US reps urge DOJ to investigate anticompetitive conduct affecting apartment rent
klobuchar.senate.gov
klobuchar.senate.gov
Wait until she hears about hotels and flights.
> The software analyzes non-public data that RealPage gathers from its property management clients, including confidential information on the rents charged by competing property managers, data it also makes available to its subscribers in aggregated, anonymized form. The program may also induce landlords to charge the rents recommended by the algorithm, putting upward pressure on prices
This is identical to how employers share salary information.
Either this is nonsense grandstanding (most likely) or the beginning of a sea change in consumer protection. I won't hold my breath.
Employers sharing salary information is also maybe a descriptive reality but I don't believe to be necessarily smiled upon. Remember the wage fixing scandals in SV?
Analogies are great because you can say A is like B, up until A is no longer like B and then they are terrible. But seriously, there are qualitative differences in things which make comparable effects be more or less of a problem (or even go from good to bad!). Thinking continuously by analogy misses the forest for the trees.
You also _have_ to get education, healthcare and a whole lot more than nobody is doing anything about making any kind of affordable.
Especially odd to consider healthcare as "nobody is doing anything", as if this is a new political topic for debate instead of an ongoing fight for the past.... 40? years? The lack of progress isn't for lack of wanting it!
Myself I'd say that both having a roof over your head, education, healthcare and a bunch of other stuff is a human right, but I digress.
I mean I agree, you're missing my point.
> You can live outside in a tent or under a couple of moving boxes.
Not legally in a lot of places you can't! The point I'm making is that while we need (and should have as a right) many good things, the need to have a home is a particularly special one because locations are in fixed supply, and not even for one minute can you opt out of existing in a location, and every location that people want to exist in is currently owned by somebody, most of whom aren't interested in sharing.
And wouldn't you know it? Locations that have steady access to all that other good stuff (education, healthcare, bunch of other stuff) tend to be way more expensive than other locations, precisely because they gatekeep access to them.
The vast majority of the US has set some building codes that basically say "be rich enough to build to this code or be homeless." One can debate the merits of whether the streets are safer than a sub-code house. If you go somewhere like Asuncion, Paraguay you'll find people living in a shack who would end up homeless in the US.
IMO notably missing in zoning and building codes is they tend to consider the harmful effects of substandard zoning / code. But they seldom consider the harmful effects of the tradeoffs made to get it up to code/zone, including less money for healthcare, education, healthy foods, investing in your children, etc. Often it boils down to "fuck you, got mine, I won't risk some elevated risk of spread of fire to help keep you from freezing to death."
If they are really facilitating collusion, then they would be selling a broken product. For example, for simplicity's sake, let's say that a city has a lot of landlords, but all their units are identical and they all follow the RealPage algorithm for price suggestions. Realpage suggests that they charge an exorbitant $10000 per unit, which leads to only 50% of all units being occupied, so your expected value of $5000 per unit. However, if you're a landlord, you'd be better off renting your units at $9000, leading to 90% occupancy. Your expected profit per unit is $8100, so you're actually much better off without the algorithm.
While I was a small-time landlord in the past, I am not now. It is difficult (financing, zoning, permits) to put up a new apartment building, so there is no extra $8100 for me.
If landlords meet weekly at the diner to set unit pricing it would be anti-trust collusion. The landlords paying uncle Bob to do the same thing is an extra step and it is still collusion.
Did you read my example? My point is that this not what they're doing. You pay Realpage a fee based on the total square footage of units you want to be priced. In exchange, they estimate the market rent of your apartment to the best of their ability. They have no incentive to do otherwise.
Not sure about that, there are entire industries around cheap flights for people that are location agnostic. ScottsCheapFlights comes to mind.
For example, I would like to go to a major city in Europe sometime this summer. Which city isn’t urgent to me. The week I go doesn’t matter. Except oh so and so is getting married that week of June and I’ve recently been to Germany so would prefer something else.
Very very few people plan their vacations like this. They would rather pay twice the rate a deal site gives them and plan around school breaks for their kids, know which country they are kicking off their bucket list, have a direct flight from their home airport, etc. We who are willing to book an international flight and only then figure out what our vacation will be give up a lot for our discounted ticket prices.
