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YieldStar software helps landlords set prices for apartments across the U.S: https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://ww

YieldStar software helps landlords set prices for apartments across the U.S: https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r... "To arrive at a recommended rent, the software deploys an algorithm — a set of mathematical rules — to analyze a trove of data RealPage gathers from clients, including private information on what nearby competitors charge. For tenants, the system upends the practice of negotiating with apartment building staff. RealPage discourages bargaining with renters and has even recommended that landlords in some cases accept a lower occupancy rate in order to raise rents and make more money. One of the algorithm’s developers told ProPublica that leasing agents had “too much empathy” compared to computer generated pricing."

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SoftTalker 3y ago
Say I own a house, and want to rent it out. I'm naturally going to go onto rental search sites and look at what similar houses in the area are renting for, and probably ask something pretty close to that. I would assume this is not illegal because it's using public information and not colluding with any competitors on price. But subscribing to a service that uses an algorithm that does basically the same thing is (might be) illegal? Does it cross the line when I explicitly agree with competitors that we'll all use the same algorithm? Or if we're all just independently using the popular pricing service could that become illegal? Or if the service agreement requires me to not rent for less than their algorithm calculates?
- 10000truths 3y ago
  What makes it collusion is the fact that others are using it as well, so the answer to your questions is yes. My understanding is that there's nothing wrong with building your own software that crawls public information and computes a price for you - the key thing is that it has to be your own, you can't distribute that software to others.
  - jkic47 3y ago
    ate you sure it is that? after all, we all independently use the Kelley Blue book value of a car before we sell. I think there has to be some intentional and provable link that you and I agreed (colluded) to use a particular value and set a floor below which we wouldn't sell.
    - dkjaudyeqooe 3y ago
      > ate you sure it is that? after all, we all independently use the Kelley Blue book value of a car before we sell. That book doesn't price individual cars, only types and the price of the actual car is open to interpretation and usually negotiation.
      - slrainka 3y ago
        The key distinction lies in how YieldStar approaches setting rental prices compared to other systems. YieldStar not only recommends rental prices by analyzing the entire inventory it oversees but also incorporates a strategy that effectively eliminates the possibility of rent negotiation with potential tenants. This approach mirrors the dynamics of the prisoner’s dilemma, a situation in game theory where individuals may not cooperate, even if it’s in their best interest to do so. However, YieldStar transcends the Nash equilibrium—the point at which no participant can benefit by changing strategies if the others remain unchanged—by stripping tenants of any bargaining power. This ensures that the rent pricing strategy is firmly controlled, without the usual back-and-forth negotiation process.
        dkjaudyeqooe 3y ago
        The only way you can productively refuse negotiation is by knowing the price is fixed (or you have the only supply), otherwise others will take your business.
        jprete 3y ago
        If it's widely believed that other landlords use the same pricing system as you, then that's exactly how landlords can refuse to negotiate.
- aaomidi 3y ago
  The issue is, you're one person doing this manually. That means there's also a ton of people who don't. This algorithm, unlike a single person, ends up taking over entire cities, which means now there is no supply & demand. There is supply, and all that supply is effectively the same number. Demand has no other choice other than meet the supply where they are. It's either that or being without a house.
  - theragra 3y ago
    What if there are multiple vendors selling algorithms? Open source bots doing this? How many bots is a collusion?
    - polygamous_bat 3y ago
      Even if you’re talking to your next door landlord and coming up with a joint price, it’s collusion.
      - theragra 3y ago
        But it is not talking and agreeing. It is algorithm that determines some abstract price that makes sense in the current market. If me and my neighbor use the same formula from Wikipedia, is this also collusion?
    - dragonwriter 3y ago
      > What if there are multiple vendors selling algorithms? Then each vendor’s customers may constitute a small price fixing conspiracy, which is still illegal (price fixing doesn’t have a market threshold before it is illegal) but also a lot less effective, so it probably would be a transitory condition even if it didn’t get punished.
      - theragra 3y ago
        What about open source apps? Formulas from blog articles or Wikipedia?
- dkjaudyeqooe 3y ago
  1. I'm going to use this pricing service. 2. I'm not going to deviate from what it tells me. 3. I know everyone else (who matters) is using this service in the same way.
  - hnburnsy 3y ago
    What amazed me was that sometimes the recommendation from the software was to not lease a unit to anyone.
    - bluGill 3y ago
      you should always have a unit not leased so that you can lease it to someone who needs it now and is willing to pay. If you only have a few units though you will never hit that point where the theory is worth the risk the desperite person comes along.
      - lupire 3y ago
        Why would that desperate person be willing to pay the xN premium needed to cover the idle time? Why would there be exactly one desperate person in the market? You need a curve, charging more as the space fills up. Desperate renters don't have infinite money. People with money are the people who are not desperate, because they have flexible options.
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- letmeinhere 3y ago
  The algorithm is not operating on public info, it is soliciting proprietary pricing and vacancy data that is not available to renters or regulators. That secretive information sharing is the basis of the whole scheme. And the collusion doesn't stop with this information hoarding; the pricing recommendations are as profitable as they are precisely because many property owners in a market are enacting them with the knowledge that a known quantity of their peers have no intent to undercut. Sure, someone can renege on that, but collusion doesn't require that you have an airtight legal contract to bind all parties; after all, such contracts are inherently illegal!
  - jessriedel 3y ago
    > That secretive information sharing is the basis of the whole scheme. can you recommend a link that this describes this in detail?
    - karmajunkie 3y ago
      the link at the top of this thread does so.
