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I lived in a building that was owned by a hedge fund and used algorithmic pricing. It was frustrating to know the vacancy rate in the building, how desperate th

I lived in a building that was owned by a hedge fund and used algorithmic pricing. It was frustrating to know the vacancy rate in the building, how desperate the sales people were for residents, and still be told that rent was going up hundreds of dollars a month because of demand in the region. Another thing they did was to offer lower rent if you moved into a unit that was vacant. They ”incentivized” people to move every year instead of just increasing the rent a reasonable amount. I’m talking rent going up $500-$1,000/month unless you moved into the identical unit next door. Most of the people in the build paid the increases but we were young so we moved. Our first year we lived in a small 1br. When the lease came up they wanted to increase our rent by $600/month. We opted to move into a huge 2br with limited light that had been vacant for a year or two. When our lease on that one came up they wanted to more than double our rent because there was such high demand for the unit. We were the demand.

scotty79 3y ago
I don't know how regulators can look at this number of vacancies and conclude that yes, the taxation on property with vaccancies is as high as it should be.
- lotsofpulp 3y ago
  Should be a formula that keeps increasing the tax liability per empty month, so eventually the owner has to dump it for zero or give it back to the government.
  - bluGill 3y ago
    You want a number of empty units in your city so that if you want to move there is a place to move to. No empty units means someone does without. You don't want too many empty units of course. some is needed. this price fixing is partially about units not even for rent which is a different problem you don't want. (but you want some units not for rent while they remodel)
- screenobobeano 3y ago
  I am really a proponent of the Chinese system. I’m a real estate investor and this “free market” isn’t going to last much longer since owning vacant homes will net you more than virtually anything else you could do legally. Real Estate is a free money machine, and it won’t stop until we adopt realistic government controlled system.
  - carom 3y ago
    What is the Chinese system?
    - deleted 3y ago
      [deleted]
    - trimethylpurine 3y ago
      The Chinese system restricts foreign nation state actors from buying everything so they will not be able to do what China is doing to the US. The US has only just started writing policies to address that (for example: [1]), probably because for so many decades Americans wanted to believe that China was an ally, or at least a well meaning business partner. China proves that capitalism doesn't work by destroying it. [1] https://www.faegredrinker.com/en/insights/publications/2024/1/influx-of-state-statutes-regulating-foreign-ownership-of-us-real-estate https://www.faegredrinker.com/en/insights/publications/2024/...
      - xbmcuser 3y ago
        China is not doing anything to the US, western countries were willing to hide the black money of countries before as it helped their economies. As China and other countries got richer the amount of money those people started bringing and putting into the real estate of western cities in the world exploded. The property market crash of 2008 and low interest rates made the situation worse. Now people in the west are crying about property prices but if they stopped allowing in black money from countries they would not face the problem they do. If they can find out about terror financing etc then they for sure can find all the corruption and black money coming into their countries/cities.
- pas 3y ago
  what vacancy numbers are we talking about exactly? and how high are they, and how did they change over time?
  - vineyardmike 3y ago
