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But YieldStar is just automating what every landlord does anyways - looks at comparables. And large rental corporations can get pretty sophisticated in data an

by 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.
- tsimionescu 3y ago
  > 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. While you're right about how regulators typically approach this, it's also important to note that the converse is also true. That is, if they happen to get clear proof that Alice and Bob agreed together to raise rents, then it doesn't matter if they actually succeeded in increasing rents in the area, and it doesn't even matter if they didn't follow through with the agreement: the agreement itself was illegal, and they would get an easy win in court (though damages may be low if the material impact was low, so the case may still not be worth pursuing). It is typically very rare for such direct evidence of collusion to exist, and thus indirect evidence like you suggest is normally how this is investigated. However, RealPage and the others here have provided this evidence directly: the way their price recommendation service is structured, the terms and conditions and so on, constitute direct evidence of an explicit attempt at price fixing. So, even if it turned out that all of landlords participating in this scheme actually "cheated" the price recommendation algorithm, and even if it turned out that rents went down or stayed the same when RealPage moved in, they would still be guilty of price fixing, per the FTC.
bcrosby95 3y ago
If you scrape rental data, then send an email to every person renting a unit saying "I recommend you allow your unit to sit vacant rather than renting below this price", that would be price fixing.

by refurb 3y ago

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.

tsimionescu 3y ago
> 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. While you're right about how regulators typically approach this, it's also important to note that the converse is also true. That is, if they happen to get clear proof that Alice and Bob agreed together to raise rents, then it doesn't matter if they actually succeeded in increasing rents in the area, and it doesn't even matter if they didn't follow through with the agreement: the agreement itself was illegal, and they would get an easy win in court (though damages may be low if the material impact was low, so the case may still not be worth pursuing). It is typically very rare for such direct evidence of collusion to exist, and thus indirect evidence like you suggest is normally how this is investigated. However, RealPage and the others here have provided this evidence directly: the way their price recommendation service is structured, the terms and conditions and so on, constitute direct evidence of an explicit attempt at price fixing. So, even if it turned out that all of landlords participating in this scheme actually "cheated" the price recommendation algorithm, and even if it turned out that rents went down or stayed the same when RealPage moved in, they would still be guilty of price fixing, per the FTC.

bcrosby95 3y ago

If you scrape rental data, then send an email to every person renting a unit saying "I recommend you allow your unit to sit vacant rather than renting below this price", that would be price fixing.