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As a non-landlord, it seems quite odd that landlords and property managers can’t “collude” on rent pricing. If I were to have a rental property and a managemen

As a non-landlord, it seems quite odd that landlords and property managers can’t “collude” on rent pricing. If I were to have a rental property and a management company for it to be hands off, I’d probably want to defer rent setting to the people that understand that local rental market. Both parties have aligned incentives - they want to maximize rent. I guess the government just wants the low-information party to set the pricing? Are there any near-monopoly property management companies in any major metro in the US? Seems like they’re a dime a dozen with lots of competition — doesn’t seems very anti-trust-worthy to me, but what do I know?

quasse 3y ago
It's not understanding the local rental market that's the problem. It's controlling enough of it that you can influence prices globally upwards outside of economic competition. If 60% of a city's major property companies sign on with RealPage and *also* agree that they will not undercut the prices RealPage chooses (eliminating economic competition between the property companies), that's not just being a high information party, it's collusion. The problem is that housing in major cities has a relatively fixed supply, so the colluding landlords know that even if a competitor undercuts them eventually they will simply fill their units and cease to be competition for new renters.
apendleton 3y ago
Yes, the companies targeted here aren't property managers themselves, they sell software to property managers, and have ended up providing services to many ostensibly-competing managers and building owners in some metro areas, who collectively control enough of the rental market in those areas that they can "maximize rent" by moving the whole market up in concert rather than having any of the owners actually compete with one another. From a ProPublica piece [1] about it, for example: > 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. [1] https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r...
- Rapzid 3y ago
  Ahh, this is the missing context! The collusion is the agreement to adhere to the pricing set by a central pricing authority, not basing your prices off shared information or recommendations. This makes a lot of sense now. Edit: Well maybe it wasn't missing, but I missed it in any case. Cheers.
  - lazide 3y ago
    But why wouldn’t they just got a couple percent under the price, and fill all their units? Vacancies kill returns.
    - dugite-code 3y ago
      > Vacancies kill returns. Unless you can guarantee prices will rise, then you just recoup lost revenue when it's next occupied.
      - lazide 3y ago
        It takes a LOT of rent increase (in a short period of time) to make up for even a month or two of lost rent. Literally one month of rent lost (due to vacancy) would require all the following months rent to be 8.5%ish higher to make up for it if you wanted to recoup within the next year. Vacancies kill returns, because you aren't actually getting paid - at all - for the thing that you make money off of. Long term (very long term) more modest improvements could of course pay off - BUT, that shortly would require you be way outside the market rates if you had many vacancies, or doing completely impossible things like 100%+ increases in rent y/y to not lose money. Now if you're able to corner the market, maybe. But good luck actually successfully doing that, since people are generally able to move, live with relatives, live in RVs, live in tent encampments, etc. if you try.
        dugite-code 3y ago
        The problem here is they apparently DID corner the market in some area's. With apparently nearly 70% of some area's Realtors using the software. Given rents went up 18% across the US between 2017 to 2022 (and I believe it's continued as such but I didn't find good numbers quickly) it's entirely possible to reach your 8.5% increase in tightly controled areas. https://www.pewresearch.org/short-reads/2022/03/23/key-facts-about-housing-affordability-in-the-u-s/ https://www.pewresearch.org/short-reads/2022/03/23/key-facts...
akira2501 3y ago
Well.. if you agree to do something illegal in secret then this is "collusion." Price fixing is a defined crime. So if your agreement is to fix prices between competitors in secret then you are "colluding." The extension here is that if your agreement is to use similar pricing information sources, property availability lists, or algorithmic components, that this is a form of price fixing, and is thus also illegal, and so you "colluded" by forming this agreement. The FTC's position is that the agreement itself is illegal. They additionally suggest that even if some of the competitors sometimes "cheat" on the agreement, that doesn't prevent the formation of the agreement itself from being a crime. This all seems pretty straight forward. They committed a crime. There was no reason to form an agreement. Had they not done that, there would be no case, and no obvious intent. As it is, their intent was clear, to break the law at the public's expense. This, by the way, is why we have ANSI and IEEE and ITU and all kinds of other "open" standards groups. If you don't do it in secret then much legal burden is immediately lifted from you.
- ghaff 3y ago
  Trade associations basically have a long list of things at the beginning of every presentation that lay out the rules for why this isn't collusion.

