12 ms·

Up to a Quarter of Rental Inflation Is Due to Price-Fixing

107 points by pseudolus 2y ago

ppeetteerr 2y ago
I wonder if addressing price fixing in rent prices will ease the regulations around short-term rentals (which have shown to also increase rents by about 3%).
plutaniano 2y ago
I wonder if we will ever reach a point where implementing a land value tax will be politically feasible. All other solutions look like bandaids to me.
firejake308 2y ago
> the cost of shelter accounts for 70% of all inflation for the last twelve months Technically, this should read "70% of inflation in all items less food and energy". And since enrgy costs are actually down for the past year, this basically says that rent increases are the majority cause of inflation except maybe food, but that's not clear from the BLS data linked.
- ericjmorey 2y ago
  It's like there's a shortage of housing or something.
  - hnthrow289570 2y ago
    Why would you need to collude for higher rents with RealPage if a shortage of housing was the primary driver of rent increases? If someone's being that greedy, they can't really use supply and demand to say their hands were tied in terms of controlling rent.
    - derektank 2y ago
      If you have the option to extract rents by forming a cartel (without legal punishment), you'll do it regardless of the underlying value of the asset you're trying to control because it's free money (assuming you can trust the other members of the cartel)
  - papercrane 2y ago
    That's true in some markets, but the DOJ complaint highlights some places, like Atlanta, where vacancy rates have gone up, but rents have still climbed higher.
- onlyrealcuzzo 2y ago
  Rent is 36.1% of the CPI basket - so if inflation was distributed evenly - you'd expect 36.1% of the increase to come from rent / housing. 70% is really not that shocking. Rents only need to increase a little bit more than average with most other things increasing a little bit less than average to end up at 70%. Vehicles and energy make up almost 14% of the basket - and those are negative.
JamesBarney 2y ago
The middle case is that we are paying 2.6% higher rent due to RealPage. I don't think the aggressive piece is realistic. And if we break up RealPage I highly doubt we'll see an significant drop in rent prices. An interesting analysis would be looking at vacancy rate across different cities over time. If we saw a large increase in cities with a high penetration of RealPage I'd be more inclined to believe it's having a significant impact. For California and Text at least it looks like the price increase is classical supply and demand driven. We're not building enough multifamily or apartments. https://fred.stlouisfed.org/series/TXRVAC https://fred.stlouisfed.org/series/TXRVAC https://fred.stlouisfed.org/series/CARVAC https://fred.stlouisfed.org/series/CARVAC
- deleted 2y ago
  [deleted]
- flimsypremise 2y ago
  In NYC I can tell you that the metropolitan area lost about 500,000 people since 2020, added ~20-30k housing units per year in that same time. The vacancy rate somehow dropped dramatically despite this and rents also rose dramatically. I've yet to see any good explanation for this, yet you'll still see people advocate for building more housing as the solution. Simply using the rental vacancy rate as a proxy for supply and demand does not work, since there are lots of factors that can affect vacancies. One of then, as outlined in the article, is landlords keep units off the market to drive up prices.
  - ProfessorLayton 2y ago
    The explanation is that there isn't enough housing to meet demand. That's it. Until there is, prices will keep going up even when building more units. Landlords wouldn't be buying up a ton of units and renting them out at a profit if there was a glut of inventory, because it would be a terrible investment.
    - ethbr1 2y ago
      Or, accounting and tax law makes it less painful to keep units vacant than reprice them at lower rents. Which is a thing we could change via something like Vancouver's vacancy tax. Make it more in landlords' interest to reprice units lower, if the market has excess inventory.
tptacek 2y ago
The problem I have with this analysis is that it's tying RealPage to the politicized perception of rent inflation --- i.e., when the news cycles about it began. But affordability has been a crisis for something approaching a decade now, far precedes RealPage, and impacts places RealPage doesn't operate. There's a subtext in this article that you have to follow Stoller to know about, which is whether he's aligning himself with the NIMBY opposition to the YIMBY movement, so I expect him to take some flak for these arguments, whether or not RealPage is a proximate cause of higher rents (I have no reason to disbelieve him on that point; by all means burn it to the ground).