      - jessriedel 3y ago
        It does not
    - colechristensen 3y ago
      https://www.propublica.org/article/doj-backs-tenants-price-fixing-case-big-landlords-real-estate-tech https://www.propublica.org/article/doj-backs-tenants-price-f... Contains links to an investigation and lawsuits where you can read DOJ complaints
      - jessriedel 3y ago
        Right, but I'm asking a more specific question: what is the secret info that they are sharing? Is it just the rents?
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- turquoisevar 3y ago
  This is why nuance and details are key in legal matters and where the sum is greater than the parts. Where the line gets drawn is often unclear and is often a matter of “I know it when I see it”. Just individually comparing prices isn’t an issue. What does become an issue is if (at least) all of the following are met. - You use an algorithm service does automates all of this - This algorithm uses both public and private data - The algorithm is ubiquitous and widely used by almost every relevant market player - The algorithm tells all users to not negotiate and the users abide by this recommendation - All of the above has a noticeable effect on the market to the detriment of a big demographic of market participants
  - tsimionescu 3y ago
    Per the FTC filing, many of these are not relevant for deciding if illegal price fixing has occurred. It doesn't matter how the algorithm operates. If all landlords in an area publically agree that they will set rent prices at 400xx the price of a coke can, they are only using public information, but still engaged in price fixing. It doesn't matter how many people actually use the algorithm. If you try to start a cartel to do price fixing and only succeed in convincing two of your 50 competitors to participate, you've still engaged in illegal price fixing. It doesn't matter if individual price negotiation happens or not. If a bunch of companies agree to set the same list price, but also agree that they can offer deals to their customers, they are still engaging in illegal price fixing. It doesn't matter if the scheme actually succeeds in changing the prices. If two companies meet and agree to set prices at a certain value, but then they backstabber each other and undercut the agreed price, or simply other companies in the space who were not part of the scheme have too much market power to allow prices to change, the original companies still agreed to an illegal price fixing scheme and are guilty. All of the above will probably have a massive impact on the amount of damages and so on. But they have no bearing on the verdict, as the FTC lays out at length in the filing they link from the article. And this is not speculation, it is established case law.
    - chii 3y ago
      > meet and agree to set prices at a certain value so the question becomes what it means to "meet and agree". If these companies never communicated, and all came to the same conclusion of a price floor (that happens to all be the same), then how can it be price fixing? To me, price fixing require that the parties agree (explicitly, or implicitly with punishment) to _not_ lower the price regardless of the lack of sales. It is not enough to have the same price (however that price comes about is irrelevant).
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- HumblyTossed 3y ago
  > I'm naturally going to go onto rental search sites and look at what similar houses in the area are renting for, and probably ask something pretty close to that. Or, Say I own and house, and I want to rent it out. I would calculate how much I would have to charge for rent for it to be worthwhile to me. Why would I care what anyone else is charging?
  - pylua 3y ago
    Because you want to maximize your profit and get the most from your investment. You also want to see, generally speaking, if it is even reasonable that anyone would to rent out your house at that price
  - zymhan 3y ago
    > Why would I care what anyone else is charging? Then you probably shouldn't be participating in this discussion.
  - bikezen 3y ago
    You have a duty to your family/pets/shareholders to extract maximum value clearly. /s I added /s because dear lord this thread is full of people who think its true. Housing shouldnt be an investment venue when we have millions unhoused.
    - codexb 3y ago
      That's like saying people shouldn't invest in farms, or pharmacies, or water pumps because there are poor or mentally disabled people who have trouble securing and affording those products.
      - lupire 3y ago
        The difference is whether the good in question is being produced by investment, or monopolized by investment. This has been enshrined in law for over a century. You want to make more money in housing? Build more housing.
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- lowbloodsugar 3y ago
  If you own a house and it sits empty for a year because an algorithm told you you could get more for it, you’re an idiot. If you use an algorithm to effectively collude with others and you fail to rent your house but keep rents artificially high, then you an idiot and a criminal.
  - bluGill 3y ago
    If you own 100 houses to rent it is already known you should have a few empty at all times.
  - lozenge 3y ago
    I don't think it suggested leaving places empty for a year. Rather they wanted to spread out lease renewals. If everybody's lease ends in September then your property is competing with a lot of others. Whereas if you keep it empty until February then offer a 12 month lease, your renter will have much fewer choices and is more likely to stay (despite your demand of a high rent increase).
  - FireBeyond 3y ago
    This generally isn't targeted at single property homeowners/landlords. RealPage says if you have a portfolio of apartments, that following their recommendations will generate you more overall, regardless of occupancy. Their algorithm literally is "it is better to rent out 19 units at $X, when the demand will drop to 0.94X if there's 20 available". And it can do so because it happens to know that the other 80 units on the market with other landlords will be following the same rule.
- ThrustVectoring 3y ago
  You're over-emphasizing the methods by which these people are price-fixing, rather than the result. The result is a price higher than the market-clearing price that is low enough to find tenancy for all housing. Any scheme to generate excess profit by raising rent above this price is (or ought to be) illegal, whether it's colluding to do price fixing, using some algorithm to price-fix, or monopolizing the market.
  - closeparen 3y ago
    All store owners should be jailed, then, since the presence of inventory on their shelves is proof of a scheme to generate excess profit by charging higher than market-clearing prices - or it would have sold already.
    - bluGill 3y ago
      We only know current inventory. As I write this in early March stores are starting to order their halloween candy (the orders need to be in by somethime in april). You do not know what candy your competitor will order, but this is relavant to sales since you will price match their ads and in turn lower priced candy will sell in greater quantities.
