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I am a small-time landlord. There's no "marginal cost" to determine how much to charge for rent. The only thing I use to determine the price is the current mark

I am a small-time landlord. There's no "marginal cost" to determine how much to charge for rent. The only thing I use to determine the price is the current market rate. And all I have to do is open up Zillow or Craigslist and do a search on similar properties with similar characteristics. It only takes ~5 minutes of research to get a competitive market rate. While RealPage might command 80% of the market for this type of software, they only have 12,000 clients. There are over 5.2 million multi-family dwellings in the US. It's only a monopoly in that they offer a very niche product. So I doubt the implication the justice department is making here - that RealPage is having a significant impact on market price through widespread collusion. Furthermore, housing is a market - nobody is "competing on merits". There's limited inventory, and it goes first-come, first-serve. Realpage advertising that it gets the best dollar for its clients isn't that much different than your Schwab account letting you know you shouldn't sell your MSFT share for $50. I suspect the DOJ may have trouble actually proving that landlords held to the price recommendations to their own detriment to keep them high. While I appreciate the breaking up of a potential cartel here, and this is a software I would never use, I would hold my breath if I was expecting a sudden change in the rental market because of this. Inventory is still fundamentally limited, and unless the DOJ bans all market research, the going rate is still the going rate.

Sohcahtoa82 2y ago
> While RealPage might command 80% of the market for this type of software, they only have 12,000 clients. There are over 5.2 million multi-family dwellings in the US. That reveals a startling statistic that 80% of the market is controlled by only 12,000 users. That's 433 units per user on average.
- legitster 2y ago
  I think the better implication is that the vast majority of apartment owners don't bother paying for pricing software. It's worth pointing out that third-party tools like 6Sense assess RealPage's customer base as much, much lower (around 6000 paying customers).
  - lcnPylGDnU4H9OF 2y ago
    > I think the better implication is that the vast majority of apartment owners don't bother paying for pricing software. I don't think there's anything so far to indicate this or that; there's still a reasonable possibility that 80% of the market is controlled by large property management businesses.
    - legitster 2y ago
      This is easy to look up. There are approx 300,000 property managers in the US. Assuming RealPage isn't lying about their number of active customers, they would only account for 16% of the industry. Obviously the numbers could be skewed wildly but it's still far from a monopoly.
      - everforward 2y ago
        The allegation would be that they have a monopoly over rental pricing, in which case the relevant metric is the percentage of rental pricing they control, not what percentage of landlords use RealPage. If Kroger, Walmart, and Safeway decided to collude, they’re probably less than a percent of grocery store brands. They are like 95% of the grocery supply, though.
- bena 2y ago
  There's two major companies in the area that rent out apartments. I rented from one a few years back. In my unit, there were 12 apartments (I think). IIRC, four per floor, with three floors. I believe there were 8 to 12 units surrounding a common area in our "block". Then this "block" was a part of a larger group of complexes and in the area, they had five or six of these groups. That's around 50 - 100 units. They also had other locations. They probably manage at least 1000 units. The other company manages fewer, but not by much. If RealPage gets both of them, they've effectively set the prices for all apartments in the area.
- gunapologist99 2y ago
  > That reveals a startling statistic that 80% of the market is controlled by only 12,000 users. That's 433 units per user on average. This conflates the market for this type of software with the larger housing market. Presumably, this software is only used by some large (probably mostly hedge-fund or REIT funds) apartment complexes. So, yeah, 80% of that market, but that's only a tiny amount of the overall market. The DOJ chose that number (almost certainly out of a hat, because there's no way to actually identify all of them) of 80% in order to make it seem like it's a monopoly, but proving at trial that RealPage or its clients controls prices over more than a tiny fraction of the market will be incredibly difficult (actually impossible, because it's obviously not true). However, given the DOJ's limitless funding to pursue this, clearly it's not after actually winning at trial; it's after a consent decree.
bbatsell 2y ago
RealPage works by collating private competition data from all of their clients, running models to determine the highest possible vacancy rate for an area that will lead to the highest possible market rate, then telling their clients to set at that price and never offer discounts or reductions. In a fair market, landlords with vacancies would want to fill them — they have tons of fixed costs and they can't leave money on the table like that. If you had trouble filling, you'd look at the market and adjust downwards, or offer better amenities, or do whatever you wanted to attract customers. The tension between demand and supply leads to market equilibrium. RealPage tells its clients that if they all work together to set their prices higher than market equilibrium, hold out for far longer than they normally would want or what a free market would lead to, then the simple inelasticity of housing demand — everyone needs a home! — means that customers will eventually have to give in to the higher price in order to live their lives, and landlords will rake in the profits over time. They use the data and actions of their clients working in concert in order to manipulate a fair market into a deeply unfair one which does not properly adjust to market forces.