quasse 3y ago

It's not understanding the local rental market that's the problem. It's controlling enough of it that you can influence prices globally upwards outside of economic competition. If 60% of a city's major property companies sign on with RealPage and *also* agree that they will not undercut the prices RealPage chooses (eliminating economic competition between the property companies), that's not just being a high information party, it's collusion. The problem is that housing in major cities has a relatively fixed supply, so the colluding landlords know that even if a competitor undercuts them eventually they will simply fill their units and cease to be competition for new renters.

apendleton 3y ago

Yes, the companies targeted here aren't property managers themselves, they sell software to property managers, and have ended up providing services to many ostensibly-competing managers and building owners in some metro areas, who collectively control enough of the rental market in those areas that they can "maximize rent" by moving the whole market up in concert rather than having any of the owners actually compete with one another. From a ProPublica piece [1] about it, for example: > 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. [1] https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r...

Rapzid 3y ago
Ahh, this is the missing context! The collusion is the agreement to adhere to the pricing set by a central pricing authority, not basing your prices off shared information or recommendations. This makes a lot of sense now. Edit: Well maybe it wasn't missing, but I missed it in any case. Cheers.
- lazide 3y ago
  But why wouldn’t they just got a couple percent under the price, and fill all their units? Vacancies kill returns.
  - dugite-code 3y ago
    > Vacancies kill returns. Unless you can guarantee prices will rise, then you just recoup lost revenue when it's next occupied.
    - lazide 3y ago
      It takes a LOT of rent increase (in a short period of time) to make up for even a month or two of lost rent. Literally one month of rent lost (due to vacancy) would require all the following months rent to be 8.5%ish higher to make up for it if you wanted to recoup within the next year. Vacancies kill returns, because you aren't actually getting paid - at all - for the thing that you make money off of. Long term (very long term) more modest improvements could of course pay off - BUT, that shortly would require you be way outside the market rates if you had many vacancies, or doing completely impossible things like 100%+ increases in rent y/y to not lose money. Now if you're able to corner the market, maybe. But good luck actually successfully doing that, since people are generally able to move, live with relatives, live in RVs, live in tent encampments, etc. if you try.
      - dugite-code 3y ago
        The problem here is they apparently DID corner the market in some area's. With apparently nearly 70% of some area's Realtors using the software. Given rents went up 18% across the US between 2017 to 2022 (and I believe it's continued as such but I didn't find good numbers quickly) it's entirely possible to reach your 8.5% increase in tightly controled areas. https://www.pewresearch.org/short-reads/2022/03/23/key-facts-about-housing-affordability-in-the-u-s/ https://www.pewresearch.org/short-reads/2022/03/23/key-facts...

akira2501 3y ago

Well.. if you agree to do something illegal in secret then this is "collusion." Price fixing is a defined crime. So if your agreement is to fix prices between competitors in secret then you are "colluding." The extension here is that if your agreement is to use similar pricing information sources, property availability lists, or algorithmic components, that this is a form of price fixing, and is thus also illegal, and so you "colluded" by forming this agreement. The FTC's position is that the agreement itself is illegal. They additionally suggest that even if some of the competitors sometimes "cheat" on the agreement, that doesn't prevent the formation of the agreement itself from being a crime. This all seems pretty straight forward. They committed a crime. There was no reason to form an agreement. Had they not done that, there would be no case, and no obvious intent. As it is, their intent was clear, to break the law at the public's expense. This, by the way, is why we have ANSI and IEEE and ITU and all kinds of other "open" standards groups. If you don't do it in secret then much legal burden is immediately lifted from you.

ghaff 3y ago
Trade associations basically have a long list of things at the beginning of every presentation that lay out the rules for why this isn't collusion.