  - tsimionescu 3y ago
    The FTC is claiming the exact opposite, basically. Colluding to fix prices, by any means, is illegal. It is still illegal even if the scheme is only followed by a handful of those who "agreed" to it. It is still illegal if it utterly fails to control the price and thus has no material impact. It's like trying to scam people. You're not allowed to try to defraud people. It doesn't matter if your scam is so bad that it would cost you more money to execute than you would get out of it, and it doesn't matter if no one engages with your scam at all: what you were doing is still illegal.
    - lupire 3y ago
      FTC would not be interested if the scheme hypothetically somehow had no effect. They said that it is still be illegal even if it is imperfect. Empirical reality still gets a vote, for pragmatic reasons.
- nkrisc 3y ago
  I won’t belabor the point others have made, but if the end result is price fixing, it’s price fixing. The law isn’t code and it is open to interpretation and intent and outcomes matter, sometimes more than the methods.
  - lupire 3y ago
    So the law is an AI model :-)
- hnburnsy 3y ago
  Prices on rental search sites are wishes not actually leased costs and would be missing things like the term, pets, and incentives.
- FireBeyond 3y ago
  The service also requires you to go with their recommendation 95% of the time, and at a certain point requires you to go with their recommendation, and you can only "request an override" that RP can allow or deny at their discretion (of course, they can't enforce it, other than to kick you off their service, with no refund).
- bostik 3y ago
  Subscribing to a pricing data service: legal. Using data feed to guide pricing and set initial figures: legal. Agreeing, either implicitly or explicitly, to let the pricing data feed set the price floor: collusion. Leaving units unsold and refusing to lower the price despite insufficient demand: usually a bad business decision, possibly indicator of a market failure. Leaving units unsold to maintain agreed-upon price floor despite insufficient demand: collusion, market manipulation. Congratulations, you are a cartel.
  - ethbr1 3y ago
    I guess the other way of looking at it is: What is the value of subscribing to a pricing service where you have no idea how your competitors are using the numbers (over-, match-, under-price)? Versus what is the value of same, if you know your competitors never under-price? That value difference is the value of running a cartel.
  - hinkley 3y ago
    But we are disrupting markets! Doesn’t that make us trendy and forward thinking??
- mu53 3y ago
  Pulled from the Sherman Act, Section 1. Available on wikipedia > Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal It is written in a general way to catch all problems going into the future. The problem is translating this to case law. Often judges ask the question "Is this bad for the consumer?" If rents are rising faster than inflation with more consumers becoming homeless citing cost of rent while vacancy rates are increasing, the market is bad for the consumer and the country.
- cyanydeez 3y ago
  it was illegal. making a mechanical turk to kill people doesn't free the turk from a crime.
- kevin_thibedeau 3y ago
  Your acting on independent research doesn't distort the market. If you directly or indirectly control pricing in 30% of housing stock you can drive prices up incrementally because you have influence on every lease offer in that population.
- MagicMoonlight 3y ago
  Imagine you are Microsoft and you want to collude with Amazon to rig compute prices. You both agree to follow the recommendations of an unbiased Amasoft Price Calculator tool. This tool uses an advanced algorithm looking at thousands of data points and always returns the same price, $10000 per month. You both follow this independent tool and end up pricing it the same. Is this a fair system? You’re both subscribing to an algorithm.
- ametrau 3y ago
  You can’t be part of a price fixing cartel no.
- unethical_ban 3y ago
  You're missing a critical point, which is that using this software requires agreeing to follow its recommendation (else penalty) and to give them access to your pricing.
dkjaudyeqooe 3y ago
> One of the algorithm’s developers told ProPublica that leasing agents had “too much empathy” compared to computer generated pricing." That's true by definition. What's shocking is that the developers want to replace leasing agents with a sociopath.
- Espressosaurus 3y ago
  Why is that shocking? It's not just laundering the price fixing, it's laundering the guilt.
  - dkjaudyeqooe 3y ago
    Shocking that he figures that the right amount of empathy is zero (see toomuchtodo's comment).
    - ClumsyPilot 3y ago
      Seems fairly typical of software developers drunk on cool aid
- toomuchtodo 3y ago
  The developer in this case is the sociopath. Not uncommon.
  - Espressosaurus 3y ago
    It's a banality of evil situation for the developer and their entire chain of command.
- voidfunc 3y ago
  This is shocking? You're kidding right?
refurb 3y ago
But YieldStar is just automating what every landlord does anyways - looks at comparables. And large rental corporations can get pretty sophisticated in data analysis. So the FTC says "price fixing by algorithm is still price fixing". If I scrap rental data from a website and then determine my own rental price, is that price fixing? Doesn't seem to me.
- vineyardmike 3y ago
  What’s missing from your view is the scope. yield star is provided the same data to a large chunk of the market (in some rental markets). Going online and looking at comparables isn’t one company setting the price for every market participant.
  - tsimionescu 3y ago
    The scope isn't exactly what's important. Whether their selling to 80% of the market, 1% of the market, or even just to 2 competing landlords, what they're doing is still price fixing. The only thing that's legal is doing your own pricing research, using your own methods. You can hire a consultant to do this for you, but this burden then transfers to them: they can't consult for multiple competing businesses.
- heroprotagonist 3y ago
