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Comment by asdasdsddd | Hacker News Reader

Disagree with algos being problematic. The crux of the issue is that vacancy needs to be taxed on rental units in high demand areas when its above a certain threshold.

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The problem is not simply the use of algorithms. The problem is that the algorithm is coordinating prices for a large percentage of rented properties. It's effectively a cartel.

You can see the same thing starting to happen in the domain industry. Registries are buying pricing data rather than setting their own prices, so high-value keywords end up having the same price across TLDs that should be competing with each other.

That's fine, if apartments are too expensive for people and landlords are penalized heavily, then the rent will come down otherwise landlords will be underwater. If tenants are still moving inspite of the high prices, then the price is probably right.

> If tenants are still moving inspite of the high prices, then the price is probably right.

Housing is a necessity. Demand for which is inelastic. The price will be paid regardless, via rent or purchase. And purchase is out of reach or unmanageable for many. Leaving rent as their only option.

Also, in no particular order and not limited to:

- Single or multi-year contracts.

- Minimum space requirements for family size

- Local social ties, extended family and friends

- Dependency or ties to local services, groups, business

- “Keeping up with Joneses”

- Moving is a PITA

- Comfort, familiarity, nostalgia

- Work requirements and industry connections

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

That's just not true, people leave shitty landlords, buildings, and cities all the time. People also confuse housing as a necessity versus good housing in a good location as a necessity. It's normal for desirable cities to be expensive, if algorithms are truly scalping people on rent, then those cities would be less desirable and the rent would reach equilibrium.

Elasticity is a spectrum. The relative elasticity of housing demand might be best illustrated by comparing to a similarly priced good: personal vehicles. Which is more elastic and why?

If you have another appropriate or even better comparison to offer, please do.

Demand for housing is not entirely inelastic. People downsize, move cities, move in with roommates/family, etc.

It’s not rapidly responsive like subscribers of netflix, but it’s fairly elastic over the long term.

I agree. It is definitely not perfectly inelastic. But for the sake of pushing back against this claim by gp:

>> If tenants are still moving inspite of the high prices, then the price is probably right.

it’d probably be best to focus on housing’s relative inelasticity as compared to other goods where such a claim might actually be quite true.

Isn't the measure of an economic system the efficiency with which it converts resources into social welfare? In this case, renters are paying above what they would pay in a competitive market. That gap in prices is a deadweight loss to society. It's money out of consumers' pockets for zero added value.

Isn’t the real problem not enough units?

If there are enough units, there’s no need for extra taxation on vacant units as it becomes a self-correcting problem (or someone pays a whack of property tax while consuming less than the proportional services, meaning they’re subsidizing others).

The algorithm would create scarcity by having some sit empty.

That only works when a single owner controls a massive % of them. In a healthy market with lots of smaller landlords, one individual owner won’t let their 1-2 apartments sit empty so that some other landlord can rent theirs for more.

What if an app allows landlords to easily coordinate on prices?

The moment one of them had their apartment left empty they would fold and drop their price rather than leave it vacant and take a loss.

That isn't what's happened with the RealPage case. Landlords are keeping properties vacant for months at a time under the promise that it will boost their long term profits.

The higher the margins, the more wealthy people will want to build houses to rent them out.

At some number of vacant houses the algorithm changes

There is a strong negative correlation between vacancy rates and rent, that would immediately deincentivise the new housing construction that actually leads to lower rental costs.

Except that new construction does NOT lead to lower rental costs.

Yes, yes, supply-and-demand, market, blah blah blah.

It's the simple reality: new construction that increases housing density in cities does NOT lead to lower rental costs. The best results are one-time single-digit percentage decreases in rents immediately near the new construction.

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