The complaint:
https://oag.dc.gov/sites/default/files/2023-11/DC%20OAG%20Re...
At this moment, are we even surprised that big-capital-anything is doing amoral things in the singular pursuit of profit?
Meanwhile on the west coast, the renter protections are so strong that landlords are either killing their tenants or paying them to leave. Seems like housing is a hot mess on both sides of the country... in their own ways.
All landlords are Ferengi. One day you can exploit others too haha.
That's nothing compared to the Texas Apartment Association (TAA) that prints one contract and refuses to let any member of the TAA use any other contract. Literally every single place has the same multi-page, 2-collum contract.
A collective refusal to deal is a crime under Texas law.
I have filed many complaints. I get no action.
How about software engineers collude for bigger salaries? It's not even against the law, its called 'unions'.
Sure would be nice if one of these bandits went to jail. If you steal $100 worth of groceries, Walmart calls the cops. If they steal $100M worth of rent, who do you call?
Jail would be nice but seizing the housing stock from them and administering it as a public good would be my dream.
Similarly, if a Walmart worker steals $10 of merchandise, they face serious repercussions and even permanent markers on your record. Walmart stole over $100m in wage theft and won their court case. The only price being some lawyers wages.
Its no different than the yield management software long-employed in the travel industry. Can a distinction be made where it is legal for use in a hotel but not in rental housing?
Ironically enough, one just has to watch a history of Louis Rossmann's (think Right to Repair, youtube.com personality - https://www.youtube.com/channel/UCl2mFZoRqjw_ELax4Yisf6w) videos about his rent / lease in the commercial space of NYC, to understand how the equations work. I think the city and state governments are the bigger issue. The collusion meets with government bureaucracy as well. This doesn't seem to be a unique situation, but in NYC and the exodus of big tenants in the city matched with post-COVID beliefs that costs will remain high turns out for a toxic environment there for business at least.
Naturally the "Rent is TO damn high" guy from a few election cycles ago (look on Google for that) is also the case.
I don't know how the used car market and rental market will return to what it was before for a forseeable future.
I seem to be the only person here that's actually used YieldStar. RealPage basically is a big data play where they can project forward demand because most larger landlords are using their software. Landlords are NOT communicating with each other "colluding" on property management & leasing decisions. That's ridiculous. Landlords hire a property management company. The property management team works with ownership to determine the budget and financial goals and the property manager works does leasing/works with YieldStar to hit those goals. The property management company may have other clients as well (like Greystar, which manages most large properties)
As a YieldStar user, you basically set the desired occupancy you want, like 93% or 95% (and before you have a misinformed take about 95% occupancy = landlords keeping units vacant... this is an industry standard... there is always some slack in the market). So YieldStar basically tries to pull/push forward demand to get to the desired occupancy by changing the rent. You could make your occupancy 100%. But it's actually less revenue to do that.
Is this all legal? No idea. I'm eager to wait to see how this plays out. But an interesting thought is: Are property management companies "colluding"? They work on behalf of other landlords in the same area. They "aggregate" leasing data and act as a central operator to conduct leasing.
There are probably A LOT of other industries where some central party is aggregating data, which makes the market more "efficient" from a capital perspective.
What's funny though, is i can't think of any other industry begging to let us build housing, which reduces rents and income for landlords. We are seeing rents come down fast in these oversupplied apartment markets. Maybe there's a lesson. Want to reduce rents? You have to add supply (i.e. TX), or reduce demand (San Francisco's years of mistakes making it lease desirable).
Recently moved to Irvine, and I found that almost all decent apartment complexes are owned by the same one company.
IANAL, but data sharing does not sound like it meets the threshold for collusion.
One of my offspring leases from a company that uses this type of software. We offered to pay the lease term in full up front for a discount but there was no negoiating. It felt like no one even had the ability to negoiate and they could only offer the terms that the AI told them.
Sounds like there's about to be a new market for "pricing stratey consultants" who work individually with landlords to teach them generally how to estimate market rates and how to optimize vacancy/lower rate, etc.
Or an author to publish "the magic formula" in a textbook that is popular among landlords
Or self-hosted software that does the same thing as RealPage except bring-your-own-data (companion app: craigslist scraper) and phrases recommendations more like "probability of these consequences using this strategy"
Price collusion has been moved into software. Automated systems that recommend pricing for Gas and everything else. We're at the tip of a huge iceberg right now.
Computers have a way to automate collusion and hide it's existence. In every major industry there is a small cottage industry that provides pricing data.
The obvious response someone can reply with is that there needs to be a way to punish non-colluding players, but the reality is, you only need to have the whales involved. The small players can charge less, but realize that if they're only providing 5% of the market (combined), and cannot exceed that, they have no downward pricing pressure.
Combine all that with the fact that the FTC asleep at the wheel to this and monopolies gobbling up all of the competition. Almost all of our food is owned by a handful of companies that own hundreds of brand names.
Collusion only works if there isn’t enough supply for real competition. Just let them build, man
Regardless of what you call it (collusion or not), the anticompetitive effects of everyone using the same algorithm and not deviating from its seems clear.
I would love for this kind of lawsuit to win. In an algorithm driven world, systems level views are critical and I hope the law keeps up. If anticompetitive prices are an emergent feature without a literal “let’s collude” handshake, it still needs dealing with.
On a tangentially related note, big companies often say that they perform pay benchmarking by contributing compensation data to third-parties to then determine the market rate for employees. After reading the article, it strikes me as a very similar process, just for a different type of market (housing vs labor).
Did anyone try to challenge pay benchmarking in court?
We should get fine amounts and sentencing guidelines to adopt the same sorts of algorithms.
RealPage wasnt suggesting rent prices based on local market conditions, they were telling you what to set your rent at and if you did not comply you got kicked. It was a cartel you joined and you got booted if you didnt go along with the rest.
Read up on the Cravath system for determining lawyer salary[1]. Every top "biglaw" firm in the US pays the same salary and publishes them. This has been found not be collusion because there is no agreement or requirement they stick to the price.
Every once in a while, one law firm will defect and raise salary, and every other law firm will update theirs within a week to the new rate.
the law firms in that category have their pick when it comes to hiring new graduates; those are coveted jobs and coveted salaries. Students who want to work at a corporate firm who don't get those offers wish they did. So it's difficult to argue that this aspect of the system is oppressing anybody.
after this initial hire, your salary growth (and segue to lucrative partnership) will be based on your performance and how much they want to keep you, again, undermining the notion that you are somehow locked into an oppressive system.
Who said anything about oppression? I'm talking about the definition of illegal collusion and price fixing. There is nothing illegal about squeezing poor people for every penny they have.
does your point hinge on that one word, or do you really think I didn't say anything of value that you could address more broadly?
Not really. I was responding to a question about price fixing with respect to employment law.
It seems like you want to have some unrelated debate about what group is more oppressed than other groups.
>after this initial hire, your salary growth (and segue to lucrative partnership) will be based on your performance and how much they want to keep you, again, undermining the notion that you are somehow locked into an oppressive system.
as a point of clarification, Biglaw salaries is fixed for associates up to 8th year. Yes they can still be fired, yes they can be made partner. Yes they make more than an Afghani dirt farmer.
Companies use third-party services all the time to benchmark prices of all sorts of things--including compensation and other benefits. And it's not even clear why this is a problem. The extreme opposite position is to have the minimum amount of pricing transparency which would make it hard to have a meaningful market.
Market benchmarks are used to set minimums or maximums for compensation or pricing that workers or consumers will just barely tolerate. That’s the threshold these benchmarks measure.
The practice of pay benchmarking using private data is egregious because of the very detailed publicly available data from BLS.
I went to BLS site (as well as Googling with site:bls.gov) to see what very detailed data I could find to help me benchmark software engineer compensation.
I didn’t find anything usable. Could you send a URL for data for a company who wants to understand cash plus equity competitive positioning relative to the top 10 highest-paying large SWE employers?
There is a related (linked) article that talks about replacing the word algorith, with "a guy named Bob" and seeing if the result is illegal.
https://www.propublica.org/article/yieldstar-rent-increase-r...
Separately, I find it sad that CEOs are thinking topline only and not thinking about their bottom line. The CAC for all new renters is not fixed costs, its variable, and increasing CAC vs leaving it close to 0 (and reducing related payroll) would be a viable strategy for a lot of buildings.
CEO just haven't done the hard work/math
It seems like a lot of tech is used to launder normally illegal activities.
Want to create an illegal taxi company? Just make it an app. Want to discriminate based on race? Hide it behind facial recognition and predictive policing. Collude for wage suppression? Create a wages database and "suggested wage" for HR. Want to copy other people's art but need to file off the serial numbers? Dali has your back. Copy other people's code without a license? AI is on it.
This is not a conceptually new thing. People want to enrich themselves, new tech is just new tools to do that. Has happened since the beginning of time.
Totally, so many examples, the ones you already listed plus theranos, enron, all thr crypto stuff, on and on
Yes, it seems our legal infrastructure is not capable of keeping up with tech developments. Probably need to replace government with an app...
Systems of government that bias towards inaction and stalemate, via excessive amounts of checks and balances and other deadlock-inducing mechanisms, are going to be less and less able to keep up with technology that is growing at an exponential rate. A system that biases towards zero change can’t keep up with a world in which the rate of change is rapidly accelerating.
You can even view the climate catastrophe etc and environmental contamination issues and other things as a manifestation of this. Our industrial scale has outpaced our system’s willingness to regulate, and agile corporate structures using this tech advance at a decidedly linear or exponential pace while the government agility trends towards zero.
It is better to have systems that bias towards someone being able to rule, and then we can work on making sure the system decides that someone in a fair way, rather than biasing towards gridlock unless every possible dimensionality of the population (as represented by the various branches and chambers of government) all absolutely 100% concur. Obviously it would be silly to require 100% concurrence, but if you require that five different dimensions of society all agree at 70% threshold then you have effectively required that level of agreement anyway. At some point this leads to social collapse.
https://en.wikipedia.org/wiki/Liberum_veto
Since the US has a unique geographic position which makes it effectively invulnerable this will take the form of internal rot, stagnation, and gridlock until a sufficient crisis pushes us over.
And really those are both just two sides of the same coin anyway, it is pretty obvious to me that over-biasing to inaction is just as dangerous as over-biasing to action in general, and especially inaction may be particularly dangerous as we move into a century where things are ever faster and the consequences are going to be very very real.
> Some say the world will end in fire, Some say in ice. From what I’ve tasted of desire I hold with those who favor fire.
> But if it had to perish twice, I think I know enough of hate, To say that for destruction ice Is also great. And would suffice.
It's only a matter of time. We already have had judges writing rulings using ChatGPT... DOOM I SAY!
> Want to discriminate based on race? Hide it behind facial recognition and predictive policing.
Or gate employment on requiring college/high level academic degrees.
I often see newly-posted job descriptions for exactly what I am doing now, and they state that a master's degree is required (which I don't have).
> and they state that a master's degree is required
This most likely means that they have a surfeit of applicants and want to cull the herd, or that they aren’t serious about hiring (or at least about hiring someone who is actually qualified).
Very few jobs actually require the knowledge gained during an undergraduate degree, much less what is learned during a master's.
Sorry, I'm going to need you to go back for your Post-Doc before you can write that login page.
The facial recognition one is particularly concerning and explicit. Police stations regularly reapprove contracts with systems that can be as high as 96% false positives. It gives police a scapegoat to do what they wanna do
https://arstechnica.com/tech-policy/2020/06/detroit-police-c...