  Well, yes, if you continuously adjust your prices to match your competitors, rather than basing your changes on other factors (changes in maintenance expenses, inflation, property values as a whole, changes in area demographics like crime rate, school quality, walkability, availability of services, etc), and you do this at the same time they do, then that can be an indicator to the law that you're engaging in price fixing. But it's not the only indicator, and likely is insufficient on its own if you don't have significant enough share of the local market for changes in the prices you make to ripple outwards to smaller players. It's hard enough to get them to go after the big players, so they won't go after you. Usually price fixing requires multiple indicators. The law doesn't have to prove that Bob is talking with Alice and prove that they're discussing how to raise rents with each other. Prosecutors just need to demonstrate that Bob and Alice are both doing the same things, around the same time, which contribute towards artificial increases. As players get larger, their policies and procedures have greater impact over an area. Their practices get more scrutiny because of this greater impact. That's one (of many) reasons we see large companies spread themselves to multiple cities. While nobody bothers when someone who rents a dozen units uses algorithms to set their prices, they start to notice more when it's thousands of units all concentrated in a single area. When you get to a position where 4-5 companies can significantly inflate prices for a city with millions of people, how they behave is important. There are other tricks they use beyond third party algorithmic engagement. Consider this: If only 30% of the rental market engage in a laddered renewal scheme where they push renters towards always renewing within the same 2 month period of the year (via 10 or 14 month renewals that are more financially viable than 12 month renewals, or are simply the only option for renewal until the renter is within that two month period) and also add significant lease penalties for breaking out of that schedule, it takes less than a decade to reach a point where 90+% of rentals are renewing within the same two months every year. And what does that do? It artificially constricts supply (nobody releases their lease until they've found a new apartment, so many units are not displayed as available or need to be accepted sight-unseen) and artificially inflates demand (everybody is looking during this same time period). The result is artificially increased rent. Which has a side effect of inflating bubbles in the housing market. That may _seem_ good for property owners, as they can sell their houses for more. For a time, until the next pop that everyone blames on lenders with dodgy loan acceptance criteria or other criteria. Until then, homeowners pay inflated property taxes. They might overextend their mortgage with the new perceived value of their home that may eventually drop, etc. The point is: rental price fixing is real and deliberate, large players with greater impact know better but do it anyway, and this is not the only trick they use. It's just the one they've currently stepped far enough over the line on to get caught at.
FireBeyond 3y ago
> RealPage discourages bargaining with renters It's more than 'discourage'. RealPage considers (their own words) landlords to be "cheating" when they deviate from the recommended rates. Landlords are contractually obligated to follow RP recommendations 95%+ of the time: > Consistent with their agreement to impose rents generated by RealPage RM Software nearly all the time, Defendants agreed to limit overrides. For example, a RealPage LRO training document states: “Overrides should be few and far between.” Similarly, internal RealPage LRO training documents teach cartel members’ regional managers to beware of “Override Overload” or “rogue” leasing agents who too frequently override the LRO-generated pricing. > An internal presentation created by Defendant Greystar explicitly acknowledges that RealPage RM Software users should each seek to accept at least 95% of the RealPage-generated prices, emphasizing that “Discipline [o]f using revenue management increases more consistent outcomes.” > Former Greystar employees have similarly confirmed that negotiating rents other than those set by the RealPage RM Software was unacceptable. > Even where Participating Landlords do not enable auto-accept, most landlords cannot, on their own, charge rents other than those generated by RealPage’s RM Software— landlords can only “propose an override.” The landlord must then provide a written business justification for why they wish to depart from the RealPage-generated rent. RealPage is simple fucking cartel software.
- lupire 3y ago
  This is blatant flouting of the law in confidence that the government will collude. Elections have consequences.
Guest42 3y ago
The usage of this algorithm prevents the lowering of prices by simply building more units as the occupancy rate can simply be adjusted.
anomaloustho 3y ago
I worked on a direct competitor to YieldStar and we had very high parity to YieldStar before we were acquired by Realpage. At least, the discussions at my smaller company pre-acquisition about negotiating price was that one unfortunate mis-negotiation could result in a Fair Housing incident (legitimate or not) For example - Tenant 1 of racial profile X walks through the door and is a good negotiator. Tenant 2 of racial profile Y walks through the door and doesn’t negotiate. Tenant 2 finds out about Tenant 1 and opens a discrimination case under FHA. At least the culture at my smaller company was to do everything to steer the rental property away from potential Fair Housing incidents. However, we did learn while working on the competing YieldStar product that the simple act of removing the negotiations caused a big knock-on effect of creating a revenue increase. That kind of put a bad taste in our mouths, because we didn’t like the fact that it wasn’t the software that was causing the increase so much as the pre-requisite of stopping negotiations. We started experimenting with how to improve the algorithm even more and if it could create bigger gains that drove more product value than simply the “don’t negotiate” effect. But we were then acquired by Realpage. There are other ways these algorithms discriminate indirectly. For example, these algorithms tend to dial up prices around holidays like Christmas. And they do that because anyone who wants to sign a lease around the holidays has a much higher percentage chance of having some sort of life turmoil. (like maybe a family fight broke out or abuse happened on Christmas that caused someone to move out) From a business standpoint, the rental property would argue, “Someone in a bad way has a statistically more significant chance of also causing undo cost increases or breaking leases early.” — so the algorithm cranks up the prices to make up for potential costs. Dialed up at the level and scope of industry control that Realpage has gained over the years, then you encounter all kinds of other issues. The other perspective that these products take is they look at the short term rental industry like hotels and AirBnB. The business approaches by wondering, “Why can’t long term rentals be as technologically sophisticated as the short term rental industry. Let’s create a product that brings long term rentals automation into this decade” and the issue you run into is that short term rentals have 30x-100x the data points that you have. So it creates a gravity towards reaching into as many data points as you possibly can in order to make the product half as compelling, which includes reaching into your own internal data.
- wholinator2 3y ago
EasyMark 3y ago
It's amazing that they are providing tons and tons of public admissions on how they are colluding together to make an in "quacks like a duck" monopoly. I personally think this should be codified in law rather than court precedence, since that doesn't seem to mean much in the US "justice" system any longer.
- danielmarkbruce 3y ago
  Antitrust should be codified? The Sherman Act exists.