I've heard of many people saying, I have 1000 bucks to spend on a vacation, I'd like to go somewhere for that amount during this time.
Person 2: "Sure, where should we go?"
Person 1: "How about Japan?"
Person 2: "Sounds great, how much are tickets?"
Person 1: "Hmm, they're around $1,600 each. That's too expensive. What about going to Amsterdam instead?"
That seems like a totally plausible exchange.
What about property tax assessments? Municipal governments don't care about pricing out local residents when they hire companies or banks that do exactly what Realpage is doing (i.e. collecting information, applying some proprietary regression model to it, and spit out valuations). In fact, they can put a lien on what should be your home, even if your one dollar short. The issue isn't market-based solutions. The issue is lack of transparency.
I don't know as much about hotel pricing, but my understanding of flight pricing is that it's done with buckets of fare classes: prices are set in buckets, and they only go up (or down) as each bucket is exhausted (or re-opened, if a ticket is canceled). I'm sure it's more complicated than that these days, but I don't think it's directly comparable to the rent adjusting system described in the news release.
The price if you purchase today changes daily, in both scenarios.
To my knowledge, airline pricing algorithms are fiercely guarded and competitive. Hotels, less so, but it's a fragmented space. RealPage, in contrast, is a single algorithm coordinating pricing for large sections of the market.
Or TicketMaster's adaptive pricing! When are these politicans going to focus on society's big problems: getting me Taylor Swift tickets.
If most/all hotels artificially maintained empty rooms and based their prices exclusively off booking.com or Priceline, I'd want that racket broken apart too.
What is the single pricing system that the majority of hotels or flights use? If there is one, and it's used for tacit coordination of prices, then yes, that should be pursued as an illegal cartel as well.
But my understanding was that each airline uses their own yield management algorithms. Delta does not use software that knows about price increases at American before they happen, for instance.
I'd welcome correction if you know otherwise.
> This is identical to how employers share salary information.
Um, no? RealPage actually suggests pricing. They use data from property A to tell property B what to charge. And they (allegedly) coordinate price increases across multiple properties.
This would be like if employers shared salary information and shared a software package that proposed lower and lower pay across all employers.
https://www.propublica.org/article/yieldstar-rent-increase-r...
> Competing airlines began using common software to share planned routes and prices with each other before they became public. The technology helped head off price wars that would have lowered ticket prices, the Department of Justice said.
> The department said the arrangement may have artificially inflated airfares, estimating the cost to consumers at more than a billion dollars between 1988 and 1992. The government eventually reached settlements or consent decrees for price fixing with eight airlines, including Alaska Airlines, all of which agreed to change how they used the technology.
“Efficient market” perhaps is not all it was once cracked up to be.
Regardless, if any of those are shown to be an elaborate price fixing scheme, I would hope that government officials would take action.
I don’t see the need to be so needlessly negative.
To the Senator's credit, she's investigating other oligopolies as well.
Friendly reminder to all: you can opt out of most of this.
Most employers subscribe to The Work Number, but you can opt out of your data being shared here: https://employees.theworknumber.com/employee-data-freeze
Note you will still see your current employer submitting data if you log in, but it's not visible to other employers who participate.
This is definitely nonsense grandstanding. I have no idea what they're even trying to say here. The program may also induce landlords to decrease rents as recommended by the algorithm, putting downward pressure on prices and increasing the availability of affordable apartments.
The algorithm's sole purpose - how it gets customers and makes money - is to maximize revenue and prevent that as much as possible.
Unfortunately, the state of economic education is so poor in this country that Senators would rather grandstand about making economic signals illegal rather than actually address the root cause of these economic signals.
Actually, the algorithm seems to do the opposite.
https://www.propublica.org/article/yieldstar-rent-increase-r...
> During an earnings call in 2017, Winn said one large property company, which managed more than 40,000 units, learned it could make more profit by operating at a lower occupancy level that “would have made management uncomfortable before,” he said.
> The company had been seeking occupancy levels of 97% or 98% in markets where it was a leader, Winn said. But when it began using YieldStar, managers saw that raising rents and leaving some apartments vacant made more money.