Who cares if it has a 96% false positive if it looks good in front of the honorable Grant A. Warrant.
sentencing guidelines are automated in some jurisdictions. they recommend based on historical data. so if you had a racist sheriff, guess who's getting longer sentences.
this stuff has been simmering before AI got branded.
it's definitely AI washing.
From what I'm reading, the key distinction is RealPage pressures landlords to adhere to the pricing suggestions. That's what puts them over the line (not simply "because algorithms" as the headlines and teasers state).
We dig the coal out of the ground, refine it, ship it to where it’s to be used, but we don’t encourage you to use it so that makes what we do ok.
Not an attack, but isn’t that almost the same logic they’re using?
Not at all.
The issue at hand is that the company required at least 80% compliance with their pricing suggestions as a stipulation of using the service. This gave them the ability to influence the market. If you didn't accept their listing recommendation 80% of the time, they kicked you off the platform.
Good point.
Not sure what coal mining has to do with price fixing?
My very simplistic take on this...
- offering a sampling of current rents in the area for $50/month [not price fixing]
- offering a sampling of current rents in the area for $50/month, and then facilitating collusion between land-lords, and also pressuring landlords to adhere to rent rates [price fixing]
Obviously, there's a lot more nuance there, and I'm not a lawyer, but seems to be the gist of it.
> Not sure what coal mining has to do with price fixing?
You don't recognize an analogy?
Not that one, apparently.
Just… thank you.
maybe. But the thing here as well is not just that they suggest pricing but that it's not necessarily prioritizing occupancy. If you have the ability to pressure more than one party into allowing lower occupancy you can set an artificial floor on pricing or slow the amounts rents should fall during a downturn.
It’s a simple case of conspiracy price fixing. It’s just our laws haven’t caught up to the distributed nature of the collusion.
when can we openly discuss this in terms like: "software used hapless land-onwers in DC to make more money" ???
This is capitalism working as intended.
Whenever libertarians or deregulation-loving neoliberals start arguing for "smaller government" or deregulation just point them to examples like this. Only government stops thinks like price-gouging, housing discrimination and many other state functions.
What we're dealing with here in economic terms is what happens when you apply a largely unregulated market to a necessity that (by being a necessity) has inelastic demand. You need somewhere to live so the only function of capitalism in that case is to extract as much wealth from you as possible for something you can't possibly do without.
Some will point out not all landlords do this (that's just a matter of time) and there is other software. This is the lie of competition when what we really end up with is price-fixing. Except price-fixing is technically illegal so instead you end up with "price leadership", which is the same thing but legal. This is where Delta decides to start charging $30 for a checked bag and United and American Airlines mysteriously follow suit.
"Leadership".
This isn't innovation. It's not even market efficiency. It's coercion, which is state violence, something people seem blind to. If you don't pay the sheriff will show up and phyusically throw you on the street. Eviction is violence.
> This is capitalism working as intended.
1. Many capitalists and libertarians are in favor of antitrust regulations. Cartels are second only to the government in their ability to distort markets
2. Calling the housing market "unregulated" is a joke. In many places the supply is constrained largely due to regulations.
3. The tension between socialism and libertarianism in the US has ended up with kind of an anti-dialectic where we end up with the worst-of-both worlds (if your not a rentier). Any legislation that can reduce competition is framed as benefiting the poor, while any legislation that might upset the status-quo is framed as government overreach.
> Many capitalists and libertarians are in favor of antitrust regulations. Cartels are second only to the government in their ability to distort markets
Who enforces these "antitrust regulations"? A gutted "small" government?
> The tension between socialism and libertarianism in the US has ended up with kind of an anti-dialectic where we end up with the worst-of-both worlds
This is an interesting framing, because during the original rise of socialism in the mid 20th century, USA had an extremely productive dialectic of socialism+libertarianism (1930-1960). It was only after the capitalists took over again in the 70s, and pushed back against socialism, that things started to go south for the median American.
To say there is a significant component of socialism in today's USA is absurd, and demonstrates how foreign the concept of "socialism" has become. We are controlled by corporations and the corrupt politicians they manage. There is clearly NOT a dominant thread of "public servitude" that is required for a socially-oriented economy.
> Who enforces these "antitrust regulations"? A gutted "small" government?
Yes? Small doesn't have to mean toothless.
> This is an interesting framing, because during the original rise of socialism in the mid 20th century, USA had an extremely productive dialectic of socialism+libertarianism (1930-1960). It was only after the capitalists took over again in the 70s, and pushed back against socialism, that things started to go south for the median American.
Friedman et. al. (who certainly championed the gutting of antitrust in the US) were able to take over in the at least partly because of a wide range of geopolitical events that happened to depress the US economy, and then Reagan (who Friedman was an advisor to) took credit for the recovery. While counterfactuals are difficult, I think the example of Thatcher (who Friedman also advised and in some ways paralleled Reagan on policy) gets blamed for the UK's economy in the 80s.
> To say there is a significant component of socialism in today's USA is absurd, and demonstrates how foreign the concept of "socialism" has become. We are controlled by corporations and the corrupt politicians they manage. There is clearly NOT a dominant thread of "public servitude" that is required for a socially-oriented economy.
I agree that we are left with the remnants of FDR's socialism that hurt the wealthy the least.
Interesting that those geopolitical events, namely the gas-as-economic-subtrate in alleged peril, took place at the exact time conservatism came swooping to the rescue. Almost like US conservative oil tycoons were colluding with foreign nations in the ME to the detriment of our own.
By this measure, are stock markets and commodities markets collusion because they determine the market clearing price?
If all the sellers used software to enforce a minimum price (which is what’s happening here), then yes that would be collusion. And things like that have absolutely happened in finance (see: LIBOR, bid ask spreads in the 90s, etc.).
So you agree that if there is no requirement to enforce price, there is no collusion?
It seems like half the people in this thread are arguing that simply knowing the market price constitutes collusion.
Where else do we require charges of collusion to be substantiated by hard-requirements?
Everywhere?
In general the legal system requires all charges to be substantiated by evidence. In general logical or rational thought requires allegations to be well founded.
In contrast, where else do we simply let charges and outcomes be dictated by sentiment or allegations opposed to evidence?
The presumption there being that the only possible evidence for collusion is the existence of hard-requirements levied on each party.
Unless you're misreading my reply to mean the absence of hard-evidence.
the thing is that the crime of collusion is defined not by behavior, but by agreement. It is 100% legal to offer the same price as your competitors, even if an entire industry is doing it. it only becomes illegal if parties make an explicit agreement. Hard-requirements would demonstrate an explicit agreement.
If there is no requirement, but every landlord using the service takes their advice to maintain a price floor, it is still collusion.
No it is not. The classic example is law firm salary. Every biglaw firm in the US pays the same salary and publishes them. This has been found not be collusion because there is no agreement or requirement they stick to the price.
Every once in a while, one law firm will defect and raise salary, and every other law firm will update theirs within a week to the new rate.
That's different - they are choosing to raise their prices to attract talent. In this case landlords colluded to extract rent. You can always pay more for labor, no one is going to stop you because it's not exploitative.
no, it is the same. They are choosing to align prices so that they do not have to get in a bidding war for employees. It is legal because there is no formal agreement and they are just price matching to a published standard. In theroy, anyone can depart from the standard at any time, but 99% of the time, they dont.
It is the same with the landords. In theory, they can charge whatever they want. It is 100% legal to extract rent. It is only illegal to make agreements with other parties to price fix.
> It is only illegal to make agreements with other parties to price fix.
Conveniently, all of the landlords participating in the conspiracy had some kind of service agreement with RealPage/YieldStar, which appears to equate to an agreement to fix prices.
That depends on the service agreement. It seems like there are different services.
One where RealPage gives you a recommended price and you are free to choose whatever price you want. They might ask you something along the lines of "why didnt you use our price?"
The other is the AutoPilot feature, where RealPage "takes the wheel" and set/publishes the listing price for you based on their model.
I think the first case is pretty clearly legal, and the second has some valid concerns.
The point of both services is to help landlords maximize profit, but that isnt illegal by itself.
The first example is still a crime, but the landlords probably have deniability, whereas RealPage is still very much attempting to create a pricing cartel, which is illegal. The second one is a conspiracy to defraud and a violation of antitrust law.
> The point of both services is to help landlords maximize profit, but that isnt illegal by itself.
No, it's immoral, which is why lawsuits and regulation are coming.
Seems like the other half are not aware that RealPage requires users to accept some % of centrally-decided prices. It's blatant collusion. RealPage is cartel software, full stop.
Having read the complaint, that isnt the case. Real page doesnt require users to accept any % of price. There is a recommendation and no requirement to stick to it.
However, that isn't the only service RealPage offers. They also offer a service where they set the price and list units for the owners.
The first service is not collusion, but the second one is collusion.
It is the difference between a service that reports gas station prices and a recommendation to owners to make a decision VS a service that controls the sign and sets the price for them.
What is collusion exactly?
I think it's when cooperation replaces competition in the market. Free markets, like everything, have pros and cons. The pros of a free market depend on competition. Some markets are so small that everyone in the market grows to trust each other and they find a mutually beneficial arrangement; they stop competing and there goes all the benefits of a free market while leaving all the cons.
Did I miss anything?
It reminds me of https://ncase.me/trust/ . Often it's a good thing to have trust in a group, the elimination of competition is good. But, again, the merits of a free market are based on the assumption that companies will compete, and to the extent this is not true, the benefits of free markets are undermined.
Why the focus on RealPage? Aren't there other software companies like Buildium, Appfolio, Yardi, etc that do this as well?
I wondered this too. My guess, it may have political benefits, as it's D.C.
Will see how the other companies would react to this. I'd guess, they would enforce the notion of "recommendation" to whitewash the outright collusion.
My guess is that realpage has a very large share of the market.
This is one form or market manipulation that we can all agree is suboptimal for renters.
But in order for it to even have a chance at success, there's a deeper and more insidious market manipulation: an engineered shortage of apartments.
If there was adequate housing supply, landlords could not profit from this collusion.
However, we embrace this collusion through heavy restrictions on housing supply, which directly enrich landlords.
This is the true collusion that we should remedy, and perhaps there should be lawsuits against the city and its land use officials.
"There are a thousand hacking at the branches of evil to one who is striking at the root."
Henry David Thoreau
Many companies bar engineers from visiting the USPTO site or looking at patents, because of the treble damages risk.
It should be be the same deal for landlords. Using this site should constitute evidence of collusion and multiply the penalties.
The USPTO insanity isn’t a model that should be replicated.
True, it is so difficult to work around that by using your own device/network.
Seems completely different imho. The patent issue if triple damage for knowing infringement, E.G. Not acting on information.
The practice of designing around existing patents is actively encountered.
Eh. Is it collusion to look at the prices for similar properties on craigslist/zillow and then set your rate accordingly? Is it collusion to pay someone to do that part for you? My initial reaction was that yes what they're doing is collusion, but in a supply limited market, prices going up due to market pressure is the same thing.
Essentially isn't the company at this point just acting as a market maker, by figuring out the market clearing price where as many units as possible are filled at the highest price?
By colluding to set prices to a certain level they are implementing a monopoly pricing scheme. Otherwise competitors would set their prices lower to sell the most housing. As it is, housing is going vacant, but profits are higher because of increased price.
Research vs racketeering. The distinction is that it is illegal and that is the entire distinction. So it matters what society deems acceptable behavior for businesses. The line is arbitrary, but well defined in case law.