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SoftTalker 3y ago

Say I own a house, and want to rent it out. I'm naturally going to go onto rental search sites and look at what similar houses in the area are renting for, and probably ask something pretty close to that. I would assume this is not illegal because it's using public information and not colluding with any competitors on price. But subscribing to a service that uses an algorithm that does basically the same thing is (might be) illegal? Does it cross the line when I explicitly agree with competitors that we'll all use the same algorithm? Or if we're all just independently using the popular pricing service could that become illegal? Or if the service agreement requires me to not rent for less than their algorithm calculates?

10000truths 3y ago
What makes it collusion is the fact that others are using it as well, so the answer to your questions is yes. My understanding is that there's nothing wrong with building your own software that crawls public information and computes a price for you - the key thing is that it has to be your own, you can't distribute that software to others.
- jkic47 3y ago
  ate you sure it is that? after all, we all independently use the Kelley Blue book value of a car before we sell. I think there has to be some intentional and provable link that you and I agreed (colluded) to use a particular value and set a floor below which we wouldn't sell.
  - dkjaudyeqooe 3y ago
    > ate you sure it is that? after all, we all independently use the Kelley Blue book value of a car before we sell. That book doesn't price individual cars, only types and the price of the actual car is open to interpretation and usually negotiation.
    - slrainka 3y ago
      The key distinction lies in how YieldStar approaches setting rental prices compared to other systems. YieldStar not only recommends rental prices by analyzing the entire inventory it oversees but also incorporates a strategy that effectively eliminates the possibility of rent negotiation with potential tenants. This approach mirrors the dynamics of the prisoner’s dilemma, a situation in game theory where individuals may not cooperate, even if it’s in their best interest to do so. However, YieldStar transcends the Nash equilibrium—the point at which no participant can benefit by changing strategies if the others remain unchanged—by stripping tenants of any bargaining power. This ensures that the rent pricing strategy is firmly controlled, without the usual back-and-forth negotiation process.
      - dkjaudyeqooe 3y ago
        The only way you can productively refuse negotiation is by knowing the price is fixed (or you have the only supply), otherwise others will take your business.
        jprete 3y ago
        If it's widely believed that other landlords use the same pricing system as you, then that's exactly how landlords can refuse to negotiate.
aaomidi 3y ago
The issue is, you're one person doing this manually. That means there's also a ton of people who don't. This algorithm, unlike a single person, ends up taking over entire cities, which means now there is no supply & demand. There is supply, and all that supply is effectively the same number. Demand has no other choice other than meet the supply where they are. It's either that or being without a house.
- theragra 3y ago
  What if there are multiple vendors selling algorithms? Open source bots doing this? How many bots is a collusion?
  - polygamous_bat 3y ago
    Even if you’re talking to your next door landlord and coming up with a joint price, it’s collusion.
    - theragra 3y ago
      But it is not talking and agreeing. It is algorithm that determines some abstract price that makes sense in the current market. If me and my neighbor use the same formula from Wikipedia, is this also collusion?
  - dragonwriter 3y ago
    > What if there are multiple vendors selling algorithms? Then each vendor’s customers may constitute a small price fixing conspiracy, which is still illegal (price fixing doesn’t have a market threshold before it is illegal) but also a lot less effective, so it probably would be a transitory condition even if it didn’t get punished.
    - theragra 3y ago
      What about open source apps? Formulas from blog articles or Wikipedia?
dkjaudyeqooe 3y ago
1. I'm going to use this pricing service. 2. I'm not going to deviate from what it tells me. 3. I know everyone else (who matters) is using this service in the same way.
- hnburnsy 3y ago
  What amazed me was that sometimes the recommendation from the software was to not lease a unit to anyone.
  - bluGill 3y ago
    you should always have a unit not leased so that you can lease it to someone who needs it now and is willing to pay. If you only have a few units though you will never hit that point where the theory is worth the risk the desperite person comes along.
    - lupire 3y ago
      Why would that desperate person be willing to pay the xN premium needed to cover the idle time? Why would there be exactly one desperate person in the market? You need a curve, charging more as the space fills up. Desperate renters don't have infinite money. People with money are the people who are not desperate, because they have flexible options.
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letmeinhere 3y ago
The algorithm is not operating on public info, it is soliciting proprietary pricing and vacancy data that is not available to renters or regulators. That secretive information sharing is the basis of the whole scheme. And the collusion doesn't stop with this information hoarding; the pricing recommendations are as profitable as they are precisely because many property owners in a market are enacting them with the knowledge that a known quantity of their peers have no intent to undercut. Sure, someone can renege on that, but collusion doesn't require that you have an airtight legal contract to bind all parties; after all, such contracts are inherently illegal!