- kelnos 2y ago
  > running models to determine the highest possible vacancy rate for an area that will lead to the highest possible market rate In my view, holding units vacant intentionally in order to increase profit should be illegal. Vacancy taxes don't go far enough; landlords who do this should be forced to sell any units they've decided to keep vacant, or see their properties seized. Optimizing profit around providing people shelter (or avoiding doing so) is evil.
  - bluGill 2y ago
    That is very easy to cheat though. Two obvious ones: a different unit is held open every month; or these units are closed for remodeling. Until you get to long term 40% vacancy it is really hard to tell - and be careful not to kill rural small towns that no longer have demand and so apartments that will never be full anymore get torn down thus harming the few renters who remain (since it isn't worth replacing the building at current rents and many cannot afford the rent that a new apartment would need just to be worth building)
matwood 2y ago
I generally agree with your assessment. As someone mentioned above though, I think the emails where RealPage is telling landlords not to lower prices are much more damning. It puts RP as the locus of collusion.
seydor 2y ago
> they only have 12,000 clients When you perform said Zillow or Craigslist search, do you settle for the higher end of the range of prices or the low end? Realpage only needs to manipulate a relatively small number of listings to have a huge impact in all rent prices.
- legitster 2y ago
  The lower end! I usually undercut the market rate by ~$50. My house rents for $2400 a month. If I leave it on the market for just a month I would lose more money than I would gain in 2 years at a higher rent! So the incentive is to get it rented out as quickly as possible and get it booked before the other guy. So my incentive is to be just a bit lower than the other guy so mine goes first. I will not deny that the market rate for housing is absurdly high, but it is still a market and incentives still matter.
  - bluGill 2y ago
    That is because you only have one or a few units. When you have many units the numbers work out very different for empty units in exchange for higher rent.
kelnos 2y ago
> While RealPage might command 80% of the market for this type of software, they only have 12,000 clients. There are over 5.2 million multi-family dwellings in the US. Those statistics don't tell us enough to see if this is a problem, though. In the extreme case (obviously this is not true), everyone uses pricing software, so RealPage's 80% is 80% of all dwellings, and those 12,000 clients own 4.2M multi-family dwellings. Also what matters is number of units, not number of multi-family dwellings. Owning a duplex does not give you the same clout over local rentals as, say, owning the only large (at say, 500 units) apartment complex does.
kerkeslager 2y ago
> While RealPage might command 80% of the market for this type of software, they only have 12,000 clients. There are over 5.2 million multi-family dwellings in the US. It's only a monopoly in that they offer a very niche product. So I doubt the implication the justice department is making here - that RealPage is having a significant impact on market price through widespread collusion. Well, given your only justification for your doubt is that you compared clients to multifamily dwellings, I gotta say, your doubt is pretty not founded in reality. > Furthermore, housing is a market - nobody is "competing on merits". Oof, bro. "Competing on merits" is the entire justification for why free markets are important. If you're arguing that nobody is competing on merits, then that starts to sound like you're arguing that competition isn't working here. > Realpage advertising that it gets the best dollar for its clients isn't that much different than your Schwab account letting you know you shouldn't sell your MSFT share for $50. The difference being that Schwab doesn't have the pull to price-fix MSFT. In cases where a single coordinates to control 80% of shares of a stock and then price-fix it, that is, in fact, illegal. > While I appreciate the breaking up of a potential cartel here, and this is a software I would never use, I would hold my breath if I was expecting a sudden change in the rental market because of this. Inventory is still fundamentally limited, and unless the DOJ bans all market research, the going rate is still the going rate. I agree with you that housing prices are not likely to drastically change as a result of this, but my reason is that this isn't the only price-fixing mechanism in place.
- legitster 2y ago
  Competition clearly isn't working for housing. Because it's not a competitive market. I am just skeptical to the extent it is due to pricing cartels.
  - bluGill 2y ago
    It is a competitive market. However supply is often supply constrained (both by bad zoning and that some places are just better than others). The cartels only work because supply is constrained enough that they have power, if supply was less constrained the cartel could not raise prices as much (when supply is constrained you need less members in the first place). I support looser zoning rules as reducing supply constraints is the only long term way out of high rents. However some places are better than others and there is a limit to how much looser zoning can reduce prices. (I wouldn't live in a tiny mud hut even if it was cheap and legal)
ceejayoz 2y ago
> While RealPage might command 80% of the market for this type of software, they only have 12,000 clients. There are over 5.2 million multi-family dwellings in the US. This is pretty misleading. "Greystar was the largest apartment manager in the United States, with over 726,826 units/beds..." - https://en.wikipedia.org/wiki/Greystar https://en.wikipedia.org/wiki/Greystar That's one client. (And yes, they are a client. https://www.realpage.com/case-studies/greystar-optimizes-submeter-health/ https://www.realpage.com/case-studies/greystar-optimizes-sub...)