The natural result of a free market for an essential good with inelastic demand and a finite supply is collusion in result if not in fact making owning the limited supply increasingly profitable pulling more money into the system until eventually a handful of major players control most of the space while lobbying to make competing options increasingly hard to build. Eventually it becomes profitable and logical to consolidate players until you are either renting from Rent INC or Homes4U if you rent an apartment. Single family homes see a related raise in price as supply outpaces demand leading the top 10% in wealth including both well off young/middle ages people and old folks investing wealth earned over a lifetime to invest in rental homes competing with people who have income but little wealth driving the cost further out of reach for people who aren't already home owners.
Because this benefits half the country we ignore the fact that its sucking the life out of the other half and celebrate the increase in household wealth for middle class folks. Meanwhile another group of vampires is waiting to suck the life out of these mom and pop landlords as they get old and overpay for medical services. Because grandpa lives to 95 instead of 90 there is no generational transfer of wealth other than to the financial services industry which acquired grandpas rental house cheap when he ran out of money at 75 and his house even cheaper at 90 in a reverse mortgage so he could stay in his house for a few more years.
40 years later housing medicine and education have broken the middle class even though the first increasingly builds tiny shitty apartments which fall apart, the second increasingly relies on nurse practitioners and other less than doctors, and the latter pays adjunct professors like burger flippers. Somehow even when those industries absolutely dominate normal folks paychecks not much of the money even seems to stick to the hands of the folks actually doing the work.
To say that prices are the result of a free market is both true and meaningless. Unmanaged free markets aren't really good for anything.
I'll take a shot and someone with domain expertise can opine on my low-effort take.
In kaibee's first paragraph, there's a missing question: Is it collusion to pay someone to set rates accordingly by using information and decision-making processes you yourself could not have gotten on your own?
I think this is the key. E.g., looking at Zillow could tell a given landlord that they need to charge more rent for a given unit. But looking at Zillow couldn't tell that same landlord to, say, keep that unit vacant for months in the hopes there is a multi-landlord unit-vacancy plan to increase prices across a city. And IIRC, these kinds of decisions have been made by a lot of landlords in a lot of these markets.
In fact, if I'm a landlord, I'm not going to take that risk unless I've got a good reason to believe that a) the software I'm relying on is used by the vast majority of other landlords, and b) the software is advising and strongly incentivizing everyone else to do the same thing. (And possibly that there are penalties if the other landlords don't make that move.)
Part of this may be driven by the laws that prevent landlords from evicting tenants or raising rates.
The US court system is really dropping the ball here. Simple evictions for nonpayment should take a week and almost no legal costs. Instead, I am looking at 6+ months of lawyer and court costs in some of the states.
And this is at hotels. Our solution? Force all hotel guests to checkout before reaching the statutory number of nights that afford them tenant protections. Which is massively inconveniencing responsible people, all because the government wants to protect scammers.
You made an investment decision (allowing hotel guests to legally become tenants) and it ended poorly for you. Why should the government bail you out for “almost no cost”? The legal system doesn’t exist to insulate you from risk.
It did not use to take 6+ months to evict a non paying tenant. This is a post Covid phenomenon. That is an insane amount of time to prove that someone did not pay you. How can anyone trust in the legal system if such a simple thing takes so long to get resolved?
The legal system should exist to remedy legal disputes, for everyone, in a timely manner. Whether it be a big business or a small business or a personal dispute.
A clogged legal system where simple disputes take an inordinate time to resolve is a sign of decay and corruption. You end up with people losing trust in the system, so now you have an incentive to take advantage, because others are going to take advantage of you. And then it becomes a game of who you know (more than it already is), or taking matters into your own hands.
I’m sorry you failed to react to changing market conditions. Have you considered reinvesting in a less risky sector, like index funds?
By adding risk to being a landlord, the result is higher rental rates to cover the risk.
We did react once we had the information. Do you expect businesses to monitor how long court cases take on a regular basis?
Now, our many long term hotel guest have to pack up all their shit after a certain number of nights and go stay at a different hotel. So society inconveniences productive people, and conveniences a scammer. Does not sound like a net win for society.
I don’t know if you are trolling, but if you are not, trust is worth a lot. Trust is what makes businesses in the developed world so productive, and lack of trust is what makes business so costly in the developing world.
I’m not trolling. I’m treating your business no different from any other business. You don’t deserve even more special treatment from the justice system merely because you’re a landlord.
One company I partly own sued a customer for nonpayment several years ago. Customer declared bankruptcy. Sucks for all the same reasons as your relatively tiny tenant dispute. At the next board meeting, we didn’t waste our time bemoaning the existence of bankruptcy protection—after all, we may benefit from it ourselves someday. Instead we developed plans for how to mitigate the risk of nonpayment in the future.
You run a business; act like it. Accept the inherent danger of swimming or get out of the pool.
> You don’t deserve even more special treatment from the justice system merely because you’re a landlord.
I never wrote that I did. I merely provided an example showing the consequences of not having properly functioning courts.
I am not bemoaning protections for tenants. I am bemoaning not clearing the dispute for inordinate amounts of time. Which leads to discrimination.
> Accept the inherent danger of swimming or get out of the pool.
I would rather not see my country become the developing country my parents moved away from, hence spreading an opinion about this issue (which is broader than just tenant laws).
No, no they shouldn't. We don't really want folks who lost their job last week to be out this week with all their possessions on the sidewalk. Everyone should have the option of a court date and some degree of legal help before ending up on the street in case they are getting cheated even if some people misused this.
It is absolutely impossible to ensure good faith and lawful process by having the landlord make an unverifiable assertion followed by the cops kicking people out a week later. This isn't enough time to schedule a hearing let alone have the counter party getting representation. Furthermore factually society as a whole is better off as a whole if we have fewer people with crashed lives living like hobos on the sidewalk so its advantageous for such a process to be orderly and slow enough that people land somewhere other than flat on their back.
People staying long term in hotels is an extreme edge case we shouldn't optimize the rest of the system for.
What the law is telling you is that if you offer long term tenancy you are a landlord even if you call yourself a hotel. This and your decision not to get into the landlord business both seem to me perfectly acceptable. To quantify this let me ask you a question.
How many of your folks staying over 30 days were planning on staying indefinitely? If the majority of the folks planning on staying 30 days were planning to leave in 90 perhaps the threshold should be increased to accommodate contractors and students who might need accommodations.
If most of the folks over 30 days are lifers then maybe the threshold is already accurately set.
> We don't really want folks who lost their job last week to be out this week with all their possessions on the sidewalk.
Cool, then that “we” (government, voters, taxpayers), should pony up for all the time that a tenant ends up staying and not paying.
Otherwise, what “we” want is for a certain subset of society to subsidize not having people out on the sidewalk, as opposed to having it come from government coffers where everyone’s taxes would pay.
Another option is for the government to provide housing for people.
>It is absolutely impossible to ensure good faith and lawful process by having the landlord make an unverifiable assertion followed by the cops kicking people out a week later. This isn't enough time to schedule a hearing let alone have the counter party getting representation.
I disagree. We have computers, broadband, and electronic databases. It takes 2 minutes to prove if you did or did not pay someone.
Hell, in my case, I have an email from the squatter explicitly stating they will no longer pay unless they get a reduced price AND that they have done this to other hotels in the past AND that they waited until the statutory time passed so they could take advantage of eviction wait times.
Most of the negative things that can happen to a business aren't covered by uncle sam.
Broadband and computers make it easier to transmit an unverifiable assertion prepared wholly by one side. The way you verify this is you have a human being listen to both sides.
Without this we wouldn't capture
- failure to keep proper records
- recording the payment in the wrong account
- inappropriate or illegal charges
- rent being legally withheld
- lost or stolen money orders including stolen by employees of landlord
- disputes over whom was supposed to get paid in situations where custody of property was disputed
- malicious lies
Again its pretty clear that your accommodations for the night and your home ought to be treated substantially differently. For 36% of American households their home is the linchpin of their life and livelihood. I don't think we ought to undermine a process essential to the lives of tens of millions of people to help out a couple of hundreds of low rent hoteliers deal with squatters.
We already normally deal with hotel guests who won't leave substantially different then tenants in most states usually by establishing a threshold beyond which one goes from A -> B and a simple process by which one removes unwanted guests different from the process to remove tenants.
I do have to wonder if complainants are dealing with situations arising effectively providing long term housing in fact if not in law eg slum level accommodations rented cheaply by the week or if the process of removing non-paying guests in hotels in your state is just well and truly broken and instead of fixing it you are suggesting breaking the process which tens of millions rely on instead for the benefit of mere dozens of hoteliers
> I don't think we ought to undermine a process essential to the lives of tens of millions of people to help out a couple of hundreds of low rent hoteliers deal with squatters.
I agree, and the government should pay for it, not “a couple of hundred low rent hoteliers” (not sure what purpose the denigrating adjective serves, as if a business providing lower priced services is somehow bad for society).
> instead of fixing it you are suggesting breaking the process which tens of millions rely on instead for the benefit of mere dozens of hoteliers
I never suggested “breaking” the process. I suggested fixing the legal system, which is clearly understaffed or overly bureaucratic. And it helps everyone, not just a “few dozen hoteliers”.
What you seem to want is a “few dozen hoteliers” to provide housing for free for the benefit of all taxpayers, allowing you to have lower taxes.
In general, all of these "protections" just result in higher costs for everybody.
Somewhat, some people suffer more costs than others. Scammers benefit from the protections, and responsible people shoulder the cost.
Politicians should be providing housing to people if they want them to not be homeless, or paying the housing vendor. It’s easier to get elected by promising housing and low taxes though, and punt the costs onto select portions of the populace who play a game of trying to determine who is going to use the laws to scam them, which ends up resulting in discrimination.
What do you think would happen if the government offered free middle class housing?
Conversing about anything involving the term “middle class” without an extensive definition of it is a waste of time.
Obviously, free too much of anything skews incentives. But the consequences of homelessness should not be borne by select portions of the population.
We all know what the middle class is.
I agree. I think the crucial functionality is the common knowledge of common knowledge that no one else will renege on the deal. That’s effectively cartelization.
I think the problem here is that marketplaces need to be neutral and regulated as public utilities.
The same thing happens with amazon stealing vendor business, and arbitrarily banning people without legal recourse. When you set the market, you can't be allowed to dictate who participates.
Its the same core problem. These private marketplaces grow to the point where everyone depends on them and then shenanigans ensue
Meh. The answer is Yes. And this phenomenon goes FAR beyond real estate recently. I wrote about it here: https://magarshak.com/blog/?p=385
> Essentially isn't the company at this point just acting as a market maker, by figuring out the market clearing price where as many units as possible are filled at the highest price?
No, because the software was recommending leaving units unfilled. Rather than being like doing market research on craigslist, using this site is more like everybody hiring the same consultant to set their prices and vacancy rates, which does feel a bit like laundering the collusion.
They weren’t merely using price information to suggest rent. They were forcing landlords to accept the proposed rent 90% of the time or greater (and providing a lower rent required approval from the firm).
That’s the collusion — preventing landlords from lowering prices from competitive forces.
> They were forcing landlords to accept the proposed rent 90% of the time or greater
If this were true, it should be easy to find the terms of the contract the spelled this out. They didn't. What they found instead what an out of context quote that vaguely sounds like that, but is more likely expressing that if you want to profit from our recommendations, you actually need to follow them.