> “Initially, it was very hard for executives to accept that they could operate at 94% or 96% and achieve a higher NOI by increasing rents,” Winn said on the call, referring to net operating income. The company “began utilizing RealPage to operate at 95%, while seeing revenue increases of 3% to 4%.”
Yeah but come on were you born yesterday.
> The reason the algorithm recommends landlords to increase rents more often than it recommends them to decrease rents
The algorithm causing landlords to raise rents is the problem with the use of the algorithm, the subject of discussion. The mechanics of how the algorithm comes to that conclusion may be technically interesting but are not the problem, nor the solution, to rents being raised.
We can solve the underlying problem and ban this shit. We don't have to choose one neither blocks us from dealing with the other. This is happening now and would be easy to stop, if we wanted to. What do you gain from making people think we can't or shouldn't stop this?
Because they aren't doing anything illegal. They are merely facilitating price discovery. If they really were creating a cartel of landlords, then they would be selling a broken product. For example, for simplicity's sake, let's say that a city has a lot of landlords, but all their units are identical and they all follow the RealPage algorithm for price suggestions. Realpage suggests that they charge an exorbitant $10000 per unit, which leads to only 50% of all units being occupied, so your expected value of $5000 per unit. However, if you're a landlord, you'd be better off renting your units at $9000, leading to 90% occupancy. Your expected profit per unit is $8100, so you're actually much better off without the algorithm.
What it could be matters for shit. What it is in practice is maximizing wealth extraction from the people least likely to be able to bear it towards those who already, necessarily, have much more of it.
The DoJ should start with an antitrust investigation of Atherton.
Are they all using the same program and colluding on pricing?
For me, the difference is that using the same software to set the price based on the non-public information effectively makes it a form of collusion on setting rents, which seems analogous to the illegal practice of employees colluding to cap wages. It's not the same, I know, but has a similar negative effect in that the market is being subverted in some way.
The real question for me is what, if anything, comes out of the investigation. If some new legislation prohibiting the practice comes out, I could see the big landlords simply publicizing that data to avoid any legal issues.
Note that the link is from Nov 17, a couple weeks ago. Just last week it was reported that the DOJ is already investigating (discussed here):
https://www.propublica.org/article/yieldstar-realpage-rent-d... ( https://news.ycombinator.com/item?id=33744136 )
https://www.theverge.com/2022/11/26/23479034/doj-investigati...
There is also a lawsuit: https://www.seattletimes.com/business/real-estate/seattle-la...
Every day (or every week or month, up to the property) the rent gets recomputed for every unit for whatever terms you want to offer. My building offers 7, 8, 9, 11, 13 and 14 month terms at the moment (yes, 12-months is surprisingly absent). You get a wide range of rents based on the terms that seemingly don't make sense. That's because it calculates both current market factors as well as what it thinks is in store for the future. So a 9-month term can be either less or more than an 13-month term, because it heavily depends on WHEN that term will end in terms of how hard it anticipates it will be to find a new tenant.
When I first when to move in I was told that the rate quoted would only be good for a week and next week ALL the terms would be different—and they were. It feels like a little bit of a lottery. Wait another week and the rent may go up or down for any of the terms. I did wait an extra week, and then the rent went UP for the 12-month by DOWN for the 13. The rent spread between both terms and time was around $400/mo IIRC, so it was not trivial.
I just got my renewal for this year and my building is no longer using this feature. I can tell because all the terms now have the same (albeit it ridiculous) rate. I'm not sure why my building stopped using it. It may be because of the backlash happening right now, but I actually think it may be because tenant turnover is simply through the roof with this system. Our building is a rotating door. People would move in with a great intro rate, but when it comes around for renewal the rates were VASTLY different, as well as the terms they were mapped to—and you knew that. Why pick a 14-month term when you can pick a 7-month term… and maybe stand to get a lower rent in 7-months? I was always wondering what my options would be on renewal. Sometimes I would check my unit, which despite being rented, I could still see what the "new rate" would be if my renewal was that day. The numbers were always just all over the place. Sometimes the 7 or 8 month lease was the cheapest. Other times it was by far the most expensive. It honestly just felt like there were a bunch of dice rolls every day that determined rent within some range.