    Not OP but I had a similar experience. I lived in floor 30 of a “luxury” skyscraper in Seattle built after ~2015. We had an algorithm for pricing according to the landlord and the class action letter we received. Amazing water views and city views. Clearly desirable housing in a city flush with rich people and a massive housing shortage. I was the only occupant on the floor and the only tenant at the time ever to live in that unit. They tried to raise my rent like $1000/m when lease was up. We paid it since we had just gotten a raise. Next lease renewal was about $1000 again and we moved out because $2k extra was just too far above comparable units nearby. They literally offered us a Starbucks gift card to stay. We could see the other vacant units listed on the buildings website and they were always priced way above comparable units in neighboring buildings. Oh and to directly answer your question, I’m guessing the building was never more than half full. The mail room was never full, and the parking garage had about 20/100 spots in use.
    - pas 3y ago
      Thanks for the details! I'm asking because the overall rate is historically super low, and that kind of behavior from the landlords seems ... bananas - to use the terminus technicus. (But of course, maybe during ZIRP it was not a problem to try to experiment with various crazy - and inhumane - pricing schemes.) https://fred.stlouisfed.org/series/RHVRUSQ156N https://fred.stlouisfed.org/series/RHVRUSQ156N https://fred.stlouisfed.org/series/EVACANTUSQ176N https://fred.stlouisfed.org/series/EVACANTUSQ176N (estimated absolute number) https://fred.stlouisfed.org/series/EOFFMARUSQ176N https://fred.stlouisfed.org/series/EOFFMARUSQ176N (held off the market)
      - vineyardmike 3y ago
        Yea it was crazy. The data you showed says there were 7 million units held off-market. My building had only a few hundred tops. I wonder if there is more to the story though. I think that the building would be less desirable if it was full. Skyscrapers already have long lines for elevators, and common spaces get a lot of wear and tear from so many people in small areas. I wonder if they keep it below capacity while they can charge a “newness premium”, and once that fades they add extra units to the market to increase revenue.
- importantbrian 3y ago
  Obligatory Georgism callout, but a high land value tax would solve this issue. Landlords would be forced to put the property to productive use, and it discourages the kind of speculative land holding that these companies are engaging in.
  - leereeves 3y ago
    But that tax would be passed on to renters, increasing rent for everyone. Unless you're talking about a tax on vacant properties.
    - db48x 3y ago
      Yes, but adopting Georgism would mean eliminating income taxes as well. In principle most people should end up paying less in taxes (because they don’t live in a densely–populated area, or because they live in a dense area but are in an apartment instead of a house on a whole acre), while the overall tax revenue stays the same.
    - antonok 3y ago
      It wouldn't get passed on. Without land value tax, holding real estate is a good enough investment on its own that rent prices can be left artificially inflated. LVT puts pressure on landlords to actually earn back the value of the property to avoid losing money. In practice, that means offering competitive pricing. This is a solid in-depth explanation, if you're interested: https://www.gameofrent.com/content/can-lvt-be-passed-on-to-tenants https://www.gameofrent.com/content/can-lvt-be-passed-on-to-t...
      - leereeves 3y ago
        But all landlords would pay the tax, and none of them would want to lower prices below their own costs. If it becomes impossible to rent properties profitably, then eventually there would just be fewer rentals available.
        djokkataja 3y ago
- pitaj 3y ago
  Higher vacancy rates are associated with lower rents and lower house prices. Vacancies are at the lowest rate in years in high demand areas.
- ikiris 3y ago
  Because a large percentage of them have a fundamental belief that any taxation is theft.
ClumsyPilot 3y ago
> how desperate the sales people were for residents, and still be told that rent was going up hundreds of dollars a month because of demand in the region This literally sounds fraudulent I have a hypothesis, that the reason for many ailments in Western economies is that in the past 20-30 years we have created a lot of parasitic, highly-sophisticated economic fraud, and regulators have not caught up to it yet.
- harvey9 3y ago
  Many legislators are also residential landlords. Do not expect those regulators to be catching up any time soon.
- passwordoops 3y ago