The difference is the software/forums encouraged the landlords to all leave more units empty then they normally would to raise prices.
> The difference is the software/forums encouraged the landlords to all leave more units empty then they normally would to raise prices.
Well, in a working market, you'd have more supply get built up by developers and those landlords would lose pricing power. Or it could still fail in the other direction, people would find the area too expensive and find jobs elsewhere. I think my take here is if the landlords each had, competent, ruthless capitalist employees, they would end up setting the price just as high as RealPage, because RealPage doesn't actually have any kind of mechanism to enforce compliance with the cartel structure.
> because RealPage doesn't actually have any kind of mechanism to enforce compliance with the cartel structure.
Actually as others have noted, they do. Don't use their prices at least 80% of the time, and you get kicked off.
In todays housing shortage enviornment I would think that this is really going hurt them with the jury.
No, because a true market maker will decrease the price if needed to complete the transaction. In this real estate pricing collusion, the software encouraged landlords to keep their units empty rather than reduce price as needed to achieve capacity. This only works if everyone else does the same aka. collusion.
So the problem is not that they keep the prices high, but that the cost of not making a deal is neglible.
So the correct action would be to introduce cost for keeping units unrented. Personally I'd go with probabilistic approach and just penalize owning large amount of property because the more you have the higher chance is you are letting some of it go unrented. And property ownership is way easier to check than determining if some property is occupied or not.
> So the correct action would be to introduce cost for keeping units unrented.
There's already a cost of keeping them unrented - the loss of rental revenue.
If you've ever tried to sell a house and had it sit vacant for months when trying to find a buyer, you'd find out about that cost.
> There's already a cost of keeping them unrented - the loss of rental revenue.
Right. And observing the market shows us that this cost is too low.
Why would I ever sell an empty unit if it appreciates in value faster than it costs me to keep it? Provided that I have no better opportunity to use that capital, which must often be the case.
If you need capital it's another story. But even in case of a single home, the fact that you can sit on it for months instead of lowering the sale price means it's to cheap to keep it if you don't need it.
There is also the fact that having some vacant unit across a large portfolio reduces profit and the tax bill on the units that are being rented out.
If they’re doing it to maximize their long-run profits, that will tend to maximize their long-run income taxes due as well.
Occupancy is important, but price per square is more important. What will make the most money in the long run? Having a unit sit vacant an extra 2 months at a higher price might be more profitable than "completing the transaction" at a low point in the market.
> Having a unit sit vacant an extra 2 months at a higher price might be more profitable than "completing the transaction" at a low point in the market.
Yes. And it is also amoral. There is a limited supply of housing. Holding it vacant is restricting access to one of the very most critical human needs there is. It might look better on the balance sheet but it is worse for humanity. Thus, the need for regulation and legislation that prevents this sort of thing.
> Having a unit sit vacant an extra 2 months at a higher price might be more profitable [...]
You can only be certain this strategy works when you know the competition is doing the same. If you have a formal arrangement to coordinate pricing with competitors, you are deep in collusion territory.
that is a very easy price to calculate, and if you've done the calculation, you've noticed that landlords are not being realistic about things.
at this point, a lot of them are not adjusting rent down because it will reflect on their property value, which is an additional hidden variable in the equation.
It should not be profitable to keep property empty. It is a drain on society.
Here is a fun factor. A property's value is largely driven by how much rent it can bring in and its loan is based on that value. If rent goes down enough it could effect the value and ultimately the loan which is premised on its value. Nobody wants to be the bank with a 5M loan on a 4M property. In fact normally they don't want to loan more than 70% of the value of the property.
https://www.c-loans.com/loan-to-value-ratio-for-commercial-l...
>It is a drain on society.
This does not factor into any calculation about housing prices, unfortunately, and will likely never be factored in until there's a literal revolution (highly unlikely).
Just like pollution, the homeless are either ignored or bulldozed out of sight and out of mind.
> In this real estate pricing collusion, the software encouraged landlords to keep their units empty rather than reduce price as needed to achieve capacity.
Did it? Or did ZIRP?
People aren't going to sit around losing money if central banks aren't guaranteeing your asset price (on leverage) is going up about 4x your interest rate.
As someone who rented in Arlington in the 2010s, anecdotally this sounds 100% accurate. Early on I was able to negotiate lower lease renewal agreements than the apartment building's first offer. But at some point the management company started using some "software" to come up with "market rents" and the employees were reportedly "forbidden" from charging some other amount. Negotiation completely stopped and all offers became take-it-or-leave-it based on their software.
Went through this exact same process recently with our apartment building. I went down with the intent to negotiate on price / months in our next lease and we were told there was no room to negotiate on anything. I think we maybe received a free month of parking.
It's awful.
Meanwhile, there is some hope. In some areas of the country (like Texas, Florida, Georgia and Arizona), brand new apartment complexes are now offering 2 months free rent on 12 month leases.
Checking in from Seattle. Similar experience over the last 8 years where flexibility continued to be decreased.
Exact same experience in New York. I toured a building which had dozens of units sitting empty. I found one I liked and tried to negotiate, because the asking price was too high, and the leasing agent simply went "sorry the numbers come out of our software and I'm not allowed to charge any less".
The whole "efficient markets" theory goes for a toss when large corporate landlords representing a disproportionate share of the market are all able and willing to just sit on empty units and take temporary losses while prices steadily go up.
And then the next day, they lower the price 20% because the software said to do it only hours after a customer was willing to lease it for a negotiated 10% discount. The coordination of the human and software workflows is atrocious, based on what I observed when leasing a house from a big landlord/investment firm.
The roles of human leasing agents has to have changed greatly at these companies; my guess is they are more administrative now, with much less interaction with the tenants.
The optimal duration to hold out in hopes of getting a renter who will pay the asked price is not zero. The main contributor to rising prices is politicians helping prevent development.
> The whole "efficient markets" theory goes for a toss when large corporate landlords representing a disproportionate share of the market are all able and willing to just sit on empty units and take temporary losses while prices steadily go
A sufficiently high property tax would fix incentives very quickly.
Property tax in NY is very high. Don't understand your logic.
They may not be sufficiently high.
All that will happen is smaller players will be forced out and folks like Essex will be able to stay in longer.
The same thing happens in new "luxury" buildings in LA. Poorly constructed, barely occupied, but resets the rent in the neighborhood and can afford to be at 50% occupancy for 2 years+ until folks capitulate.
Obviously not high enough if the ROI for empty housing is more than occupied housing.
Or too high, compelling landlords to hold out for a higher bidder on rent to cover the cost of the taxes. Once you accept a tenant, you are effetely stuck with them, so one has to be careful to choose wisely.
Imagine a hypothetical scenario where tax is $1,000 per month, the cost of hosting a tenant is $500 per month, and prevailing rents are $1,500. –– You can accept a tenant right away and break even. Or you can wait a couple of years until someone agrees to pay $2,000 per month. Which do you choose? Spend $18,000 to wait and then make $120,000 in the following 20 years, or spend nothing now and make $0 in the following 20 years?
On the flip side, if the tax were only $500 per month then you could accept the tenant willing to pay $1,500 right away.
That scenario does not make any sense, given that it ignores the option of selling the property, and there is no guarantee someone will pay you $2k in 2 years. Why not wait 5 years for $5k?
You have your cash flow now, and your potential customers now. If it is a money losing money proposition, you can sell. If you want to bet on prices in the future, you can, but the higher the property taxes, the worse that bet is, and the less likely it is to be made.
> that it ignores the option of selling the property
While it does not speak to selling, it doesn't ignore it. It is factored in.
> Why not wait 5 years for $5k?
Well? Don't leave us hanging.
> If it is a money losing money proposition, you can sell.
And then what? Maybe in recent months the tide has started to turn, but over the past 10+ years interest rates were effectively 0 for a reason: Nobody had any idea what to do with money. Interest rates are a product of supply and demand like everything else. Real estate is the last resort where money goes when all other ideas have been exhausted. If real estate is what you are invested in, you got there by not having better ideas.
> While it does not speak to selling, it doesn't ignore it. It is factored in.
I'm being dense; how have you factored that in?
I agree that a higher tax will might not resolve the situation. I also think that a lower tax would not, either. First, some math:
((years_rent * months * rent) - (years_hosting * months * hosting)) - (years_tax * months * tax)
The cost of renting immediately at $1,5000/mo and $1,000/mo tax:
((20 * 12 * 1500) - (20 * 12 * 500)) - (20 * 12 * 1000) = $0
The cost of renting immediately at $1,5000/mo and $500/mo tax:
((20 * 12 * 1500) - (20 * 12 * 500)) - (20 * 12 * 1000) = $120,000
The cost of losing 2 of the 20 years while speculating for a $2,000/mo renter and $1,000/mo tax:
((18 * 12 * 2000) - (18 * 12 * 500)) - (20 * 12 * 1000) = $84,000
The cost of losing 2 of the 20 years while speculating for a $2,000/mo renter and $5,000/mo tax:
((18 * 12 * 2000) - (18 * 12 * 500)) - (20 * 12 * 500) = $204,000
This shows that a lower tax is more profitable. The case where profit is <=$0 exists, but the the speculation also generally increases profit if we're just ignoring the part about it being speculation (with risk of never filling a spot or not having cash flow). A solution might be to lower taxes, but the incentive to speculate is still present (would you rather $84,000 or $204,000?). A better solution would be to punish the speculation directly. A variable tax rate where the unoccupied unit is taxed higher might accomplish this.
> Well? Don't leave us hanging.
Wait 100 years for $100k…it is meant to show why your scenario makes no sense.
> And then what?
And then someone who does want to do something productive with the property purchases it. Such as a homeowner, to live in.
> but over the past 10+ years interest rates were effectively 0 for a reason: Nobody had any idea what to do with money.
This is getting off topic, but interest rate and monetary and fiscal policy is a political thing. At least one person (me) has an idea of what to do with money. Providing kids with healthy meals at school would be a start.
> Wait 100 years for $100k…it is meant to show why your scenario makes no sense.
If you have something to show, I'm interested. Why hold out on us?
> And then someone who does want to do something productive with the property purchases it.
And now the former property owner has nothing. What's the point of them going to all the trouble? I am sure they would rather use that time to post on HN, like you and I have the luxury to.
> but interest rate and monetary and fiscal policy is a political thing.
Interest rates are adjusted in accordance with certain political goals, yes, but they are adjusted in response to behaviour. Rates were lowered because people weren't looking for money, not that people stopped looking for money because interest rates were low. Basic supply and demand.
> At least one person (me) has an idea of what to do with money. Providing kids with healthy meals at school would be a start.
And if you invest wisely, you'll have even more money to help with that! So, we're back to trying to figure out what to invest in. Any ideas?
There should be a higher tax on unoccupied units, and they shouldn't be able to write down the unit as a loss (I don't know if this is even possible, a whole building but they shouldn't be able to structure their revenue like that).
What share of apartments in NYC are actually managed by corporate landlords? It actually seems like one of those markets where they are the minority.
Wouldn't have to be "corporate landlords". Realpage and the others (Yardi, MRI, Entrata, Appfolio) also have single-family modules or software products. It's not all just multi-family.
Hell, I think Realpage actually has several different single-family software titles (they tend to do lots of acquisitions).
This isn't 1982, no one wants to manage this crap on paper, or in some craptastic Excel spreadsheet.
It's mostly luxury rental buildings but it's enough to create distortion.
