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Having an algorithm literally setting prices and literally forbidding rental properties from setting lower prices seems like a real cause of problems too? I ag

Having an algorithm literally setting prices and literally forbidding rental properties from setting lower prices seems like a real cause of problems too? I agree there's a lot of other barriers to fixing housing! But the algorithmically-driven collusion here is off the wall crazy town. Zero accountability for what would have wrecked any entity doing the same a couple years ago.

Aunche 3y ago
AFAICT there isn't anything preventing landlords from setting pricing lower than what RealPage recommends. That is just Propublica's weasily framing. In reality, it sounds like they're saying, if you want to get the results from our recommendations, you actually need to follow our recommendations.
- narism 3y ago
  Realpage put many roadblocks in the way of customers using prices not provided by the system. A couple: Rent overrides required written business justifications, would often trigger follow ups to the agent attempting the override and then their management to dissuade them, and eventually might be refused in the end. Realpage monitored compliance of customers using their provided prices and those who didn’t meet a certain level would be kicked off the platform. Pages 17-22 here: https://oag.dc.gov/sites/default/files/2023-11/DC%20OAG%20RealPage%20Complaint%20-%20Filed.pdf https://oag.dc.gov/sites/default/files/2023-11/DC%20OAG%20Re...
  - Aunche 3y ago
    Thank you for finding the relevant allegations. They certainly do sound more damning, though that's to be excepted if you take the prosecution at face value. This part jumps out: > the landlord’s regional manager Why would the owner of a property have a regional manager? That makes it sound like they're deliberately conflating local property managers with actual landlords. I suppose if the actual landlords are passive REIT investors, then there's still a possibility of actual collusion.
- whimsicalism 3y ago
  Even that runs afoul of the law :)
- ecosystem 3y ago
  The profitability of cartel price fixing in a slow, supply constrained market is enough carrot to cause to lead to anticompetitive coordination. In this game theory setup, breaking from the cartel only pays off with excess supply (long vacancies, new units you could lease), which is fairly atypical especially bc of regulatory hurdles. If the market is supply constrained, being part of a cartel maximizes profits. Over longer periods, a competitor could increase supply and inject some dynamism that rewards breaking from the cartel, but for urban/suburban apartment complexes, this is long time and of limited effect to the cartel's pricing power. This is why the FTC exists to prevent this type of illegal coordination (bc it's so attractive to profits!) Edit: typo
davidw 3y ago
I'm fine with suing that company. Even 1% in increased rents, at the margin, is a lot of money across a lot of rentals. But the algorithm is simply not capable of creating San Francisco prices in Houston, because "supply and demand" carries more weight than the algorithm.
- benatkin 3y ago
  Couldn’t they just run the algorithm-based collusion better and overcome any supply challenge? That seems to be the game plan for commercial real estate.
  - whimsicalism 3y ago
    This is just not how it works in current world. Your world model is off if you think this is a significant contributor to macroscale high rents.
- scotty79 3y ago
  By setting prices the algorithm is in direct control of the portion of supply that is available to meet the demand. Even if you built additional 25% of more properties the algorithm can take 20% off the market with a single pricing decision for months before landlords decide the vaccancies are not worth it.
- washadjeffmad 3y ago
  This isn't an example of happenstance or an isolated actor in a vacuum upending "market forces". Private equity has been pumping hundreds of billions into markets across the nation to intentionally and artificially capture and inflate hard asset values. Buildings don't move, and they're already expensive. Software that enables and enforces price fixing across markets might have exacerbated temporary inelasticity by local zoning, high reliance on import building materials, and restrictions on certain materials or construction, but the system wasn't built to handle a single company with $10T in assets buying up the nation, let alone an industry around it. Blaming anyone with an economy smaller than a nation state just doesn't explain the scale and timing of the effects. Why is this happening in communities in the rural South where there's plenty of room to grow? Who's buying up minority communities, inflating prices so that home owners can't afford the tax increases, and then buying those properties from under them and renting them back at a higher rate? It's not anyone you who they'll ever meet at a local town hall or whose home they can march up to to protest, that's for certain.
init2null 3y ago
Collusion among real estate agents to set fixed commissions has been illegal for a long time now. I'm struggling to understand why landlords deserve any more protection. Hiding behind an algorithm seems unlikely to work now that there's blood in the water from the recent Realtor lawsuits.
- alcide 3y ago
  https://www.ftc.gov/business-guidance/blog/2024/03/price-fixing-algorithm-still-price-fixing https://www.ftc.gov/business-guidance/blog/2024/03/price-fix... The FTC posted an article about algorithmic price fixing not too long ago too.

