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> The program may also induce landlords to charge the rents recommended by the algorithm, putting upward pressure on prices and decreasing the availability of a

by Aunche 4y ago

> The program may also induce landlords to charge the rents recommended by the algorithm, putting upward pressure on prices and decreasing the availability of affordable apartments. 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.

ceejayoz 4y ago
> The program may also induce landlords to decrease rents as recommended by the algorithm... The algorithm's sole purpose - how it gets customers and makes money - is to maximize revenue and prevent that as much as possible.
- Aunche 4y ago
  Reducing rents may also maximize revenue by reducing vacancy. The reason the algorithm recommends landlords to increase rents more often than it recommends them to decrease rents is because the supply of housing isn't growing as quickly as demand. Without this algorithm, landlords tends to set rents in reactive manner, so the price they set lags behind the optimal market price, so when the algorithm recommends the market rent, it tends to be higher. 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.
  - ceejayoz 4y ago
    > Reducing rents may also maximize revenue by reducing vacancy. Actually, the algorithm seems to do the opposite. https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent 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%.”
    - Aunche 4y ago
      I already addressed why this is the case in my previous comment.
    - bombcar 4y ago
      Those occupancy levels are insane to me - 80% used to be considered the norm when working out the cap rate. Maybe it’s different for exceptionally large properties.
  - giraffe_lady 4y ago
    > Reducing rents may also maximize revenue by reducing vacancy. 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?
    - Aunche 4y ago
      > 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.
      - giraffe_lady 4y ago
        Do laws come down from heaven in this view? We make them when we find that something is harmful. This is harmful. We can make it illegal. 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.

by Aunche 4y ago

ceejayoz 4y ago

> The program may also induce landlords to decrease rents as recommended by the algorithm... The algorithm's sole purpose - how it gets customers and makes money - is to maximize revenue and prevent that as much as possible.

Aunche 4y ago
Reducing rents may also maximize revenue by reducing vacancy. The reason the algorithm recommends landlords to increase rents more often than it recommends them to decrease rents is because the supply of housing isn't growing as quickly as demand. Without this algorithm, landlords tends to set rents in reactive manner, so the price they set lags behind the optimal market price, so when the algorithm recommends the market rent, it tends to be higher. 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.
- ceejayoz 4y ago
  > Reducing rents may also maximize revenue by reducing vacancy. Actually, the algorithm seems to do the opposite. https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent 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%.”
  - Aunche 4y ago
    I already addressed why this is the case in my previous comment.
  - bombcar 4y ago
    Those occupancy levels are insane to me - 80% used to be considered the norm when working out the cap rate. Maybe it’s different for exceptionally large properties.
- giraffe_lady 4y ago
  > Reducing rents may also maximize revenue by reducing vacancy. 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?
  - Aunche 4y ago
    > 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.
    - giraffe_lady 4y ago
      Do laws come down from heaven in this view? We make them when we find that something is harmful. This is harmful. We can make it illegal. 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.