> As of October 2022, according to New York real estate data tracker JustFix, landlords with ten or fewer units own only 13.2 percent of the city’s total stock and only 1.2 percent of all rent-stabilized apartments. By contrast, the top 5 percent of New York City landlords control nearly 65 percent of units and 87 percent of rent-stabilized ones. Staggeringly, the top 0.3 percent of landlords, whose portfolios exceed one thousand units, hoard almost 44 percent of the city’s rental units, and a whopping 56 percent of those protected by rent-stabilization.
I guess I distinguish between large landlords and “corporate landlords”.
When I think of corporate landlords I think of publicly traded apartment managers like Avalon. Those exist in NYC but it’s not the most common type of rental at all.
In my experience close to 100% have brokers and large property management companies handling at least the leasing process, so the end result is the same.
I wouldn't be so sure. I lived in an old pre-war building that was owned (and changed ownership between) property management/private equity companies.
If anything, the large buildings in nyc call for corporate landowners instead of every day people renting second homes.
That’s not the same as say renting an Avalon apartment. When I think corporate manager I think of the publicly traded rental companies like Avalon and Equity Residential.
Why is this meaningfully different? In both cases you are dealing with a corporation. In both cases that corporation is using whatever software to set rents. The inflection point is between "I can work with my landlord as an individual person" and "there is some fucking management company sitting between me and any sort of thing I need to get done." That inflection point is long before you have 10,000 doors.
Yup.
Applied for an apartment and was accepted. Before signing my lease rent in all the other units were lower by $300-400. Asked about it and well... "The computer sets the prices, we can't change that. We can move you to a different unit though."
Suddenly the unit I applied for is back on the site at the new lower price...
This was at a complex that proudly had the realpage logo on their homepage.
Renewal offer was $600 more after a year (~25% increase).
They wanted to ask me why I was moving out...
I pointed out my car had been vandalized twice and they shrugged. I did this a few times with various things (gunshots, water pouring on my head during an interview..., my water heater blowing up and them keeping me waiting for 2 days on a replacement) and they basically shrugged off everything and kept insinuating that they would be withholding my security deposit no matter what.
Final thing I mentioned was the original RealPage lawsuit... suddenly they want me out the door asap and promises of my entire deposit back...
That doesn't mean there was collusion though. In most places employees cannot change the price of something and we wouldn't consider that collusion.
In and of itself, no. But this case goes deeper than that. There were repurcussions if lessors deviated from the price mandate. That's just a cartel, plain and simple.
Repercussions for who? The employee in charge of pricing or the real estate company?
The apartment complex management.
RealPage required 80% acceptance minimum of their pricing quotes. They required written reasoning and approval from someone at RealPage to change the price of a unit.
If you went under 80% they kicked you from the program.
Interestingly, the people at that company doing the actual economic research into pricing are saying what everyone else is:
> The surge in apartment construction is softening the Class B market more than any other asset class. In high-supply submarkets, Class B rents fell more than twice as much as Class A over the past year. Yet in submarkets with no new supply, Class B performed right in line with Class A.
https://www.realpage.com/analytics/class-b-market-softening/
This is pretty much in line with what economists everywhere are telling us:
https://www.washingtonpost.com/opinions/2023/10/20/housing-s...
Not to defend the company; if they caught them trying to fiddle things, throw the book at them. But I just don't see their software being powerful enough to manipulate prices that far out of line with the market. You can't charge San Francisco prices in Baltimore.
Of course, people want a Big Bad, a bogeyman to blame for the housing crisis, not 100's of small decisions in their city and state regarding zoning and taxes and so on that has shaped the North American city over the past 100 years.
I agree. It’s traditional to want to blame other people while voting in policies that harm oneself.
If it were easier to build housing, someone would always eat the margin here. Lead times are short these days since you can have a lot of stuff prefabbed. The hard part is usually permits and the like. You can put up a new apartment tower in a year given that permits will be zero problem.
I think even wood-framed CLT type buildings can go up in that time frame. A precast concrete building could be done in half that time or less.
+1
If the problem was caused by 100s of small decisions, then we need 100s of small solutions. I don't see why one of those can't be disallowing "more than 90 percent of units in large buildings" from sharing software that encourages them to agree on an artificially high rent floor. You can't charge San Fransisco prices in Baltimore, but you can charge 10% higher than the local market price if you get enough landlords on board, which they did.
Absolutely. But as below, my guess is that it's a few % points. Worth fixing for sure, but I'm also wary of 'bogeyman thinking' where people think this 'one thing' is going to solve the problem. The reality is that we need a lot more housing of all shapes and sizes and that is going to take a lot of work.
I guess that's fair, although I haven't seen any bogeyman thinking in the complaint or article or comments yet. I'd recommend reading the linked Propublica investigation though, it's more than a few percentage points.
Oh, I wasn't referring to the complaint at all. That's correctly focused on the issue at hand.
What I mean is the casual observer wondering why housing prices are bad. Blackrock, AirBnB, this outfit... people want to blame someone besides the local and state politics that got them where they are:
https://www.theatlantic.com/ideas/archive/2023/01/housing-cr...
I don't disagree that more housing supply is broadly the best way to combat rising rent, but if the numbers cited in the linked article are even close to true then I don't think it's surprising to think their software could meaningfully impact the market (for high-density housing at the very least):
> The collaboration "amounts to a District-wide housing cartel," Schwalb said, noting that "well over" 30 percent of buildings with five or more units use RealPage's software, along with 60 percent of 50-unit-plus buildings. Across a wider Washington-Arlington-Alexandria area, more than 90 percent of units in large buildings are subject to RealPage pricing, according to Schwalb's office.
Using a third party to set a community wide price level is something to carefully examine in court. Because such a setup could be used as a price fixing cartel with extra steps and plausible deniability for all parties.
Yes, it should be interesting to hear what comes out.
I'm not here to defend them. It's possible that, at the margin, their system helps gouge renters a few percentage points. They should be stopped from doing that.
But the broad wins are still with abundant housing.
As with much else, it's not either or... build more, and put a stop to this kind of thing if they find they are able to manipulate markets.
The software is recommending keeping units empty in areas with rental shortages because it pushes up prices.
There is nothing wrong with keeping units empty to manage overall rental yield.
It becomes an issue if a group of landlords agree not to rent below a certain threshold in a community. This is classic price fixing - leaving renters no alternative other than paying the minimum rate set.
Landlords should serve the public. "We will provide less service to the public so we can make more money" is horseshit. Deliberately limiting access to a critical human resource should be criminal.
The issue is rent-seeking. This is the basest form of rent-seeking and the downstream effects are felt by the entire economy.
So yes, there is something wrong with it. Instead of letting the prices float to the settling rate of the market, they're being manipulated to reach a specific financial goal.
That is morally reprehensible, especially when it comes to shelter.
> There is nothing wrong with keeping units empty to manage overall rental yield.
That's like saying there's nothing wrong from profiteering during a crisis. Are you for stores drastically increasing prices on essentials like water and food during a natural disaster?
I don't think profiteering is what's going on here. Its more like if you had a large block of shares to sell in a public company you might offer it up in smaller pieces so that you get a better price than if you were selling your full inventory all at once.
Yes, there is nothing wrong with it.
Here's the thing. When there's a natural disaster, it used to be that everybody outside the disaster zone would fill jerry cans with gas, load up their pickup trucks with supplies, and immediately drive into the disaster zone and sell it with high prices. They'd get there far faster than the government.
With the anti-gouging laws, nobody bothers doing that anymore.
The result is (pick one):
1. no anti-gouging laws. Gas and supplies are available.
2. anti-gouging laws. No supplies are available.
In which case are the people needing supplies better off?
That's a false dichotomy. The only reason supplies aren't available anyway is because they've been soaked up by scalpers. The situation you're describing it a textbook example, not something that happens in the real world.
The only reason scalpers buy things is to resell them. Scalping does not cause a shortage.
The reason supplies aren't available is the local supply is out of action from the disaster, and nobody has any incentive to bring supplies in to the disaster zone.
> Scalping does not cause a shortage.
Scalping by definition causes a shortage due to speculators buying up large quantities of something with the plans of selling it at an inflated price caused by a lack of supply.
It isn't the only reason, but saying it doesn't cause shortages is absurd. Availability of things like masks, hand sanitizer, and toilet paper rapidly recovered once people who drove across entire states emptying shelves were shut down.
https://www.nytimes.com/2020/03/15/technology/matt-colvin-ha...
> Scalping by definition causes a shortage
The only purpose to scalping is reselling it. Not taking it out of supply.
> caused by a lack of supply.
Scalping neither increases nor decreases supply.
> Availability of things like masks, hand sanitizer, and toilet paper rapidly recovered once people who drove across entire states emptying shelves were shut down.
People were hoarding, not scalping. And they were hoarding because stores were not allowed to increase the price.
Believe it or not, there's community networks that do this for free. Not everyone is after a buck.
Oh, I believe there are. But that is nowhere near enough to fill the demand.
> Not everyone is after a buck
Not enough to run a working economy on.
Put it that way I would say 2.
With 2. We can look into the application of these laws and figure out why nobody is picking up the opportunity to reasonably profit by making gas and supplies available.
Profeetering is defined as taking advantage of a situation to increase prices beyond "reasonable"
The law is clear with one thing: profteering by committing a crime is legally wrong.
It leaves us with cases where no crime was committed. But this post argues collusion happened in the case of property let pricing. let's not make the gasless situation the rule to the exceptions.
> We can look into the application of these laws and figure out why nobody is picking up the opportunity to reasonably profit by making gas and supplies available.
A reasonable price is what people are willing to pay for it. It's that old Law of Supply and Demand again.
> The law is clear with one thing: profteering by committing a crime is legally wrong.
Enjoy the inevitable resulting shortages, then.
BTW, anti-gouging laws also cause hoarding, making the shortages even worse.
you refuse to see unreasonable pricing happens as a result of anti competitive maneuvers, corruption, and you mentioned it: hoarding.
All illegal tactics.
But I give it to you, bureaucratic measures have shown again and again to have even more nefast consequences than business criminals doings.
> you refuse to see unreasonable pricing
"unreasonable pricing" is a nebulous undefined concept.
> hoarding
Hoarding only happens when the government tries to repeal the Law of Supply and Demand. It is not a natural state of free markets.
Whenever the government tries to repeal the LoS+D, all kinds of worse consequences result.
Those who grew up with the spectre of communism threatening the end of America, if not the whole world may be convinced that that's true, especially those in the upper middle class with less pressing financial concerns, but those who've now lived through several "once-in-lifetime" economic crises and been thrust into the job market may be less convinced. Watching the American brand of capitalism rot slowly from the inside isn't a convincing argument that the laws of supply and demand are immutable natural laws handed down by Republican Jesus and some may even be looking for better. Watching mainstream media dramatize and exaggerate, to the point of hysteria, it's no wonder that hoarding seems like an incurable problem with rationing, but if you're able to understand that's the media creating a circus, you're hopefully able to see past some of the rhetoric from the previous century.
The LoS&D is immutable. American regulators have made endless attempts to repeal it, and they all failed.
It applied in Communist countries, too, and nobody tried harder to repeal it than they did.
> Watching the American brand of capitalism rot slowly from the inside
Caused by the constant misguided attempts to repeal the LoS&D. Rent control is a n illustrative example.
So it used to be that rich people were able to get supplies previously, and now rich people are in the same situation that the poor people were always in?