seper8 2y ago
There are very few jobs that provides as little value as being a landlord. Imagine all of them dying tomorrow, what happens? People just keep on living as usual, maybe they'll have to clean their own drain and paint their poorly maintained (ex)rental unit... Its the upscale equivalent of ticket or GPU scalping (the practice of buying up all material and simply only upselling it for more money). Parasites of the system.
- ethbr1 2y ago
  I think you're underestimating how many people can clean their own drain (well). Which is its own solvable problem, but is a problem.
  - londons_explore 2y ago
    The modern way is to have a handyman (just like you have a gardner or cleaner). The handyman has a list of gutters to empty, squeaky hinges to oil, HVAC filters to clean, etc. Keep adding these small tasks to the list, and when the list gets long or something urgent comes up, call the handyman out for a half-day.
  - kelseyfrog 2y ago
    It's a problem whether the occupier is a renter or homeowner. The landlord is, in my experience, just going to call a handyman anyway. May as well cut out the middleman as thats something I can do myself.
  - _DeadFred_ 2y ago
    Funny the same people that say stuff like this say that the person who can't even clean their own drain should plan their own retirement using a 401K as the vehicle and if they fail at it and starve well that's their fault, there's no way we could have seen it not working out.
- BeetleB 2y ago
  > Imagine all of them dying tomorrow, what happens? The majority of landlords in the US (at least in the small scale - not sure about big complexes) do not own the property outright. They have a loan (e.g. mortgage) just like anyone else. So what will happen? The banks will become the new owners. And they'll sell it at a discount to someone else (with a loan, of course). I know it's easy to complain about landlords, but if you suddenly kill all landlords and ban landlording, you'll get a lot more homeless people.
ethbr1 2y ago
Also: Up to 30% of app pricing is due to price-fixing. We (including the companies cannibalizing their own ecosystems for profit) would all be better off with a refresh of competition enhancing laws that (a) decrease barriers to entry & (b) apply increasing competitive restrictions as market share and absolute company size grow.
- ppeetteerr 2y ago
  You could say the same about prices in general increasing due to credit card fees ($.30 per transaction + 3%).
lifeisstillgood 2y ago
It’s not realpage causing inflation. Come on Look, the first most important totally big thing is that at the beginning of covid governments around the world printed a boatload of cash and gave it out as furlough for waiters and nurses and construction workers. And that was a Good Thing. People could eat and pay rent. But that took a boatload of cash - US printed 10 trillion dollars - the UK a trillion. 27 European nations all did something similar - the Middle East. Noone knows how much but it’s tens of trillions - perhaps let’s say 50 trillion. With a T. Then that money went to the landlords and the supermarkets and the. Went up to the supermarket shareholders and the owners of the office buildings and eventually the wealthy - those who can live without salary - they got almost all of it. And they have to spend that money on something - property, stocks, gold, land It’s inflation because there is an extra fifty trillion floating around. Real page is doing nothing amazing - collating price information and telling landlords “hey a flat like this is renting for 20% on the next street”. Well that’s because some part of that fifty trillion just got invested in a company that hired a guy who moved into the neighbourhood- it’s going to chnage the character of the neighbourhood and those who are unlucky get squeezed out the bottom and sleep in a park looking over the Golden Gate. Look at any article in MMT. This is something we solve with 1. Taxation (equal tax treatments for capital gains etc) and 2. Sane social policies (education, health etc) The DOJ is looking for a culprit who is breaking a system that otherwise would work - that’s the point of anti-cartel laws. Ut the system is broken - and it has a simple fix. Tax the rich - we did it for Russian Olivarchs, now spread the love
