4 ms·

I’m quite happy to see this having lived in apartments driven by automated pricing which is obviously a new kind of cartel.

loeg 4y ago
The innovation here isn't the automated pricing, but convincing all the landlords in an area to collude by sharing pricing and demand data with a central organizer. Humans could do the pricing and it would still be illegal collusion.
- Aunche 4y ago
  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.
  - loeg 4y ago
    Your arbitrary figure of $9,000 -> $10,000 causing a 40% drop in occupancy is wholly invented. 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.
    - Aunche 4y ago
      > that the raise in rates causes a 0% drop in occupancy. 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.
      - ryan_lane 4y ago
        > People will move to less crowded cities if they become too expensive. 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.
  - ryan_lane 4y ago
    There was another recent article related to this product, that showed large-scale landlord (4,000+ units) using this product to run experiments around their vacancy rate vs their revenue, to figure out how much they could raise rates by participating in the collusion. They started at 5% and were testing 15% vacancies. That's a considerable number of units to remove from the market, and basically an unheard of vacancy number to target, but they were showing higher revenue with this model. It's pretty obvious that this is a net negative on society.
vkou 4y ago
Is it really a cartel, or is it just landlords squeezing every penny that they can? With there being a lot of pennies to squeeze due to a double-whammy of supply shortages, and growth in wages for the upper 30% of 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.
- dools 4y ago
  Define spare money. Since housing isn’t optional, and the cost of being homeless is extremely high, people will cease practically all other consumption in order to pay rent
- deleted 4y ago
  [deleted]
- timy2shoes 4y ago
  RealPage is Cartel As A Servics (CAAS), by allowing landlords to collude through a 3rd party to raise rents.
  - vkou 4y ago
    How is it different from just eyeballing market price from looking at similar units, and renting yours out for +10-15% more? Is there some core part of US land policy that only works if landlords behave like low-information market participants? 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.
    - alistairSH 4y ago
      Unless I’m missing something, it isn’t any different, other than it makes the market more efficient (in that the price gets set “correctly” earlier - by the manual method, a landlord likely over-prices initially and waits for a tenant OR underprices initially and loses that income). 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.

loeg 4y ago

The innovation here isn't the automated pricing, but convincing all the landlords in an area to collude by sharing pricing and demand data with a central organizer. Humans could do the pricing and it would still be illegal collusion.

Aunche 4y ago
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.
- loeg 4y ago
  Your arbitrary figure of $9,000 -> $10,000 causing a 40% drop in occupancy is wholly invented. 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.
  - Aunche 4y ago
    > that the raise in rates causes a 0% drop in occupancy. 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.
    - ryan_lane 4y ago
      > People will move to less crowded cities if they become too expensive. 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.
- ryan_lane 4y ago
  There was another recent article related to this product, that showed large-scale landlord (4,000+ units) using this product to run experiments around their vacancy rate vs their revenue, to figure out how much they could raise rates by participating in the collusion. They started at 5% and were testing 15% vacancies. That's a considerable number of units to remove from the market, and basically an unheard of vacancy number to target, but they were showing higher revenue with this model. It's pretty obvious that this is a net negative on society.

vkou 4y ago

Is it really a cartel, or is it just landlords squeezing every penny that they can? With there being a lot of pennies to squeeze due to a double-whammy of supply shortages, and growth in wages for the upper 30% of 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.

dools 4y ago
Define spare money. Since housing isn’t optional, and the cost of being homeless is extremely high, people will cease practically all other consumption in order to pay rent
deleted 4y ago
[deleted]
timy2shoes 4y ago
RealPage is Cartel As A Servics (CAAS), by allowing landlords to collude through a 3rd party to raise rents.
- vkou 4y ago
  How is it different from just eyeballing market price from looking at similar units, and renting yours out for +10-15% more? Is there some core part of US land policy that only works if landlords behave like low-information market participants? 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.
  - alistairSH 4y ago
    Unless I’m missing something, it isn’t any different, other than it makes the market more efficient (in that the price gets set “correctly” earlier - by the manual method, a landlord likely over-prices initially and waits for a tenant OR underprices initially and loses that income). 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.