Think "black market". The Soviet Union all had prices set by the government, but nothing for sale. The economy subsisted on the illegal black market.
Do you really think that's better?
It used to be that rich(er) people would get more supplies than they needed and sell them. It still is.
Under gas rationing in WW2, people would sell the gas they didn't need at high prices in the black market. Along with the black market came crime, because it was illegal.
"There is nothing wrong with keeping units empty to manage overall rental yield."
Heavily disagree. There is everything wrong with that. Housing should not be an investment or a profit source at all
There is nothing legally wrong with it.
I also disagree, it isn't right.
While real estate is commonly accepted as one of the prominent investment type of asset, it has been challenged with excellent arguments against it.
> Housing should not be an investment or a profit source at all
Who would build housing, then?
The soon to be occupiers would build them. Like they did in most places for most of human history
We're well past the age when someone can do a reasonable job of slapping together some logs.
It's fine if people make a profit at providing essential goods as long as there's enough surplus to redistribute to those who markets can't reach.
No one complains about farmers profiting from farms. We care about people going hungry, so we buy some food from tax revenues and help feed them.
It was an answer to the rhetorical comment that if housing stopped yielding a return on investment then there would be no housing.
I don't see the possible parallel with farmers, all there is in common is land potentially owned as property. Farmers bear fruits through labour. Real estate investors bear returns on capital.
That's interesting you mention some people going hungry, most people's inability to slap logs together to make shelter, and resorting to tax collection and distribution.
> Real estate investors bear returns on capital.
There have been many attempts to eliminate bearing returns on capital. They all resulted in a prostrate, non-functioning economy. There are two input requirements for a functioning business:
1. labor
2. capital
Neither can come for free.
People who need housing? It's what they call a necessity good. We get it, you have rentals - maybe it would do you some good to read more and write less.
You built your own housing?
> We get it, you have rentals
Nope.
> It becomes an issue if a group of landlords agree not to rent below a certain threshold in a community. This is classic price fixing - leaving renters no alternative other than paying the minimum rate set.
This is exactly what's happening, though. Landlords using RealPage/YieldStar are required to follow its guidelines and need permissions from the company to make exceptions. It's technology mediated collusion to price-fix.
Yeah no kidding. You think it was a coincidence that all the new built 2 bedroom apartments in Cincinatti ended up costing the exact same as the ones in Denver or Portland? The national convergence of rent prices over the 2010s was a real sight to behold. Those in major metros were cushioned by wage increases, but the people stuck paying $1800 for an apartment in the midwest got absolutely screwed.
* Nods in agreement and cries from my 1200$ one bedroom unit in a Midwest college town *
To be honest, I could have found a cheaper place as a grad student. I just wanted to live in a newer place, closer to my lab. But pretty much every new construction is priced as if it’s in a major city. There are a few buildings here in Champaign Urbana where the rent matches the rent in areas close to downtown Chicago.
> Nods in agreement and cries from my 1200$ one bedroom unit in a Midwest college town
Having lived in a remote college town long before such software could have been popular, I think a lot of college towns were probably already overpriced. There’s an almost guaranteed supply (students), often growing (as more students are accepted each year), and universities are often slow to build their own housing. Students want to be close to campus, often don’t have a car, and have access to cheap loans so landlords nearby can charge inflated rates.
This is such an odd circumstance. The OAG is not saying each of the management firms is actively colluding, but is accidentally colluding by agreeing to use RealPage pricing. In practice, this looks like RealPage is simply collecting rent data to determine what pricing looks like in the market.
Yes, these RealPage estimates seem to be used, but if these estimates were wrong, the large landlords would simply fill up their competitor's units and would create an incentive to create more competitor units.
Perhaps the DC governemnt would do better to simply build it's own brand of low-cost housing.
> In practice, this looks like RealPage is simply collecting rent data to determine what pricing looks like in the market.
Not really. RealPage "recommends" what you should set rent rates at, and even tells you that they "discourage" you from deviating from that recommendation, as it is based on an assumption of other landlords in the area (including those using RealPage) will be doing.
It's plausible deniability for landlords, at most.
> RealPage "recommends" what you should set rent rates at, and even tells you that they "discourage" you from deviating from that recommendation, as it is based on an assumption of other landlords in the area (including those using RealPage) will be doing.
Worse than that. They require you to agree to their pricing at least 80% of the time.
I think that 80% thing brings it from price discovery system to criminal conspiracy to restrict trade. If the government were serious we would have filed criminal charges against everyone involved
> would create an incentive to create more competitor units.
if only there were a way that landlords could actually prevent the creation of more competitive units... you'd probably want to preclude development in certain zones of the city... maybe could call it "zoning" or something.
Even for units that aren't priced directly using RealPage's offering, RealPage units are comps.
Formal collusion isn't the only means by which rents might rise in tandem across a market.
This is very interesting to me. Even if landlords had no interest in colluding, if they all use the same software to decide on prices, it seems like it could amount to the same thing.
In reality, the case against the landlords and RealPage seems stronger than that, but I find even the theoretical case interesting.
Charging what others charge is called the market price. You may want to charge less to attract more customers from competitors, or charge more and try to differentiate your product.
Customers do the same thing. They look at price and shop around.
Collusion where a group agrees to charge more than the market price together is bad (and illegal). Its worse for the individual supplier as they could charge less and get more revenue, but done collectively can have a potential for a higher total revenue given everyone obeys. But there is always an incentive to cheat and make more individually while hurting everyone else collectively. Which is why the legally enforceable aspect is important
But these aren't the same thing
If you replace ‘an algorithm’ with ‘a guy named bob’ and the scheme sounds illegal, it should be illegal.
If every landlord in town all went to a guy named Bob to ask what they should set their prices at, that would be illegal collusion.
That isn't illegal tho. It is common. Most industries publish pricing data and targets.
Hell, by that metric the stock market is collision.
Yes, cartels/trade associations are common.
I don't really care whether there is a cartel for paperclips.
It doesn't mean they are okay when it comes to critical sector like housing!
information sharing isn't collusion and isnt a cartel. It is only a cartel when there is agreement to fix prices.
And yet our capitalist society discourages laborers from sharing information about their wages (labor price). Wonder why that is...
Information sharing is an integral component of cartel behavior, especially when it's highly structured in cartel software like RealPage. Where there's smoke, there's probably fire.
> Wonder why that is...
Because selling labour is the most cut-throat business there is. To the point that we had to create extensive labour laws to stop the bleeding that always ensues when unencumbered labourers start competing with each other.
Revealing price information to your competition puts you at a competitive disadvantage. If they know you charge $30 per hour, they'll jump in and offer to do it for $29 per hour. Conversely, if they don't know how much you charge, they are left to guess. If they think you charge $35 per hour, they'll offer $34 per hour, but then you'll win as you charge $30 per hour. Obviously you are disadvantaged if you let that information be known. Especially if they can withhold their information from you.
No business wants to reveal price before they have to. Retail has to get the price out there early as it is the only way to get customers in the door, but businesses will keep things as close to their chest as possible. Try buying anything geared towards enterprise customers... In fact, ideally, they will leave the customer make the first offer as it is also a disadvantage to go first.
> Revealing price information to your competition puts you at a competitive disadvantage.
> No business wants to reveal price before they have to.
Interesting. If RealPage/etc is "just" about information sharing, as many of its defenders in these comments are asserting, why would any rentier use it? There must be more going on.
Anyway, coworkers or friends sharing labor price information clearly has nothing to do with your rebuttal. The main outcome is that one party might be inspired to ask for a higher wage. It's a crude form of coordination, but that is why our capitalist society discourages it.
> why would any rentier use it?
To facilitate collusion.
Although I understand your larger sentiment. As a farmer, I have to align my prices with the Chicago Board of Trade, which in many ways is similar. Once price data becomes pervasive enough, there is a tipping point where you have to reveal your prices early to remain competitive. I mentioned retail earlier as being another example of where that has taken hold. That theoretically is a reason why rentiers could be compelled into using such a system absent of collusion taking place.
> but that is why our capitalist society discourages it.
I am not sure I understand the attribution to a capitalist society here. It was also discouraged to talk about income in Soviet Russia, as an example. That competitiveness of which we speak is not a function of a capitalist society, it is a function of human nature. Hell, I bet in early hunter-gatherer societies it was discouraged to talk about how much of the gathered resources you were able to keep for yourself.
> It was also discouraged to talk about income in Soviet Russia, as an example.
What evidence do you have for this? In current "socialist" countries like China, talking openly about wages is common and not discouraged.
The incentives are crystal clear. Price coordination works, and workers in USA are brainwashed against doing it in their own benefit.
Except China moved to being a capitalist society many decades ago. The Nordic capitalist societies even go as far as to officially publish everyone's income data. You've not explained your attribution to capitalist societies and seem to be working hard to discredit your own idea.
Again, as we have discussed several times now, revealing one's price early starts to become necessary to remain competitive once price data becomes pervasive. We can find many examples in the USA where that has become true. Clearly there is nothing about even American society in particular that keeps everyone holding their price as a well kept secret.
Such data is not readily available in the USA with respect to labour in general, however, thus asymmetrically offering up such information puts one at a disadvantage, hence why workers are generally guarded. You even point out yourself that coordination is necessary to remove that disadvantage, so it seems you already understand this beneath the exterior trying to act to the contrary.
That depends entirely on the balance of supply and demand.
If there are 10 firms chasing 9 employees, more information will drive up prices. IF there are 10 employees chasing 9 jobs, more information will drive down prices.
Quite true. The former situation is rare, though. Even when it appears that there are 10 firms chasing 9 employees, a 10th is likely to materialize when they find out where the other vendors are situated, diminishing the opportunity for the 9 that were already in line.
It isn't that rate. This phenomenon is the reason that every single job doesn't pay the minimum salary required by law.
Kind of. That's just supply and demand. But markets are never perfectly efficient.
From my personal experience working in an industry that hires a lot of minimum wage workers, I encounter a lot of people who just don't realize that they could make more doing something else. I mean, they understand in some nebulous way that higher paying jobs exist, but not in an actionable way. With more information, they might notice that they could squeeze out a particular guy making $30 by doing the job for $25 per hour. But they don't even go there because they lack the information needed.
At the same time, those minimum wage jobs I speak of aren't going to pay more if the people leave – the work would just disappear. So while these individuals would make more, they would place downward pressure on the overall market in making such a move. By keeping the information hard to come by, however, you can avoid some of that competitive pressure.
I think we basically agree.
disagree. Information sharing is also part of price discovery in every single market, legal or illegal.
Information sharing is a necessary but insufficient component of cartel behavior.
Except that's not quite what's happening here. RealPage sets the price that they "suggest" landlords should pay. The landlords had to accept these prices, or ask for approval if they wanted to charge differently. I don't know how often these requests were approved or even requested, though.
Afaik last time I read about this, if the landlord refused to accept more than some % of the requests for increase (around 20% iirc), they would be kicked out of this cartel program.
It’s cartel behavior.
I thought what they did was this:
Get Apartment A to raise rents and enforce these increased rates.
Then go to Apartment B and say “look you gotta raise your prices to the market rate, apartment A is doing it so you can too”.
Then go back to A and say “hey the market can bear this price, why don’t you raise your rent?”
They also encourage owners to keep units vacant (which they should be able to afford if they’re getting prices to go up) rather than rent at a cheaper price.