- pfannkuchen 2y ago
  > printed a boatload of cash and gave it out as furlough for waiters and nurses and construction workers … US printed 10 trillion dollars Well, I don’t think 10 trillion was paid to waiters and nurses and construction workers, etc. I’m curious what that actual number was. I’d be surprised if it touched 1 trillion. Something like 250 billion sounds more plausible to me, but if anyone has a source that would be interesting. 10 trillion was added to the money supply, but I believe the vast majority of it went somewhere else and never passed through the sort of people you mention. The money supply expansion did juice the stock market and avoided a recession on paper, while shifting real value from savers and earners over to asset holders. Working as intended, I suppose. I think the biggest BS aspect of inflation is that wages are set in USD basically universally and are therefore subject to inflation. You can choose to move your savings out of USD and into something more stable, but if you are a worker you can’t move your comp into anything else. The second most BS part is being taxed on inflation whenever you sell assets. Even if the asset doesn’t have any real appreciation, you get to pay tax on whatever the government decided to inflate the currency by. Absolute nonsense.
cousin_it 2y ago
I think the biggest culprit behind rent inflation isn't companies like RealPage (evil as they may be), nor landlords, but homeowners. Who vote for laws that make housing harder to build.
- bagels 2y ago
  It's the only rational thing to do to the next generation as our parents did to us. As a homeowner when you've already been forced to pay a tremendous premium to own a house, you are not going to want to have the value of that asset decrease.
  - zeroCalories 2y ago
    [flagged]
Workaccount2 2y ago
There is a housing shortage. That's it. Fix it by building more housing. Nothing else is gonna do anything.
- HarryHirsch 2y ago
  That, and people who were born this century have no idea about the immensity of housing inflation. In 2007, a 1-BR apartment in Hanover, NH was USD 750. With official inflation at 3 % that would be now something like USD 1325. Good luck finding anything below USD 2250 these days. That's 7 %, more than double headline inflation. It's a complete policy failure, also because housing is about the most unproductive kind of investment there is.
- PlunderBunny 2y ago
  Even if you fix all the zoning and land supply problems, you still need to qualify this as building the right kind of housing. Building more large, expensive homes that are gobbled up by investors or people 'parking' money isn't going to help people that need cheap dwellings to actually live in. I'm not saying you're not aware of this or that your statement doesn't include the possibility, but (housing) developers will follow the money, and that doesn't mean making small affordable homes when the profit margins on other types of dwelling are higher.
  - maxerickson 2y ago
    It's been demonstrated over and over again that building high end housing does have an impact on the prices of lower end stuff. It is of course likely to have a greater impact to build lower cost stuff, but blocking a development because you don't like the sort of houses they want to build is more or less stupid (it's not like a developer is going to do a project there is no demand for, and that demand is probably already looking elsewhere near the proposed development...).
  - wolpoli 2y ago
    > Building more large, expensive homes that are gobbled up by investors or people 'parking' money isn't going to help people that need cheap dwellings to actually live in. Investors that gobbled up properties are renting them to renters (assuming it isn't on airbnb) to pay their holding costs (mortgage, tax, maintenance), since they are by definition investors. They actually increase the pool of property for renters, keeping rent price lower, which fights rental inflation. This does drive up purchase price for the home itself, but that's a separate topic. Same with people parking money, why would they be leaving the homes empty when they could rent it out for additional cash flow?
TacticalCoder 2y ago
> From 2020-2024, rent prices spiked by a third. How much of that is due to collusion by corporate landlords and a software coordinator? > And where is the Fed? Printing shitload of money. Which accounts for the other 75%.
- BizarroLand 2y ago
  I'm surprised you believe that.