Sohcahtoa82 2y ago

> While RealPage might command 80% of the market for this type of software, they only have 12,000 clients. There are over 5.2 million multi-family dwellings in the US. That reveals a startling statistic that 80% of the market is controlled by only 12,000 users. That's 433 units per user on average.

legitster 2y ago
I think the better implication is that the vast majority of apartment owners don't bother paying for pricing software. It's worth pointing out that third-party tools like 6Sense assess RealPage's customer base as much, much lower (around 6000 paying customers).
- lcnPylGDnU4H9OF 2y ago
  > I think the better implication is that the vast majority of apartment owners don't bother paying for pricing software. I don't think there's anything so far to indicate this or that; there's still a reasonable possibility that 80% of the market is controlled by large property management businesses.
  - legitster 2y ago
    This is easy to look up. There are approx 300,000 property managers in the US. Assuming RealPage isn't lying about their number of active customers, they would only account for 16% of the industry. Obviously the numbers could be skewed wildly but it's still far from a monopoly.
    - everforward 2y ago
      The allegation would be that they have a monopoly over rental pricing, in which case the relevant metric is the percentage of rental pricing they control, not what percentage of landlords use RealPage. If Kroger, Walmart, and Safeway decided to collude, they’re probably less than a percent of grocery store brands. They are like 95% of the grocery supply, though.
bena 2y ago
There's two major companies in the area that rent out apartments. I rented from one a few years back. In my unit, there were 12 apartments (I think). IIRC, four per floor, with three floors. I believe there were 8 to 12 units surrounding a common area in our "block". Then this "block" was a part of a larger group of complexes and in the area, they had five or six of these groups. That's around 50 - 100 units. They also had other locations. They probably manage at least 1000 units. The other company manages fewer, but not by much. If RealPage gets both of them, they've effectively set the prices for all apartments in the area.
gunapologist99 2y ago
> That reveals a startling statistic that 80% of the market is controlled by only 12,000 users. That's 433 units per user on average. This conflates the market for this type of software with the larger housing market. Presumably, this software is only used by some large (probably mostly hedge-fund or REIT funds) apartment complexes. So, yeah, 80% of that market, but that's only a tiny amount of the overall market. The DOJ chose that number (almost certainly out of a hat, because there's no way to actually identify all of them) of 80% in order to make it seem like it's a monopoly, but proving at trial that RealPage or its clients controls prices over more than a tiny fraction of the market will be incredibly difficult (actually impossible, because it's obviously not true). However, given the DOJ's limitless funding to pursue this, clearly it's not after actually winning at trial; it's after a consent decree.

bbatsell 2y ago

RealPage works by collating private competition data from all of their clients, running models to determine the highest possible vacancy rate for an area that will lead to the highest possible market rate, then telling their clients to set at that price and never offer discounts or reductions. In a fair market, landlords with vacancies would want to fill them — they have tons of fixed costs and they can't leave money on the table like that. If you had trouble filling, you'd look at the market and adjust downwards, or offer better amenities, or do whatever you wanted to attract customers. The tension between demand and supply leads to market equilibrium. RealPage tells its clients that if they all work together to set their prices higher than market equilibrium, hold out for far longer than they normally would want or what a free market would lead to, then the simple inelasticity of housing demand — everyone needs a home! — means that customers will eventually have to give in to the higher price in order to live their lives, and landlords will rake in the profits over time. They use the data and actions of their clients working in concert in order to manipulate a fair market into a deeply unfair one which does not properly adjust to market forces.