Also good to stagger lease expirations so not everyone is moving in and out at the same time.
Coincidentally there’s a class action suit against landlords in Seattle about the subject of the article.
It seems to me that RealPage simply helps landlords assess the market price for apartments. Sort of like how "Redfin Estimate" and Zillow's "Zestimate" help homeowners assess the market value of their house. The reason houses and apartments are expensive is because the market rate is so high.
My test for whether RealPage is anticompetitive would be: does RealPage induce multiple landlords to withhold apartments from the market in order to intentionally restrict supply and drive up rents? (Or, does RealPage just clue them in to how high the market rents are?)
State policies may indeed be already limiting supply, realpage makes things worse.
you can't create a system with politically "liberal" rules ("let's have the government control the economy") and then say it's "conservatives" who are holding things up.
the politically conservative position would be let owners of property do what they want with it, including developing it into more housing if they want.
not saying one system is better than the other, just saying you're simply using liberal and conservative to mean good and bad.
This is openly stated in their investment prospectuses, it's not a secret.
You could instead imagine a (still completely fictitious) figure that makes your argument look bad -- e.g., that the raise in rates causes a 0% drop in occupancy. Then the landlords/algorithm win by raising prices.
One reason occupancy rates might remain relatively stable even in the face of rising prices is if consumers have relatively few better options, because e.g. all of your competitors collude to also raise their rates similarly.
Housing demand isn't really that inelastic. People will move to less crowded cities if they become too expensive. Americans tend to have much more living space per capita than most of the world, so there is a lot of room to move in with roommates or family.
> all of your competitors collude to also raise their rates similarly.
Realpage doesn't control the prices for the majority of housing in the US, the majority of rental units in the US, or even the majority of multifamily rental units in the US. If they tried to facilitate collusion, their customers would simply lose money.
The vast majority of people die within 10 miles of where they were born. People want to live near their families, and for the most part do not want to move to another city, and won't even if their rent is difficult to afford.
> Realpage doesn't control the prices for the majority of housing in the US, the majority of rental units in the US, or even the majority of multifamily rental units in the US.
They don't need to. They just need to control the prices for particular cities, because market prices are heavily tied to regions and not to the entire US. Detroit's housing market crashing didn't affect SF's rent.
It's pretty obvious that this is a net negative on society.
If people didn't have spare money, rents wouldn't be growing (As nobody would be able to pay), and if vacancies were higher, landlords would have to accept lowball offers.
If these landlords were colluding with eachother to punish defectors that undercut them, that would be a cartel. If they are all reacting to a shortage by raising their prices, that just makes them... Market agents.
It’s just in a broken market - there isn’t enough supply of housing, so prices are going up. And because everybody needs housing, it feels icky to many people (I’m one of them, but my solution would be relax zoning and allow more housing).
Unless using this system requires participants to set a price, I’m not sure it meets the definition of price fixing. A landlord can still underprice to guarantee a tenant quickly. Or overprice in the hopes they catch a low-info, high-income tenant.
OPEC works because they all move together. One of them raising or lowering production alone doesn't do much; all of them doing it at similar times does.
Same with RealPage. By having nearly everyone use it, nearly everyone's pricing moves in a coordinated fashion, and they collectively reduce the chances of downward price pressure.
Landlords don't always advertise, and they also negotiate rents. Knowing the actual market price isn't easy (and sometimes not possible), because that information isn't publicly available and certainly isn't real-time.
RealPage is getting private market information from landlords, and using it to coordinate rent prices, including coordinating actions to remove supply from the market to artificially increase prices. This removes competition from an otherwise competitive market. This is collusion via a middleman.
It doesn't, and it can't. That's what makes it not a cartel.
The problem is not collusion, the problem is supply shortage. All the sellers raising prices isn't illegal, or cartel-like. All the sellers punishing a seller that lowers prices would be - but it doesn't happen. Not with landlords, at least.
I think our current land policy is pants-on-head stupid, but this isn't the problem with it.
Your definition means OPEC isn't a cartel. (That is... incorrect.)
There is no mechanism for keeping other landlords from leaving the software, and there are multiple competing alternatives.