  Not that sophisticated. The tech industry in particular celebrates rentierism and middle men while calling it a "service". Any other way to describe darlings like Uber, AirBNB, what Amazon became, many SaaS (looking at you MSFT Office) is simply disingenuous
  - CatWChainsaw 3y ago
    It would be a much better world if we could get rid of rentierism.
- lm28469 3y ago
  > I have a hypothesis Well, it's more than an hypothesis, there are books about it: https://www.penguin.co.uk/books/451795/technofeudalism-by-varoufakis-yanis/9781847927279 https://www.penguin.co.uk/books/451795/technofeudalism-by-va...
sheepybloke 3y ago
This is literally what I'm facing right now. We were hoping to stay in our place for one more year, but the company is raising our rent by 10% while at the same time are running a special for a free month's rent. Every place I've rent from has done this, raising rent at least 5% to 10%. I just want one place where I can stay and try to save up money for a house.
- kurthr 3y ago
  If both of you aren't on the lease, alternate between the two of you. At least you won't have to move very far. When I was just out of school I did this in a large complex with my wife more than once (we had different last names and used her parents address for mail). The first time, we didn't even have to move, because she got the pick of open apartments... one of which was ours. We worried they would want to paint it, but I guess since I'd only had a it a year, they didn't bother. The Sales person was happy because they got commission anyway, and we got a free months rent rather than paying an extra month's rent in increases.
- ikekkdcjkfke 3y ago
  Do like the EU, group up and collective bargain. Strike, lock-out etc. are all concepts explored over hundred years ago
  - rocqua 3y ago
    I hope it would work, but fear evictions and police intervention would be brutal enough to quash the will to fight.
    - madsbuch 3y ago
      EU citizens love this attitude from Americans as they invest in REITs while sitting in their cheaper apartments. The EU states love it as they got to tax that income from US REITs. In Denmark we have "Bopælspligt" meaning that an owner of an apartment is obligated to have someone living in the apartment. While i know this is detrimental to the US mentality is forces a free market on real estate and is, IMHO, the only way you can ensure a fair rental market without rent control. As a result real estate in Copenhagen is cheap enough that most working people in Denmark are able to buy (albeit that being a small apartment).
taylorhou 3y ago
Unfortunately this is because they know there's a massive cost to moving and the operators are pushing the rent as much as they can for "convenience"... Regardless of external demand.
xnx 3y ago
> It was frustrating to know the vacancy rate in the building, Isn't the ideal vacancy rate always one unit? Any more than 1 unit and you could be collecting more money. Any less than 1 unit and you may be underpricing.
- Tolaire 3y ago
  Not if landlords are colluding to drive rents up.
HDThoreaun 3y ago
Jacking up the price on renewal is the first move any landlord who is looking to maximize profits will do because most people really dislike moving. Plenty of people will accept the rent increase instead of the hassle of moving, allowing you to charge above market rates..
- benhurmarcel 3y ago
  I’m surprised this is legal in the US. In a lot of European countries, the landlord cannot raise the rent as he wants, there’s a maximum per year (usually a bit lower than official inflation).
xyzzyz 3y ago
What you describe is not really an issue with algorithmic pricing per se, but rather that the particular algorithm at hand is shit.
- miiiiiike 3y ago
  I know. Like I said, this was on top of the algorithmic pricing.
EasyMark 3y ago
Maybe it's obvious to people smarter than me but what possible advantage could there be for them to move people to a new apartment, or was it simply the apartment managers letting you know that was a way to save some money and beat the algorithm?
- data-ottawa 3y ago
  Some people will opt to pay instead of move, they can take down the worse apartment listing and relist the one that draws people in to the building, and I’m sure it’s an easy way to pad some average time on the market stat for their listings to make themselves look better to investors and real estate websites.