- jessriedel 3y ago
  > That secretive information sharing is the basis of the whole scheme. can you recommend a link that this describes this in detail?
  - karmajunkie 3y ago
    the link at the top of this thread does so.
    - jessriedel 3y ago
      It does not
  - colechristensen 3y ago
    https://www.propublica.org/article/doj-backs-tenants-price-fixing-case-big-landlords-real-estate-tech https://www.propublica.org/article/doj-backs-tenants-price-f... Contains links to an investigation and lawsuits where you can read DOJ complaints
    - jessriedel 3y ago
      Right, but I'm asking a more specific question: what is the secret info that they are sharing? Is it just the rents?
  - 3y ago
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turquoisevar 3y ago
This is why nuance and details are key in legal matters and where the sum is greater than the parts. Where the line gets drawn is often unclear and is often a matter of “I know it when I see it”. Just individually comparing prices isn’t an issue. What does become an issue is if (at least) all of the following are met. - You use an algorithm service does automates all of this - This algorithm uses both public and private data - The algorithm is ubiquitous and widely used by almost every relevant market player - The algorithm tells all users to not negotiate and the users abide by this recommendation - All of the above has a noticeable effect on the market to the detriment of a big demographic of market participants
- tsimionescu 3y ago
  Per the FTC filing, many of these are not relevant for deciding if illegal price fixing has occurred. It doesn't matter how the algorithm operates. If all landlords in an area publically agree that they will set rent prices at 400xx the price of a coke can, they are only using public information, but still engaged in price fixing. It doesn't matter how many people actually use the algorithm. If you try to start a cartel to do price fixing and only succeed in convincing two of your 50 competitors to participate, you've still engaged in illegal price fixing. It doesn't matter if individual price negotiation happens or not. If a bunch of companies agree to set the same list price, but also agree that they can offer deals to their customers, they are still engaging in illegal price fixing. It doesn't matter if the scheme actually succeeds in changing the prices. If two companies meet and agree to set prices at a certain value, but then they backstabber each other and undercut the agreed price, or simply other companies in the space who were not part of the scheme have too much market power to allow prices to change, the original companies still agreed to an illegal price fixing scheme and are guilty. All of the above will probably have a massive impact on the amount of damages and so on. But they have no bearing on the verdict, as the FTC lays out at length in the filing they link from the article. And this is not speculation, it is established case law.
  - chii 3y ago
    > meet and agree to set prices at a certain value so the question becomes what it means to "meet and agree". If these companies never communicated, and all came to the same conclusion of a price floor (that happens to all be the same), then how can it be price fixing? To me, price fixing require that the parties agree (explicitly, or implicitly with punishment) to _not_ lower the price regardless of the lack of sales. It is not enough to have the same price (however that price comes about is irrelevant).
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HumblyTossed 3y ago
> I'm naturally going to go onto rental search sites and look at what similar houses in the area are renting for, and probably ask something pretty close to that. Or, Say I own and house, and I want to rent it out. I would calculate how much I would have to charge for rent for it to be worthwhile to me. Why would I care what anyone else is charging?
- pylua 3y ago
  Because you want to maximize your profit and get the most from your investment. You also want to see, generally speaking, if it is even reasonable that anyone would to rent out your house at that price
- zymhan 3y ago
  > Why would I care what anyone else is charging? Then you probably shouldn't be participating in this discussion.
- bikezen 3y ago
  You have a duty to your family/pets/shareholders to extract maximum value clearly. /s I added /s because dear lord this thread is full of people who think its true. Housing shouldnt be an investment venue when we have millions unhoused.
  - codexb 3y ago
    That's like saying people shouldn't invest in farms, or pharmacies, or water pumps because there are poor or mentally disabled people who have trouble securing and affording those products.
    - lupire 3y ago
      The difference is whether the good in question is being produced by investment, or monopolized by investment. This has been enshrined in law for over a century. You want to make more money in housing? Build more housing.
- 3y ago
lowbloodsugar 3y ago
If you own a house and it sits empty for a year because an algorithm told you you could get more for it, you’re an idiot. If you use an algorithm to effectively collude with others and you fail to rent your house but keep rents artificially high, then you an idiot and a criminal.
- bluGill 3y ago
  If you own 100 houses to rent it is already known you should have a few empty at all times.
- lozenge 3y ago
  I don't think it suggested leaving places empty for a year. Rather they wanted to spread out lease renewals. If everybody's lease ends in September then your property is competing with a lot of others. Whereas if you keep it empty until February then offer a 12 month lease, your renter will have much fewer choices and is more likely to stay (despite your demand of a high rent increase).