kelnos 2y ago
> running models to determine the highest possible vacancy rate for an area that will lead to the highest possible market rate In my view, holding units vacant intentionally in order to increase profit should be illegal. Vacancy taxes don't go far enough; landlords who do this should be forced to sell any units they've decided to keep vacant, or see their properties seized. Optimizing profit around providing people shelter (or avoiding doing so) is evil.
- bluGill 2y ago
  That is very easy to cheat though. Two obvious ones: a different unit is held open every month; or these units are closed for remodeling. Until you get to long term 40% vacancy it is really hard to tell - and be careful not to kill rural small towns that no longer have demand and so apartments that will never be full anymore get torn down thus harming the few renters who remain (since it isn't worth replacing the building at current rents and many cannot afford the rent that a new apartment would need just to be worth building)

matwood 2y ago

I generally agree with your assessment. As someone mentioned above though, I think the emails where RealPage is telling landlords not to lower prices are much more damning. It puts RP as the locus of collusion.

seydor 2y ago

> they only have 12,000 clients When you perform said Zillow or Craigslist search, do you settle for the higher end of the range of prices or the low end? Realpage only needs to manipulate a relatively small number of listings to have a huge impact in all rent prices.

legitster 2y ago
The lower end! I usually undercut the market rate by ~$50. My house rents for $2400 a month. If I leave it on the market for just a month I would lose more money than I would gain in 2 years at a higher rent! So the incentive is to get it rented out as quickly as possible and get it booked before the other guy. So my incentive is to be just a bit lower than the other guy so mine goes first. I will not deny that the market rate for housing is absurdly high, but it is still a market and incentives still matter.
- bluGill 2y ago
  That is because you only have one or a few units. When you have many units the numbers work out very different for empty units in exchange for higher rent.

kelnos 2y ago

> While RealPage might command 80% of the market for this type of software, they only have 12,000 clients. There are over 5.2 million multi-family dwellings in the US. Those statistics don't tell us enough to see if this is a problem, though. In the extreme case (obviously this is not true), everyone uses pricing software, so RealPage's 80% is 80% of all dwellings, and those 12,000 clients own 4.2M multi-family dwellings. Also what matters is number of units, not number of multi-family dwellings. Owning a duplex does not give you the same clout over local rentals as, say, owning the only large (at say, 500 units) apartment complex does.

kerkeslager 2y ago

> While RealPage might command 80% of the market for this type of software, they only have 12,000 clients. There are over 5.2 million multi-family dwellings in the US. It's only a monopoly in that they offer a very niche product. So I doubt the implication the justice department is making here - that RealPage is having a significant impact on market price through widespread collusion. Well, given your only justification for your doubt is that you compared clients to multifamily dwellings, I gotta say, your doubt is pretty not founded in reality. > Furthermore, housing is a market - nobody is "competing on merits". Oof, bro. "Competing on merits" is the entire justification for why free markets are important. If you're arguing that nobody is competing on merits, then that starts to sound like you're arguing that competition isn't working here. > Realpage advertising that it gets the best dollar for its clients isn't that much different than your Schwab account letting you know you shouldn't sell your MSFT share for $50. The difference being that Schwab doesn't have the pull to price-fix MSFT. In cases where a single coordinates to control 80% of shares of a stock and then price-fix it, that is, in fact, illegal. > While I appreciate the breaking up of a potential cartel here, and this is a software I would never use, I would hold my breath if I was expecting a sudden change in the rental market because of this. Inventory is still fundamentally limited, and unless the DOJ bans all market research, the going rate is still the going rate. I agree with you that housing prices are not likely to drastically change as a result of this, but my reason is that this isn't the only price-fixing mechanism in place.

legitster 2y ago
Competition clearly isn't working for housing. Because it's not a competitive market. I am just skeptical to the extent it is due to pricing cartels.
- bluGill 2y ago
  It is a competitive market. However supply is often supply constrained (both by bad zoning and that some places are just better than others). The cartels only work because supply is constrained enough that they have power, if supply was less constrained the cartel could not raise prices as much (when supply is constrained you need less members in the first place). I support looser zoning rules as reducing supply constraints is the only long term way out of high rents. However some places are better than others and there is a limit to how much looser zoning can reduce prices. (I wouldn't live in a tiny mud hut even if it was cheap and legal)

ceejayoz 2y ago

> While RealPage might command 80% of the market for this type of software, they only have 12,000 clients. There are over 5.2 million multi-family dwellings in the US. This is pretty misleading. "Greystar was the largest apartment manager in the United States, with over 726,826 units/beds..." - https://en.wikipedia.org/wiki/Greystar https://en.wikipedia.org/wiki/Greystar That's one client. (And yes, they are a client. https://www.realpage.com/case-studies/greystar-optimizes-submeter-health/ https://www.realpage.com/case-studies/greystar-optimizes-sub...)