scotty79 3y ago

I don't know how regulators can look at this number of vacancies and conclude that yes, the taxation on property with vaccancies is as high as it should be.

lotsofpulp 3y ago
Should be a formula that keeps increasing the tax liability per empty month, so eventually the owner has to dump it for zero or give it back to the government.
- bluGill 3y ago
  You want a number of empty units in your city so that if you want to move there is a place to move to. No empty units means someone does without. You don't want too many empty units of course. some is needed. this price fixing is partially about units not even for rent which is a different problem you don't want. (but you want some units not for rent while they remodel)
screenobobeano 3y ago
I am really a proponent of the Chinese system. I’m a real estate investor and this “free market” isn’t going to last much longer since owning vacant homes will net you more than virtually anything else you could do legally. Real Estate is a free money machine, and it won’t stop until we adopt realistic government controlled system.
- carom 3y ago
  What is the Chinese system?
  - deleted 3y ago
    [deleted]
  - trimethylpurine 3y ago
    The Chinese system restricts foreign nation state actors from buying everything so they will not be able to do what China is doing to the US. The US has only just started writing policies to address that (for example: [1]), probably because for so many decades Americans wanted to believe that China was an ally, or at least a well meaning business partner. China proves that capitalism doesn't work by destroying it. [1] https://www.faegredrinker.com/en/insights/publications/2024/1/influx-of-state-statutes-regulating-foreign-ownership-of-us-real-estate https://www.faegredrinker.com/en/insights/publications/2024/...
    - xbmcuser 3y ago
      China is not doing anything to the US, western countries were willing to hide the black money of countries before as it helped their economies. As China and other countries got richer the amount of money those people started bringing and putting into the real estate of western cities in the world exploded. The property market crash of 2008 and low interest rates made the situation worse. Now people in the west are crying about property prices but if they stopped allowing in black money from countries they would not face the problem they do. If they can find out about terror financing etc then they for sure can find all the corruption and black money coming into their countries/cities.
pas 3y ago
what vacancy numbers are we talking about exactly? and how high are they, and how did they change over time?
- vineyardmike 3y ago
  Not OP but I had a similar experience. I lived in floor 30 of a “luxury” skyscraper in Seattle built after ~2015. We had an algorithm for pricing according to the landlord and the class action letter we received. Amazing water views and city views. Clearly desirable housing in a city flush with rich people and a massive housing shortage. I was the only occupant on the floor and the only tenant at the time ever to live in that unit. They tried to raise my rent like $1000/m when lease was up. We paid it since we had just gotten a raise. Next lease renewal was about $1000 again and we moved out because $2k extra was just too far above comparable units nearby. They literally offered us a Starbucks gift card to stay. We could see the other vacant units listed on the buildings website and they were always priced way above comparable units in neighboring buildings. Oh and to directly answer your question, I’m guessing the building was never more than half full. The mail room was never full, and the parking garage had about 20/100 spots in use.
  - pas 3y ago
    Thanks for the details! I'm asking because the overall rate is historically super low, and that kind of behavior from the landlords seems ... bananas - to use the terminus technicus. (But of course, maybe during ZIRP it was not a problem to try to experiment with various crazy - and inhumane - pricing schemes.) https://fred.stlouisfed.org/series/RHVRUSQ156N https://fred.stlouisfed.org/series/RHVRUSQ156N https://fred.stlouisfed.org/series/EVACANTUSQ176N https://fred.stlouisfed.org/series/EVACANTUSQ176N (estimated absolute number) https://fred.stlouisfed.org/series/EOFFMARUSQ176N https://fred.stlouisfed.org/series/EOFFMARUSQ176N (held off the market)
    - vineyardmike 3y ago
      Yea it was crazy. The data you showed says there were 7 million units held off-market. My building had only a few hundred tops. I wonder if there is more to the story though. I think that the building would be less desirable if it was full. Skyscrapers already have long lines for elevators, and common spaces get a lot of wear and tear from so many people in small areas. I wonder if they keep it below capacity while they can charge a “newness premium”, and once that fades they add extra units to the market to increase revenue.
importantbrian 3y ago
Obligatory Georgism callout, but a high land value tax would solve this issue. Landlords would be forced to put the property to productive use, and it discourages the kind of speculative land holding that these companies are engaging in.
- leereeves 3y ago
  But that tax would be passed on to renters, increasing rent for everyone. Unless you're talking about a tax on vacant properties.
  - db48x 3y ago
    Yes, but adopting Georgism would mean eliminating income taxes as well. In principle most people should end up paying less in taxes (because they don’t live in a densely–populated area, or because they live in a dense area but are in an apartment instead of a house on a whole acre), while the overall tax revenue stays the same.
  - antonok 3y ago
    It wouldn't get passed on. Without land value tax, holding real estate is a good enough investment on its own that rent prices can be left artificially inflated. LVT puts pressure on landlords to actually earn back the value of the property to avoid losing money. In practice, that means offering competitive pricing. This is a solid in-depth explanation, if you're interested: https://www.gameofrent.com/content/can-lvt-be-passed-on-to-tenants https://www.gameofrent.com/content/can-lvt-be-passed-on-to-t...
    - leereeves 3y ago
      But all landlords would pay the tax, and none of them would want to lower prices below their own costs. If it becomes impossible to rent properties profitably, then eventually there would just be fewer rentals available.
      - djokkataja 3y ago
pitaj 3y ago
Higher vacancy rates are associated with lower rents and lower house prices. Vacancies are at the lowest rate in years in high demand areas.
ikiris 3y ago
Because a large percentage of them have a fundamental belief that any taxation is theft.