So this feels like collusion to me. But they also say “Everything we do is legal!” - and if that’s the case we need better laws and regulation to avoid this type of behavior. It’s like a distributed cartel - you can’t charge SF rates in Baltimore but what if you could get Baltimore rates to go up by X% YoY with this tactic? Seems unfair.
none of that is collusion.
This IS collusion because RealPage goes to apartment A and B and says "give us control and we will list your prices together to get the highest price"
Sure they can try that. And helps if there are only two options, when in reality there are many (same town, other town, live at home with parents, move in with partner, etc).
But that first person takes a Big risk raising prices since he is necessarily losing money relative to charging market price in the hopes others come along in significant numbers.
Leaving rooms vacant is incredibly expensive. Profit margins are not that high. So think if you're making 15% margin eating a single month of rent would cost you profit over 6 units. It's a hell of a gamble
Yeah I you have just explained why it is collusion. In a free market, a landlord raising price too high will be afraid of losing market and having too much vacancies. But not here, he is relatively assured he won’t be losing much since other landlords won’t undercut him, since they have implicitly agreed via the software to follow the same pricing. That’s collusion. Period
Indeed it is a gamble.
Which is why the very bad and illegal part, of the software company trying to enforce the high prices, was so bad.
This only works if landlords can't "defect" and lower prices on their own.
That's why it's collusion.
This is not hypothetical, it actually happened, and a lot more than two landlords were involved. 14 companies, and "Across a wider Washington-Arlington-Alexandria area, more than 90 percent of units in large buildings are subject to RealPage pricing, according to Schwalb's office."
Profit margins are high if you collude with 90% of the market to artificially raise prices.
Where did you get that from the article?
> The complaint, filed earlier today by Attorney General Brian Schwalb, focuses on the multifamily landlords' use of software from Texas-based firm RealPage, which suggests rental prices based on a pricing algorithm. Key to those models, according to the suit, is the data fed in from the landlords and the pressure RealPage puts on them to stick to the code-derived rental rates.
It's a complaint. Nothing was filed yet. And it looks like they used a pricing algo to suggest a price? Im suggested a price when I sell on eBay, or StubHub or Facebook marketplace, or pretty much anywhere. I don't know how they "pressured" landlords but maybe a box like "we suggest market price to maximize returns!" eBay similarly warns me when I stray too far away. The pricing algo is actually a fabulous service.
And if they're a property manager then their job is to find the market price and rent out apartments at the behest of landlords. I really don't see the technical issue here. You can say collude and conspire, but what does that mean in technical terms. And what does "being subject to" the algo mean? Exposed?
I got it from the linked Propublica investigation. There is quite a bit of information in there about how the software works and what the real-world results have been.
I like your comparison to other marketplaces. If an overwhelming portion of a certain product were sold on eBay, and eBay suggested prices to all sellers that nearly all of them accepted, I would consider that collusion as well. If that product were a luxury good like Pokemon cards or something, I would consider the collusion unethical but maybe not a huge deal. If the product were a fundamental human right, like housing, I would be very upset and would want the government to get involved.
> You can say collude and conspire, but what does that mean in technical terms
RealPage requires users to accept some % of centrally-decided prices.
That's the issue.
> And what does "being subject to" the algo mean? Exposed?
No. It means being required to set prices to what the algo says, instead of being allowed to "defect",with lower price.
And higher rent means the valuation of the property goes up. All the incentives are there for them to do this, we just all need to really convince ourselves they would never do such a thing.
...
Investors aren't stupid. If you're financing a building with high rents but high vacancy, it's pretty obv and their revenue will necessarily be lower than charging market price (which is by definition the profit maximizing price to charge).
If someone can figure out the con on a message board unrelated to real estate I'm pretty sure investors financing this stuff could figure it out as well
An asset can be owned by multiple investors who have competing interests with some wanting to take a large amount of risk by allowing real estate to remain vacant if it can mean a larger reward later.
Louis Rossmann has made numerous videos about vacant properties where asking prices for rent are significantly above what he considers to be market value. Notably, https://www.youtube.com/watch?v=NdfmMB1E_qk and the Reddit post which that video comments on: https://www.reddit.com/r/nyc/comments/innhah/comment/g4ai27m...
The TL;DR is that there's weak evidence that the contractual conditions attached to financing from investors who seek high risk and high reward makes those landlords ignore local market conditions and incentivizes those landlords to leave commercial units vacant instead of renting them out at market value.
Banks are that stupid. For loans, you demonstrate expected rental income, based on rents of comps. We were in that exact situation. Just provided estimates based on a listing search. Question of vacancy rates or whatever did not come up.
Did you have a stipulation of maintaining a certain debt service coverage ratio, otherwise the lender can consider you to have defaulted?
Investors have heard of such a thing as "diversification" and will surely look at their entire portfolio before jumping to short-sighted conclusions. It's very likely real-estate investors have an intimate knowledge of rental markets. There's a nontrivial cost to acquiring tenants and maintaining the buildings.
If they did the math after all the various factors are considered and this happened, then clearly this is the best play from their perspective. It's not even malice it's just "economic sense", except the way the economics works out just happens to screw people with barely enough money to afford rent.
That still doesn't mean they're not culpable under the textbook legal definition of collusion.
I wonder if there is upward pressure on housing prices due to Zillow's Zestimate feature? Or on used car prices due to Kelley Blue Book?
No one reading either of those sources is obligated to use the price or prohibited from selling lower.
These days Kelly Blue Book only exists so that insurance companies can rip off their customers by underpaying when totaling out a car.
It used to have too high a value so that you can get paid well but you get screwed on registration costs
// I wonder if there is upward pressure on housing prices due to Zillow's Zestimate feature?
I would be surprised if this were the case. It's supply and demand. Imagine there are 20 houses available for sale in a small area. The Zestimate for each is 1.5M. But I see they are sitting on the market a long time, and I don't see a full open house. If I am going to bid on one, am I bidding 1.5? Nope. I am gonna bid way less because I perceive the market is in my favor (more supply than demand)
Opposite scenario. Only one house for sale. The Zestimate is the same 1.5M. The open house is mobbed. Am I going to bid 1.5? No, because I gotta bit higher if I want this house because the market is not in my favor (more demand than supply.)
The Zestimate is useful in the 2nd case because it tells me what a similar house in the area went for, so I have an idea of how much people are willing to pay, and go higher than them. But I am not going to actually bid high unless I see the market shape that way.
I have noticed Zillow removing listing history for houses in my area. If the house does not sell, then sometimes it is taken off the market and the fact that it was listed for sale and the prices and the dates are deleted.
Or a house where the seller is dropping prices for many months will have the old data deleted, and the history only shows that it was just put up for sale at a lower price than before.
I don't know if this is a feature of MLS, but Zillow already had the data, so I cannot think of a reason that they would remove the data unless they wanted to hide the fact that the houses are not moving at the original prices.
That's very weird. I've definitely seen "price reduction history" on listings when I was looking for a house a few years ago.
BTW this is one of those cases where having an agent helps you. A good agent will be able to tell you "oh there's a lot of houses coming on the market, getting no bids, and coming off" if you don't pick up that insight yourself.
I see price reduction history even now. But starting a couple months ago, some of the listings started losing their price reduction history.
And it’s selectively deleted too. For example, one house, you can see the price reductions in 2010/2011, and then it never sold. And they tried selling again, and reduced prices, and once again, the house didn’t sell, but this time, all of the information about this year and last year was deleted.
Cars at least have regular auctions in the used market, which is also where slow-selling new cars can end up. Because cars depreciate, only rarely is it a good idea to hold on to a car if your business is to sell cars.
Adding transparency, and a tax incentive to fill vacant rentals, could make rent prices less sticky.
Perhaps a little however, neither Zillow nor Kelly Blue Book are legally obligating you to ask for permission to sell lower like RealPage did with their terms of use.
Definitely think housing is more easily manipulated since there's little standardization of the condition of a house or the materials or features that would drive pricing. (sq foot, # bedrooms/bathrooms/pool/garage size, year built). Everything else is neighborhood comparative sales.
The auto world works a little different since there is an entire wholesale operation behind the scenes that also drives pricing. There are several alternatives to KBB although less targeted to consumers. Also way more standardized in condition reporting.... but I know too much about the industry.
I'm not so certain. There are only like a dozen car makers. In any meaningful city in America there are going to be several hundred, if not thousand, landlords. It seems hard to manipulate in that sense. Despite conspiracy theories - landlords are highly incentivized not to let apartments sit empty without rent coming in.
I do think that the introduction of software has probably made price discovery more efficient and gives landlords more confidence that if they raise rents, they will easily have offers even if the current tenants leave.
I see what you are saying. My comment was more geared towards how a Zillow number or KBB number could move the market and I didn't consider that in the context of the article about rent.
It would be interesting to see if how rent markets change if more data becomes available. In the auto-industry, a car dealer can offload the unit to the wholesale market to minimize loss, whereas a landlord is less liquid.
The inventory pressure is there in both situations. An unsold car after 30-60 days is a problem both because of typical retail business dynamics and additional factors with general vehicle depreciation and high maintenance overhead of a vehicle compared to other capital goods, but the exit strategy is there and risk exposure can be limited.
Yes, the are thousands of what technically qualifies as a 'landlord' in every city, but the distribution of landlords by property type skews strongly. Units with >10 units are owned by a relatively few number of large landlords with many properties. Properties with 1 or 2 units are often owned by individuals with one or maybe a couple properties. So depending on the neighborhood, properties there might be owned by lots of different small-time landlords or it might be just a couple of large corporate landlords.
For some of the more desirable and built-up urban neighborhoods, small individually owned properties are all but bought up and almost all of the units are in large complexes owned by large corporate landlords.
In addition, very often lots of the small landlords are hands off delegating most practical decisions on renting to a handful of large management companies, and if they were to become unsatisfied with doing that would exit the landlord role, rather than directly manage. So, in market effect, they function more like a smaller number of large landlords who happen to pay out profit shares to a larger pool of people than like a large number of landlords directly participating in the rental market.
I would just wager the number of people locked in to a super specific neighborhood is not that large. Even so I don't think the power law distribution is that extreme here compared to other parts of the economy.
I live in NYC. The housing market sucks here - but I don't think its because of collusion in setting prices. The supply just isn't as high as demand (and millions of voters who already own property seem fine with that)
It probably is more so in DC than in NYC. Most of the young professionals I know there only consider living in northwest, south of U street, which is only a few neighborhoods.
But if we consider that people would consider living in the larger commute area, the article says:
> Across a wider Washington-Arlington-Alexandria area, more than 90 percent of units in large buildings are subject to RealPage pricing
And these large building are the bulk of the housing stock in these areas, they're not competing with single family homes or duplexes in these areas.
Right - but what percent of those large buildings are owned by the same people?
I'm not suggesting an app couldn't help coordinate prices in this instance, but I am suggesting that as long as the buildings are owned by other people they still have strong incentive to compete with each other.
If I own a building and the app suggests I raise prices, but then the units don't fill, I'm just going to lower prices.
Whatever the number is, 90% of them are owned by companies that were colluding on pricing.
> If I own a building and the app suggests I raise prices, but then the units don't fill, I'm just going to lower prices.
Yes, but if everyone raises prices together, people won't just choose to be homeless. Collusion is anti-competitive because it ensures that the participants wont compete with each other on price. They all raise rates together so people are stuck: their rent went up, but so did rent everywhere.
In a competitive market, some will raise rates, some will keep them the same, some may drop them. Those differences in strategy is what creates competition. When everyone cooperates to do the same thing, it eliminates competitive pressure.