Aunche 3y ago

AFAICT there isn't anything preventing landlords from setting pricing lower than what RealPage recommends. That is just Propublica's weasily framing. In reality, it sounds like they're saying, if you want to get the results from our recommendations, you actually need to follow our recommendations.

narism 3y ago
Realpage put many roadblocks in the way of customers using prices not provided by the system. A couple: Rent overrides required written business justifications, would often trigger follow ups to the agent attempting the override and then their management to dissuade them, and eventually might be refused in the end. Realpage monitored compliance of customers using their provided prices and those who didn’t meet a certain level would be kicked off the platform. Pages 17-22 here: https://oag.dc.gov/sites/default/files/2023-11/DC%20OAG%20RealPage%20Complaint%20-%20Filed.pdf https://oag.dc.gov/sites/default/files/2023-11/DC%20OAG%20Re...
- Aunche 3y ago
  Thank you for finding the relevant allegations. They certainly do sound more damning, though that's to be excepted if you take the prosecution at face value. This part jumps out: > the landlord’s regional manager Why would the owner of a property have a regional manager? That makes it sound like they're deliberately conflating local property managers with actual landlords. I suppose if the actual landlords are passive REIT investors, then there's still a possibility of actual collusion.
whimsicalism 3y ago
Even that runs afoul of the law :)
ecosystem 3y ago
The profitability of cartel price fixing in a slow, supply constrained market is enough carrot to cause to lead to anticompetitive coordination. In this game theory setup, breaking from the cartel only pays off with excess supply (long vacancies, new units you could lease), which is fairly atypical especially bc of regulatory hurdles. If the market is supply constrained, being part of a cartel maximizes profits. Over longer periods, a competitor could increase supply and inject some dynamism that rewards breaking from the cartel, but for urban/suburban apartment complexes, this is long time and of limited effect to the cartel's pricing power. This is why the FTC exists to prevent this type of illegal coordination (bc it's so attractive to profits!) Edit: typo

davidw 3y ago

I'm fine with suing that company. Even 1% in increased rents, at the margin, is a lot of money across a lot of rentals. But the algorithm is simply not capable of creating San Francisco prices in Houston, because "supply and demand" carries more weight than the algorithm.

benatkin 3y ago
Couldn’t they just run the algorithm-based collusion better and overcome any supply challenge? That seems to be the game plan for commercial real estate.
- whimsicalism 3y ago
  This is just not how it works in current world. Your world model is off if you think this is a significant contributor to macroscale high rents.
scotty79 3y ago
By setting prices the algorithm is in direct control of the portion of supply that is available to meet the demand. Even if you built additional 25% of more properties the algorithm can take 20% off the market with a single pricing decision for months before landlords decide the vaccancies are not worth it.
washadjeffmad 3y ago
This isn't an example of happenstance or an isolated actor in a vacuum upending "market forces". Private equity has been pumping hundreds of billions into markets across the nation to intentionally and artificially capture and inflate hard asset values. Buildings don't move, and they're already expensive. Software that enables and enforces price fixing across markets might have exacerbated temporary inelasticity by local zoning, high reliance on import building materials, and restrictions on certain materials or construction, but the system wasn't built to handle a single company with $10T in assets buying up the nation, let alone an industry around it. Blaming anyone with an economy smaller than a nation state just doesn't explain the scale and timing of the effects. Why is this happening in communities in the rural South where there's plenty of room to grow? Who's buying up minority communities, inflating prices so that home owners can't afford the tax increases, and then buying those properties from under them and renting them back at a higher rate? It's not anyone you who they'll ever meet at a local town hall or whose home they can march up to to protest, that's for certain.

init2null 3y ago

Collusion among real estate agents to set fixed commissions has been illegal for a long time now. I'm struggling to understand why landlords deserve any more protection. Hiding behind an algorithm seems unlikely to work now that there's blood in the water from the recent Realtor lawsuits.

alcide 3y ago
https://www.ftc.gov/business-guidance/blog/2024/03/price-fixing-algorithm-still-price-fixing https://www.ftc.gov/business-guidance/blog/2024/03/price-fix... The FTC posted an article about algorithmic price fixing not too long ago too.