ClumsyPilot 3y ago

> how desperate the sales people were for residents, and still be told that rent was going up hundreds of dollars a month because of demand in the region This literally sounds fraudulent I have a hypothesis, that the reason for many ailments in Western economies is that in the past 20-30 years we have created a lot of parasitic, highly-sophisticated economic fraud, and regulators have not caught up to it yet.

harvey9 3y ago
Many legislators are also residential landlords. Do not expect those regulators to be catching up any time soon.
passwordoops 3y ago
Not that sophisticated. The tech industry in particular celebrates rentierism and middle men while calling it a "service". Any other way to describe darlings like Uber, AirBNB, what Amazon became, many SaaS (looking at you MSFT Office) is simply disingenuous
- CatWChainsaw 3y ago
  It would be a much better world if we could get rid of rentierism.
lm28469 3y ago
> I have a hypothesis Well, it's more than an hypothesis, there are books about it: https://www.penguin.co.uk/books/451795/technofeudalism-by-varoufakis-yanis/9781847927279 https://www.penguin.co.uk/books/451795/technofeudalism-by-va...

sheepybloke 3y ago

This is literally what I'm facing right now. We were hoping to stay in our place for one more year, but the company is raising our rent by 10% while at the same time are running a special for a free month's rent. Every place I've rent from has done this, raising rent at least 5% to 10%. I just want one place where I can stay and try to save up money for a house.

kurthr 3y ago
If both of you aren't on the lease, alternate between the two of you. At least you won't have to move very far. When I was just out of school I did this in a large complex with my wife more than once (we had different last names and used her parents address for mail). The first time, we didn't even have to move, because she got the pick of open apartments... one of which was ours. We worried they would want to paint it, but I guess since I'd only had a it a year, they didn't bother. The Sales person was happy because they got commission anyway, and we got a free months rent rather than paying an extra month's rent in increases.
ikekkdcjkfke 3y ago
Do like the EU, group up and collective bargain. Strike, lock-out etc. are all concepts explored over hundred years ago
- rocqua 3y ago
  I hope it would work, but fear evictions and police intervention would be brutal enough to quash the will to fight.
  - madsbuch 3y ago
    EU citizens love this attitude from Americans as they invest in REITs while sitting in their cheaper apartments. The EU states love it as they got to tax that income from US REITs. In Denmark we have "Bopælspligt" meaning that an owner of an apartment is obligated to have someone living in the apartment. While i know this is detrimental to the US mentality is forces a free market on real estate and is, IMHO, the only way you can ensure a fair rental market without rent control. As a result real estate in Copenhagen is cheap enough that most working people in Denmark are able to buy (albeit that being a small apartment).

taylorhou 3y ago

Unfortunately this is because they know there's a massive cost to moving and the operators are pushing the rent as much as they can for "convenience"... Regardless of external demand.

xnx 3y ago

> It was frustrating to know the vacancy rate in the building, Isn't the ideal vacancy rate always one unit? Any more than 1 unit and you could be collecting more money. Any less than 1 unit and you may be underpricing.

Tolaire 3y ago
Not if landlords are colluding to drive rents up.

HDThoreaun 3y ago

Jacking up the price on renewal is the first move any landlord who is looking to maximize profits will do because most people really dislike moving. Plenty of people will accept the rent increase instead of the hassle of moving, allowing you to charge above market rates..

benhurmarcel 3y ago
I’m surprised this is legal in the US. In a lot of European countries, the landlord cannot raise the rent as he wants, there’s a maximum per year (usually a bit lower than official inflation).

xyzzyz 3y ago

What you describe is not really an issue with algorithmic pricing per se, but rather that the particular algorithm at hand is shit.

miiiiiike 3y ago
I know. Like I said, this was on top of the algorithmic pricing.

EasyMark 3y ago

Maybe it's obvious to people smarter than me but what possible advantage could there be for them to move people to a new apartment, or was it simply the apartment managers letting you know that was a way to save some money and beat the algorithm?

data-ottawa 3y ago
Some people will opt to pay instead of move, they can take down the worse apartment listing and relist the one that draws people in to the building, and I’m sure it’s an easy way to pad some average time on the market stat for their listings to make themselves look better to investors and real estate websites.