They mostly just look at most recent sales in the area. It sounds simple, but can be bewildering. Just because everyone gobbled up mortgages at low interest rates in 2020, does not mean you can keep pricing houses at 2020 levels. But that's exactly what the housing market keeps doing because they simply care about the last max bid/sale.
>But that's exactly what the housing market keeps doing because they simply care about the last max bid/sale.
"The housing market" is, by far, individual home sellers. Home sellers without sufficient incentive to sell can afford to wait for a higher prices. They are getting massive utility from the house already, they live in it, they might have no reason to sell if they cannot get a sufficiently high price.
Barring loss of income, death, or something else that really motivates a home owner to sell, there is little reason for homeowners to sell the property at a price they deem too low.
Hence increasing supply is the only way to lower prices, because an empty house usually has has negative utility (property tax, maintenance, security, etc), so the seller (home builders) are far more motivated to sell it.
At the end of the day people will only pay what they will pay.
Data like Zillow's Zestimate may impact the prices that people start with, but supply and demand take care of the rest.
I think that the lack of housing supply in most markets and higher demand for housing is what is keeping prices inflated.
If anything, this shows how high prices _would have gone_ had the interest rates stayed low, given that they are still high with today's high mortgage rates lowering demand.
> At the end of the day people will only pay what they will pay.
this is empty verbage -- the money supply is run by groups of people i.e. the tender is tendered by tenders. Those comfortable with double-dipping into the cash supplies and using it to boost asset prices, did so with gusto. The rest of society suffers with a small (governing,lending) few benefiting mightily. The "copium" statements by the intellectually uncurious, those who are benefitting, and those that are perpetrating, come off like this vacuous non-statement above.
In the end you can only pay with the money you have. If rents go to a million and you are making $15 an hour you can't pay (no one can) and prices drop.
Keeping adding people and not housing supply and prices will go up. Remove people and add housing supply and prices will go down
I don't think supply and demand would autofix the issue. When a baseline is set, everyone believes it to be the new price. Same as how when a lie is repeated multiple times, it can dangerously become the false truth.
Everyone might believe it is the new price, but that doesn't mean they are willing to pay it.
After years of prices being 'high' yet continuing to rise, they night just accept it.
If they do accept it, that means the market is right and the house is really worth that much to someone :)
Or AirBNB hosts relying on its pricing feature.
At what point can a hostile housing market be considered a discrimination issue (on financial basis)?
When you sell the thing you sell (say, your labor) - do you try to sell it to the highest bidder (ie, prefer high salary) or do you not "discriminate" in this way?
Possibly when they refuse to accept a buyer offering the listed price, absent a higher bidder because of perception of wealth.
I don't think ever. If the rich and poor could afford the same things, money would have lost all meaning.
Welcome to one of the main ideas of communism - a futuristic moneyless society.
How is the allocation of resources determined? If I want 30 pairs of underwear and only 2 pairs of socks, how do I make that happen?
Maybe the rich can show off by having especially fancy houses, instead of just by having a roof at all?
Rich people can still stand out with their fancy watches & flashy sun glasses. Shelter shouldn't be a status symbol.
And I'd even add that shelter is also one of those things we shouldn't just let the free market sort out (as it has been, and we all see how that's been going).
Except the problem is we haven't been letting the free market sort it out. The market is highly distorted by laws which prevent development, which is why prices are so high.
Exactly. In the developed world the least free market is the real estate market. Free market extremists show up as NIMBYs at local council meetings. Progressives are no better, placing all sorts of rules on development in the name of fairness that only result in even higher prices and less development.
Zoning rules like height restrictions, floor area ratio, lot coverage, setbacks, parking minimums, square footage minimums, lot size minimums, and other zoning restrictions place extreme limits what can be built before we even mention exclusive single family zoning.
We've tried public housing in the past, and it hasn't gone so well, so I'm not sure that's a great solution, either.
It only took a few generations, but we've gone from America, land of the free and home of the brave, to America: we tried it once in the past and there were problems, so we should give up now and never try again.
Or maybe your solution is just bad, and that's why the market doesn't prefer it?
There are lots of places all over the US, that have some forms of public housing.
And yet most people prefer private housing.
By all means, the government should compete in the housing market like everyone else.
And then the consumer should decided.
But, my feelings are that most people are currently choosing private housing markets for a reason.
Public housing can be amazing, especially when the people involved actually want it to succeed.
Besides - even if there weren't many success stories to draw from, which there are - things can be improved on. Just because the first bicycles kinda sucked, doesn't mean that modern e-bikes aren't amazing. There are similar examples everywhere.
What's going on right now is a horror show. It's stupid, economically and morally.
It's a pipe dream to expect public housing to meet the demand for shelter in a political climate like that of the USA. That said, I'll still take as much public housing as I can get in my city.
Wholly agree. Basic necessities Food, Water, Shelter, HealthCare etc should not be left to the whims of the free market. It isn't even hard to fix in the US where land is still plenty but artificially controlled by regulations as opposed to heavily population density places like Japan.
It's interesting that you decry the free market, but explicitly agree that regulations (market distortions) are what's preventing abundant housing.
When it is shown that landlords are discriminating based on a protected "Class" such as race, religion, etc... Otherwise they are just discriminating against the poor.
Until we make housing into a much less attractive "Investment" we will see obscene pricing levels. The only way to do that is to increase supply of housing. The hands down best way to do that is to end R1 zoning, minimum offsets, and parking minimums. At least within 20 miles of major cities.
People don't understand this yet:
The only way to increase the housing supply is to increase the price of the house. So you're left with a death spiral. Build to lower prices, but the actual building is costing more than what people are willing to pay for a house, let alone the markup needed to justify KB homes (or others) to get involved at all.
Sure they're building, and you can go to job sites, but they're not going to charge what you think they will at the end. Long gone are those signs that say NEW HOMES LOW $400s!!!
And if you do, they're undesirably small condos. The sales cycles are extended or, unfortunately, they're just going to keep selling at the $800 prices you're seeing for a new home.
No, the best way is to build housing. As long as we try make developers build housing through whatever incentives we can invent, they'll always be an investment. Developers aren't going to make new housing out of the goodness of their hearts. It is a business deal, an investment with an expected ROI. Making it a less attractive investment is going to end up with less of it being made. If the government builds housing, or subsidizes it (improving ROI for developers), we'll have more housing.
America sucks at socialized housing to be honest. We always build sprawling tracts of public houses in the worst locations so as not to piss off their neighbors.
Soviet style block housing with mixed use development would be awesome but rich Americans would HATE it. Especially when you are building on a 10 acre lot next to their $2M 3 bedroom house, 3-5 miles from downtown, to build 4,000 units for the poors that make them coffee and deliver their Uber Eats.
It's much more politically viable to allow them to build a 20 unit apartment building on their 1/3 acre lot and rent it for $40,000/month to help pay for their $2M mortgage.
And yet when I actually go building the only place I could afford it was to go to a place with no code or safety inspections. This make HN mind melt, many folks here want to maintain the house crushing regulatory machine because all said they'd rather an extra homeless guy freeze behind a dumpster than elevate risk of fire spreading to their home.
GP said
> The only way to do that is to increase supply of housing
And gave some examples of reduced regulation (zoning, parking) that would make it easier to build. They didn't say anything about government subsidies.
You said
> No, the best way is to build housing
Aren't you both saying the same thing?
I think you might have stopped reading at "don't make housing such a good investment" and not considered the substance of their argument.
OP is talking mostly about housing being considered an 'investment' for the average homeowner, I think. Homeowners, on paper at least, are the biggest beneficiaries of the housing crisis:
https://oregoneconomicanalysis.com/2021/03/16/who-benefits-f...
Granted, those are paper gains, but still, better to have that option than to be priced out of the market completely, as many are.
> Until we make housing into a much less attractive "Investment" we will see obscene pricing levels
Yeah same for health, education, insurance, internet, medicine etc.
> Until we make housing into a much less attractive "Investment" we will see obscene pricing levels. The only way to do that is to increase supply of housing.
That isn't the only way.
We could eliminate the many tax benefits like: accelerated depreciation, 1031 exchange, step up cost basis for inherited property, etc.
Even without those tax benefits, I still made $60k in equity just by owning my own house. Probably more in the time since I last checked. There just is too much money and not enough houses.
Supply and demand.
Decrease the benefits for owning an investment property, then the number of people purchasing investment properties will be lower and prices will likely fall.
> step up cost basis for inherited property
Heck, there's no policy justification for having the stepped-up basis at all.
People who have houses like it. Doesn't mean it's good policy.
The private homebuilding sector is not going to build at the rate required to improve supply, because excess supply will cut into their margins. Deregulating will just allow them to build a ton of cheap low quality housing and still charge enormous amounts for it. Landlords would just pass that on.
The solution is quality social housing, built by the state in large enough quantities to disrupt the market.
Allowing existing homeowners to increase their revenue by densifying housing will drive prices down. Although developers for single family dwellings will not be as happy about it, if you have a 1/3 Acre lot 10 miles from downtown S.F. which you can turn from a single family $3000 a month rental into a multi-unit $30,000 a month rental then you will be happy to do so. Even if it drives down the value of your $800/month rental in the middle of nowhere.
Imagine if you are currently owning and occupying a house and have a chance to pay your mortgage by building a rental property on the unoccupied half of your lot. A lot of people would be very happy to do so if it were legalized.
Edit: But you are totally right that socialized housing would be an excellent solution.
> Deregulating will just allow them to build a ton of cheap low quality housing and still charge enormous amounts for it.
You're stating this like it's a fact, but you haven't explained why. In a free market, competition is on the basis of price and quality.
If you convert 10 single-family-homes worth a million dollars each into a skyscraper with a thousand units there's plenty of room for profit, even if the thousand units are cheaper than the current median cost for a condo (or rental).
Cities have been writing laws and zoning that prevent economies of scale from kicking in for decades. If they just stop doing that, we'll get more housing.
This is being downvoted, but it’s actually what countries that have solved this problem have done. Even everyone’s favorite “no zoning, build, build, build” paradise Japan accomplished this by also building a large amount of public housing:
https://en.m.wikipedia.org/wiki/Danchi
Housing didn’t become a depreciating asset there over night. It was the express result of the state intervening in the market.
It can be a 'yes, and' thing. You can do both. You can't build a bunch of Japan style public housing if you do not have Japan style zoning.
Sounds a bit too commie for the yanks.
The younger generation is coming around. In a hundred years or so things may change, but until then we're stuck with our current political economic system.
https://www.pewresearch.org/politics/2022/09/19/modest-decli...
What do zoning changes have to do with quality of housing?
R1 zoning prevents the creation of affordable housing. Since you can only fit maybe two or three households per acre, and land prices are sky high, the only affordable housing is in the middle of nowhere, 2 hours from anything.
Something like this would be a huge improvement and reduce housing costs.
https://www.strongtowns.org/journal/2018/6/6/toward-dynamic-...
I agree with this. But the person i responded to was implying that relaxed zoning rules would leave more shoddy houses by developers. Despite building regulations being completely different than zoning.
Ahh! Yeah I was thinking the same thing. It makes no sense that zoning would affect building quality.
> to keep rent prices high in a city with a housing affordability crisis
this phrase undermines their whole case. A city experiencing a housing affordability crisis is not going to see a decrease in rents regardless of this software (which may be illegal and ok, throw the book at them)
Housing affordability crises are caused by shortages of housing compared to demand for living in that place.