- FireBeyond 3y ago
  This generally isn't targeted at single property homeowners/landlords. RealPage says if you have a portfolio of apartments, that following their recommendations will generate you more overall, regardless of occupancy. Their algorithm literally is "it is better to rent out 19 units at $X, when the demand will drop to 0.94X if there's 20 available". And it can do so because it happens to know that the other 80 units on the market with other landlords will be following the same rule.
ThrustVectoring 3y ago
You're over-emphasizing the methods by which these people are price-fixing, rather than the result. The result is a price higher than the market-clearing price that is low enough to find tenancy for all housing. Any scheme to generate excess profit by raising rent above this price is (or ought to be) illegal, whether it's colluding to do price fixing, using some algorithm to price-fix, or monopolizing the market.
- closeparen 3y ago
  All store owners should be jailed, then, since the presence of inventory on their shelves is proof of a scheme to generate excess profit by charging higher than market-clearing prices - or it would have sold already.
  - bluGill 3y ago
    We only know current inventory. As I write this in early March stores are starting to order their halloween candy (the orders need to be in by somethime in april). You do not know what candy your competitor will order, but this is relavant to sales since you will price match their ads and in turn lower priced candy will sell in greater quantities.
- tsimionescu 3y ago
  The FTC is claiming the exact opposite, basically. Colluding to fix prices, by any means, is illegal. It is still illegal even if the scheme is only followed by a handful of those who "agreed" to it. It is still illegal if it utterly fails to control the price and thus has no material impact. It's like trying to scam people. You're not allowed to try to defraud people. It doesn't matter if your scam is so bad that it would cost you more money to execute than you would get out of it, and it doesn't matter if no one engages with your scam at all: what you were doing is still illegal.
  - lupire 3y ago
    FTC would not be interested if the scheme hypothetically somehow had no effect. They said that it is still be illegal even if it is imperfect. Empirical reality still gets a vote, for pragmatic reasons.
nkrisc 3y ago
I won’t belabor the point others have made, but if the end result is price fixing, it’s price fixing. The law isn’t code and it is open to interpretation and intent and outcomes matter, sometimes more than the methods.
- lupire 3y ago
  So the law is an AI model :-)
hnburnsy 3y ago
Prices on rental search sites are wishes not actually leased costs and would be missing things like the term, pets, and incentives.
FireBeyond 3y ago
The service also requires you to go with their recommendation 95% of the time, and at a certain point requires you to go with their recommendation, and you can only "request an override" that RP can allow or deny at their discretion (of course, they can't enforce it, other than to kick you off their service, with no refund).
bostik 3y ago
Subscribing to a pricing data service: legal. Using data feed to guide pricing and set initial figures: legal. Agreeing, either implicitly or explicitly, to let the pricing data feed set the price floor: collusion. Leaving units unsold and refusing to lower the price despite insufficient demand: usually a bad business decision, possibly indicator of a market failure. Leaving units unsold to maintain agreed-upon price floor despite insufficient demand: collusion, market manipulation. Congratulations, you are a cartel.
- ethbr1 3y ago
  I guess the other way of looking at it is: What is the value of subscribing to a pricing service where you have no idea how your competitors are using the numbers (over-, match-, under-price)? Versus what is the value of same, if you know your competitors never under-price? That value difference is the value of running a cartel.
- hinkley 3y ago
  But we are disrupting markets! Doesn’t that make us trendy and forward thinking??
mu53 3y ago
Pulled from the Sherman Act, Section 1. Available on wikipedia > Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal It is written in a general way to catch all problems going into the future. The problem is translating this to case law. Often judges ask the question "Is this bad for the consumer?" If rents are rising faster than inflation with more consumers becoming homeless citing cost of rent while vacancy rates are increasing, the market is bad for the consumer and the country.
cyanydeez 3y ago
it was illegal. making a mechanical turk to kill people doesn't free the turk from a crime.
kevin_thibedeau 3y ago
Your acting on independent research doesn't distort the market. If you directly or indirectly control pricing in 30% of housing stock you can drive prices up incrementally because you have influence on every lease offer in that population.
MagicMoonlight 3y ago
Imagine you are Microsoft and you want to collude with Amazon to rig compute prices. You both agree to follow the recommendations of an unbiased Amasoft Price Calculator tool. This tool uses an advanced algorithm looking at thousands of data points and always returns the same price, $10000 per month. You both follow this independent tool and end up pricing it the same. Is this a fair system? You’re both subscribing to an algorithm.
ametrau 3y ago
You can’t be part of a price fixing cartel no.
unethical_ban 3y ago
You're missing a critical point, which is that using this software requires agreeing to follow its recommendation (else penalty) and to give them access to your pricing.

