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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 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.

> 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?"

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.

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.

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