For landlords, yes.
Not for tenants. That's the crux of the issue here. Tenants have no way of knowing what is happening or why and so the market becomes an anti-competitive cartel. This is doubly so in markets like Seattle, where a single-digit number of management companies cover large swathes of the market.
It's akin to people defending binding arbitration clauses by saying "just choose another competitor." When all of the competitors in the market, especially in a must-have-it-or-else market like housing, are doing the same thing in the same way, there's no choice and no competition.
Sure, just like Uber is "ride sharing" where the drivers pick the price. "We're all just using the same software" is a thin veneer over what amounts to collusion to raise prices.
> There is no mechanism for keeping other landlords from leaving the software, and there are multiple competing alternatives.
The mechanism is "you lose money" (countries can leave OPEC, but it's still a cartel), and if you read the article the competing alternatives are getting bought out.
"In addition, we understand that the Antitrust Division allowed RealPage to acquire one of its closest competitors, Lease Rent Options, in 2017 – one of more than 10 acquisitions RealPage has made since 2016."
It's pretty effective. https://www.propublica.org/article/yieldstar-rent-increase-r...
"The approval allowed RealPage to acquire its only significant competitor, Roper said, adding, 'I was surprised the DOJ let that go through.'"
"In one neighborhood in Seattle, ProPublica found, 70% of apartments were overseen by just 10 property managers, every single one of which used pricing software sold by RealPage."
But nothing stops a landlord from undercutting any other landlord. It's the difference between the Uber 'Marketplace' and an actual market.
> The mechanism is "you lose money"
Yes, that's a market mechanism, it's not a cartel mechanism.
Yes, that's the point. This fact is getting them in hot water in a variety of jurisdictions, as independent contractors are supposed to set their own rates.
RealPage is trying to play the same regulatory evasion games - "it's not collusion, everyone just uses our prices". I hope it ends poorly for them.
I am missing this point. Uber drivers can set their rates and not take the rides that are below those rates, can't they? Or do you mean they have to be able to make exactly the rate they set, e.g. the driver's rate is $21.25/h, Uber offers only $30/h and more and the driver takes Uber to court saying he could not set his desirable rate and had been paid more?
> You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.
It's a jurisdiction-by-jurisdiction battle at the moment, but the tide seems to be turning. A number of judges have already ruled that Uber and similar companies exercise enough control over their "contractors" for them to be over the line into employee territory.
> There is no mechanism for keeping other landlords from leaving the software
Nobody is saying that landlords are being victimized.
It promotes a perverse incentive for everyone to share business information and have the same pricing models and for the model to promote rising prices consistently across all landlords.
It should be banned because the incentive structure discourages (or eliminates) competition.
Which just means that the 1% can then extract as much of that 30% as possible returning the 29% right back tonwhere they effectively were before the growth (not to mention anyone that got a minimum wage increase)
https://www.marketplace.org/2022/03/02/how-private-equity-is...
When we previewed home all the windows were open. After signing paperwork we closed up windows. Hour later we noticed smell. 3 month of being told it was carpet. Floor, paint. They inspecting and saying everything is fine.
Our deductive reasoning skills where nil fairly quick into this.
Finally called gas company even. They started screaming for us to run From the road. Didn’t even get to the house before alarms went off. Kids went from gifted to special needs. I went from top programmer to taking hours to figure out laundry.
Doctors wouldn’t say gas caused injuries. So lawyers didn’t care.
About 70% Back to normal 4 years later.
1. Outlaw (at the local and state level) and punitively tax (at the Federal level) short-term rentals (eg AirBnB/VRBO). The evidence that these reduce the supply of rental units is undeniable. It's not even capital intensive as people will rent units where the lease allows them to sublet short-term;
2. Start punitively taxing second homes;
3. Punitively tax ultra-luxury housing supply.
In the longer term the government should temper these market forces by creating an alternative source for housing by buying and building housing units that are rented to people on reasonable terms.
I'm assuming you mean punitively tax 2nd homes that aren't being rented out?
This may only benefit if you have already borked your real estate market so that virtually nothing gets built anyway.
The only thing that will stop capitalists doing capitalism is that it won't be profitable.
