prayer of proving that RealPage (or its clients or whatever) controls more than a tiny minority of the housing market, because it just doesn't. This is a tiny tiny fraction of all housing nationwide.

So, since it can't do that and actually win this case on that basis, but on the other hand has virtually unlimited resources to string this out indefinitely, it's after something else. So, what do you think that could be? My guess is that this is an attempt at forcing these complexes into a price-setting consent decree.

(by the way, thanks for actually responding with a criticism. A lot of time people just signal they disagree but they can't be bothered or can't articulate a real response. I do appreciate the substantive argument even if we might disagree)

This blows my mind that they're actually pursuing this, the two complaints are that they schemed to decrease competition among landlords and that they monopolized commercial revenue management software. Both are completely bogus.

You could say the entire profession of appraising real estate prices "decreases competition" if the first complaint is valid.

And they certainly haven't monopolized the software space, I'd never even heard of RealPage until the lawsuit, I used Rentometer. There are dozens more, predicting rent prices is hardly a novel idea.

I think that was like one of the toy problems in Andrew Ng's online ML course.

It’s amazing your confidence when it sounds like you don’t even participate in the top N landlord space for a given market.

IIRC it has already been demonstrated that RealPage had the lion shares of the total units in certain markets.

The question is not about rent predictions but having asymmetric information that allows users of the site to effectively participate as a cartel. I am a big proponent of free markets but I think this is a worthy question to answer. When your algorithm controls more than 50% of pricing in a market does that count as collusion and how do you handle it. It seems like it might effectively eliminate the market price as you the dominant player are setting it.

It might get thrown out but I believe it’s naive and brash to just dismiss it so easily.

dismissive and slightly insulting replies to concerns about price are daily business

I'm glad these questions are being raised and bringing more awareness. I always suspected there was something that was going on to artificially raise rent prices. It sounds like collusion to me.

I wouldn't be happy either if I was a landlord.

But the landlord-ing business is a tough business, and business is about to get tougher.

If you think being in the landlord is tough, try getting a job.

I mean seriously, being a landlord is just owning something. At best, you do the work of a handyman, and get paid orders of magnitude more for that work. And if you're the average landlord, a handyman does a lot more work and does a better job because they actually have to compete. Being a landlord isn't hard, it's absurdly easy compared to the income it yields.

If you're the average landlord, you hire people to maintain the building and deal with the tenants. Rich people constantly try to convince everyone that owning things is a job. If buying a business forces you to work operating it, it's because you couldn't afford the business outright, so instead you're paying it off with sweat equity.

Certainly nothing wrong with buying a job, it's positively Jeffersonian, but the reason you're working there is because you couldn't afford anyone else.

Being a landlord is just feudalism. Most of the terminology is still the same.

I think being a landlord is pretty much the easiest business ever. As compared to real businesses, who really produce products and really participate in competitive markets.

Landlord is about luck of the tenants. A bad tenant will destroy your property costing you a lot of money. A bad tenant will not pay thus forcing you to have your property earning nothing for months until you can legally evict them. If you don't have enough tenants you lose money because you still have to pay your costs (the bank for your loan, maintenance...).

You can make a lot of money but it isn't easy money. (particularly in the early years, once you have the property paid for it is much easier)

Easy, you outsource your tenant management to a company that does that sort of thing. There's many highly reliable methods to get good tenants. Outsourcing to a company that specializes in that works because you're already making free money by being a landlord, so now you just make less free money.

None of them are taking on the risk of what the tenant isn't paying or you don't have one. Landlord also isn't free money. You have a lot of bills to pay.

You have negative bills to pay, because you get money purely by virtue of having those bills.

Landlord is not a job, it's a state of ownership. Owning a company is not a job either. Being a CEO is! And you can be both. But simply owning something is not a job.

You can say property management is hard, and maybe it is. That's a separate thing and the VAST majority of landlords actually don't manage their property. So being a landlord is very, very easy.

Then you wont make any money

How long have you been a landlord? If it's so easy, everyone would do it.

People don’t refrain from being landlords because it’s hard. I’ve seen people being landlords up close, it’s not. No, people refrain from being landlords because it’s so incredibly expensive to get started. Especially at a time where people are struggling to pay their own damned rent or mortgage, the cost of a second property is completely out of the question.

"Price fixing by algorithm is still price fixing," regardless of fanciness or cleverness.

https://www.ftc.gov/business-guidance/blog/2024/03/price-fix...

https://www.ftc.gov/system/files/ftc_gov/pdf/YardiSOI-filed%...

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