dkjaudyeqooe 3y ago

> One of the algorithm’s developers told ProPublica that leasing agents had “too much empathy” compared to computer generated pricing." That's true by definition. What's shocking is that the developers want to replace leasing agents with a sociopath.

Espressosaurus 3y ago
Why is that shocking? It's not just laundering the price fixing, it's laundering the guilt.
- dkjaudyeqooe 3y ago
  Shocking that he figures that the right amount of empathy is zero (see toomuchtodo's comment).
  - ClumsyPilot 3y ago
    Seems fairly typical of software developers drunk on cool aid
toomuchtodo 3y ago
The developer in this case is the sociopath. Not uncommon.
- Espressosaurus 3y ago
  It's a banality of evil situation for the developer and their entire chain of command.
voidfunc 3y ago
This is shocking? You're kidding right?

refurb 3y ago

But YieldStar is just automating what every landlord does anyways - looks at comparables. And large rental corporations can get pretty sophisticated in data analysis. So the FTC says "price fixing by algorithm is still price fixing". If I scrap rental data from a website and then determine my own rental price, is that price fixing? Doesn't seem to me.

vineyardmike 3y ago
What’s missing from your view is the scope. yield star is provided the same data to a large chunk of the market (in some rental markets). Going online and looking at comparables isn’t one company setting the price for every market participant.
- tsimionescu 3y ago
  The scope isn't exactly what's important. Whether their selling to 80% of the market, 1% of the market, or even just to 2 competing landlords, what they're doing is still price fixing. The only thing that's legal is doing your own pricing research, using your own methods. You can hire a consultant to do this for you, but this burden then transfers to them: they can't consult for multiple competing businesses.
heroprotagonist 3y ago
Well, yes, if you continuously adjust your prices to match your competitors, rather than basing your changes on other factors (changes in maintenance expenses, inflation, property values as a whole, changes in area demographics like crime rate, school quality, walkability, availability of services, etc), and you do this at the same time they do, then that can be an indicator to the law that you're engaging in price fixing. But it's not the only indicator, and likely is insufficient on its own if you don't have significant enough share of the local market for changes in the prices you make to ripple outwards to smaller players. It's hard enough to get them to go after the big players, so they won't go after you. Usually price fixing requires multiple indicators. The law doesn't have to prove that Bob is talking with Alice and prove that they're discussing how to raise rents with each other. Prosecutors just need to demonstrate that Bob and Alice are both doing the same things, around the same time, which contribute towards artificial increases. As players get larger, their policies and procedures have greater impact over an area. Their practices get more scrutiny because of this greater impact. That's one (of many) reasons we see large companies spread themselves to multiple cities. While nobody bothers when someone who rents a dozen units uses algorithms to set their prices, they start to notice more when it's thousands of units all concentrated in a single area. When you get to a position where 4-5 companies can significantly inflate prices for a city with millions of people, how they behave is important. There are other tricks they use beyond third party algorithmic engagement. Consider this: If only 30% of the rental market engage in a laddered renewal scheme where they push renters towards always renewing within the same 2 month period of the year (via 10 or 14 month renewals that are more financially viable than 12 month renewals, or are simply the only option for renewal until the renter is within that two month period) and also add significant lease penalties for breaking out of that schedule, it takes less than a decade to reach a point where 90+% of rentals are renewing within the same two months every year. And what does that do? It artificially constricts supply (nobody releases their lease until they've found a new apartment, so many units are not displayed as available or need to be accepted sight-unseen) and artificially inflates demand (everybody is looking during this same time period). The result is artificially increased rent. Which has a side effect of inflating bubbles in the housing market. That may _seem_ good for property owners, as they can sell their houses for more. For a time, until the next pop that everyone blames on lenders with dodgy loan acceptance criteria or other criteria. Until then, homeowners pay inflated property taxes. They might overextend their mortgage with the new perceived value of their home that may eventually drop, etc. The point is: rental price fixing is real and deliberate, large players with greater impact know better but do it anyway, and this is not the only trick they use. It's just the one they've currently stepped far enough over the line on to get caught at.

FireBeyond 3y ago

> RealPage discourages bargaining with renters It's more than 'discourage'. RealPage considers (their own words) landlords to be "cheating" when they deviate from the recommended rates. Landlords are contractually obligated to follow RP recommendations 95%+ of the time: > Consistent with their agreement to impose rents generated by RealPage RM Software nearly all the time, Defendants agreed to limit overrides. For example, a RealPage LRO training document states: “Overrides should be few and far between.” Similarly, internal RealPage LRO training documents teach cartel members’ regional managers to beware of “Override Overload” or “rogue” leasing agents who too frequently override the LRO-generated pricing. > An internal presentation created by Defendant Greystar explicitly acknowledges that RealPage RM Software users should each seek to accept at least 95% of the RealPage-generated prices, emphasizing that “Discipline [o]f using revenue management increases more consistent outcomes.” > Former Greystar employees have similarly confirmed that negotiating rents other than those set by the RealPage RM Software was unacceptable. > Even where Participating Landlords do not enable auto-accept, most landlords cannot, on their own, charge rents other than those generated by RealPage’s RM Software— landlords can only “propose an override.” The landlord must then provide a written business justification for why they wish to depart from the RealPage-generated rent. RealPage is simple fucking cartel software.

lupire 3y ago
This is blatant flouting of the law in confidence that the government will collude. Elections have consequences.

Guest42 3y ago

The usage of this algorithm prevents the lowering of prices by simply building more units as the occupancy rate can simply be adjusted.

anomaloustho 3y ago

I worked on a direct competitor to YieldStar and we had very high parity to YieldStar before we were acquired by Realpage. At least, the discussions at my smaller company pre-acquisition about negotiating price was that one unfortunate mis-negotiation could result in a Fair Housing incident (legitimate or not) For example - Tenant 1 of racial profile X walks through the door and is a good negotiator. Tenant 2 of racial profile Y walks through the door and doesn’t negotiate. Tenant 2 finds out about Tenant 1 and opens a discrimination case under FHA. At least the culture at my smaller company was to do everything to steer the rental property away from potential Fair Housing incidents. However, we did learn while working on the competing YieldStar product that the simple act of removing the negotiations caused a big knock-on effect of creating a revenue increase. That kind of put a bad taste in our mouths, because we didn’t like the fact that it wasn’t the software that was causing the increase so much as the pre-requisite of stopping negotiations. We started experimenting with how to improve the algorithm even more and if it could create bigger gains that drove more product value than simply the “don’t negotiate” effect. But we were then acquired by Realpage. There are other ways these algorithms discriminate indirectly. For example, these algorithms tend to dial up prices around holidays like Christmas. And they do that because anyone who wants to sign a lease around the holidays has a much higher percentage chance of having some sort of life turmoil. (like maybe a family fight broke out or abuse happened on Christmas that caused someone to move out) From a business standpoint, the rental property would argue, “Someone in a bad way has a statistically more significant chance of also causing undo cost increases or breaking leases early.” — so the algorithm cranks up the prices to make up for potential costs. Dialed up at the level and scope of industry control that Realpage has gained over the years, then you encounter all kinds of other issues. The other perspective that these products take is they look at the short term rental industry like hotels and AirBnB. The business approaches by wondering, “Why can’t long term rentals be as technologically sophisticated as the short term rental industry. Let’s create a product that brings long term rentals automation into this decade” and the issue you run into is that short term rentals have 30x-100x the data points that you have. So it creates a gravity towards reaching into as many data points as you possibly can in order to make the product half as compelling, which includes reaching into your own internal data.

wholinator2 3y ago

EasyMark 3y ago

It's amazing that they are providing tons and tons of public admissions on how they are colluding together to make an in "quacks like a duck" monopoly. I personally think this should be codified in law rather than court precedence, since that doesn't seem to mean much in the US "justice" system any longer.

danielmarkbruce 3y ago
Antitrust should be codified? The Sherman Act exists.