In a lot of places we aren't building things because we can't (eg in most of the US it is quite literally illegal to build anything other than SFHs) and what we are building in a lot of places isn't aimed at normal people (eg the ultra-luxury skinny-tall towers in Manhattan).
You have to "kowtow" to capitalists because they control resources which are required for new housing to get built. Nothing will change that short of a full communist revolution, which most people aren't too keen on.
>The only thing that will stop capitalists doing capitalism is that it won't be profitable.
>In a lot of places we aren't building things because we can't (eg in most of the US it is quite literally illegal to build anything other than SFHs) and what we are building in a lot of places isn't aimed at normal people (eg the ultra-luxury skinny-tall towers in Manhattan).
You got cause and effect reversed. The reason why only luxury apartments/houses are being built in those areas is because the land value/zoning means that the only rich people can pay those prices, and they want luxury homes. Mandating that only crappy homes can be built doesn't really fix the issue, because rich people will still buy those homes and renovate it themselves to make it luxury.
Which is exactly the point of the policy.
If the society recognizes that private landlordship is net negative like smoking, it’s expected to be regulated out of existence.
Why should people wanting to buy a second home be given priority over people wanting to buy their first, from the moral stance?
What'w the criteria for it being a "private" landlordship? Can you just register a shell company? PG spent a lot of time explaining how easy it should be to register and run a company.
Are you advocating for red tape and regulatory capture here?
Re 2: My test is, the owner(s) (all on the title) must _reside_ in the house for at least 35% of the year. That allows summer / winter homes for snowbirds, as well as moves, but makes it impossible to get the tax break on 3 properties in a given year.
House ZONING, anti-NIMBY, is also a major contributing factor. There should be rules much more like Japan's 'impact based' zoning, and automatic approval for plans that obviously surpass minimum standards for various E.G. environmental impact assessments and other forms of red tape. These benefits should also be structured to encourage housing within existing impacted areas (cities, improve density), and give benefits for exceeding minimum codes and being less impactful than allowed.
How about this one:
4. Stop artificially restricting the goddamn housing supply and catering NIMBYs, and instead allow housing of reasonable quantity and density to be built.
Either that, or the majority of people here are real estate speculators, which I very much doubt.
Why would punitively taxing vacation homes, which are almost always outside of urban / dense-surban locations where there is little housing market congestion and where building additional housing units is straight forward -- do anything to help things?
Why would punitively taxing the "ultra-luxury housing supply" do anything substantial for the issue being discussed?
To me, these points made the post sound like a class-war rallying cry rather than an effort at reasonable solutions.
Punitively taxing housing used by the wealthy isn't going to address the issue-- even if its successful at driving them out of the area there are so few that it wont make a dent in the market.
I'm disappointed in the lack of creativity in the proposals people advance. How about in regions where density is already over some threshold large employers should be required to have at least some threshold of their role qualified office workers working remotely? Remote workers can consume less square footage (less office space, less parking) and can locate themselves outside of the highest demand locations.
Surely there must be other alternatives other than just the density treadmill. While increasing density can also be a useful tool, it has the unfortunate effect of making the property even more valuable which works counter to the goal of affordability.
In California we should end the prop 13 windfall for rental properties, and at the very least allow rental properties taxes to rise with rental rates. Current policy can create weird effects like houses where if they were sold the increase in taxes would be comparable to the current rent, which essentially locks them into being rental... and even when it's not that extreme it creates a significant advantage in favor of long-time landlords vs recent buyers.
I know that's not a direction most people agree on (hitting real estate as an investment), but there really is no other way I see.
> I know that's not a direction most people agree on (hitting real estate as an investment),
Most states have substantially lower and/or increase restricted property taxes for a single owner occupied home, so I don't think you can say that taxing investment properties at a higher rate than owner occupied properties a direction people don't agree on, generally. (California is weird in that it restricts tax increases for all properties, including commercial).
One problem you run into is that most investment properties are rented out and increased taxes on them will be passed onto the tenants, so any increased taxes on these properties is arguably regressive since the tenants tend to be a lower income part of the population.
What's the problem? Don't we want transparency in pricing within a market?