107 points by pseudolus 2y ago

I wonder if addressing price fixing in rent prices will ease the regulations around short-term rentals (which have shown to also increase rents by about 3%).

plutaniano 2y ago

I wonder if we will ever reach a point where implementing a land value tax will be politically feasible. All other solutions look like bandaids to me.

firejake308 2y ago

> the cost of shelter accounts for 70% of all inflation for the last twelve months Technically, this should read "70% of inflation in all items less food and energy". And since enrgy costs are actually down for the past year, this basically says that rent increases are the majority cause of inflation except maybe food, but that's not clear from the BLS data linked.

ericjmorey 2y ago
It's like there's a shortage of housing or something.
- hnthrow289570 2y ago
  Why would you need to collude for higher rents with RealPage if a shortage of housing was the primary driver of rent increases? If someone's being that greedy, they can't really use supply and demand to say their hands were tied in terms of controlling rent.
  - derektank 2y ago
    If you have the option to extract rents by forming a cartel (without legal punishment), you'll do it regardless of the underlying value of the asset you're trying to control because it's free money (assuming you can trust the other members of the cartel)
- papercrane 2y ago
  That's true in some markets, but the DOJ complaint highlights some places, like Atlanta, where vacancy rates have gone up, but rents have still climbed higher.
onlyrealcuzzo 2y ago
Rent is 36.1% of the CPI basket - so if inflation was distributed evenly - you'd expect 36.1% of the increase to come from rent / housing. 70% is really not that shocking. Rents only need to increase a little bit more than average with most other things increasing a little bit less than average to end up at 70%. Vehicles and energy make up almost 14% of the basket - and those are negative.

JamesBarney 2y ago

The middle case is that we are paying 2.6% higher rent due to RealPage. I don't think the aggressive piece is realistic. And if we break up RealPage I highly doubt we'll see an significant drop in rent prices. An interesting analysis would be looking at vacancy rate across different cities over time. If we saw a large increase in cities with a high penetration of RealPage I'd be more inclined to believe it's having a significant impact. For California and Text at least it looks like the price increase is classical supply and demand driven. We're not building enough multifamily or apartments. https://fred.stlouisfed.org/series/TXRVAC https://fred.stlouisfed.org/series/TXRVAC https://fred.stlouisfed.org/series/CARVAC https://fred.stlouisfed.org/series/CARVAC

deleted 2y ago
[deleted]
flimsypremise 2y ago
In NYC I can tell you that the metropolitan area lost about 500,000 people since 2020, added ~20-30k housing units per year in that same time. The vacancy rate somehow dropped dramatically despite this and rents also rose dramatically. I've yet to see any good explanation for this, yet you'll still see people advocate for building more housing as the solution. Simply using the rental vacancy rate as a proxy for supply and demand does not work, since there are lots of factors that can affect vacancies. One of then, as outlined in the article, is landlords keep units off the market to drive up prices.
- ProfessorLayton 2y ago
  The explanation is that there isn't enough housing to meet demand. That's it. Until there is, prices will keep going up even when building more units. Landlords wouldn't be buying up a ton of units and renting them out at a profit if there was a glut of inventory, because it would be a terrible investment.
  - ethbr1 2y ago
    Or, accounting and tax law makes it less painful to keep units vacant than reprice them at lower rents. Which is a thing we could change via something like Vancouver's vacancy tax. Make it more in landlords' interest to reprice units lower, if the market has excess inventory.

tptacek 2y ago

The problem I have with this analysis is that it's tying RealPage to the politicized perception of rent inflation --- i.e., when the news cycles about it began. But affordability has been a crisis for something approaching a decade now, far precedes RealPage, and impacts places RealPage doesn't operate. There's a subtext in this article that you have to follow Stoller to know about, which is whether he's aligning himself with the NIMBY opposition to the YIMBY movement, so I expect him to take some flak for these arguments, whether or not RealPage is a proximate cause of higher rents (I have no reason to disbelieve him on that point; by all means burn it to the ground).

seper8 2y ago

There are very few jobs that provides as little value as being a landlord. Imagine all of them dying tomorrow, what happens? People just keep on living as usual, maybe they'll have to clean their own drain and paint their poorly maintained (ex)rental unit... Its the upscale equivalent of ticket or GPU scalping (the practice of buying up all material and simply only upselling it for more money). Parasites of the system.

ethbr1 2y ago
I think you're underestimating how many people can clean their own drain (well). Which is its own solvable problem, but is a problem.
- londons_explore 2y ago
  The modern way is to have a handyman (just like you have a gardner or cleaner). The handyman has a list of gutters to empty, squeaky hinges to oil, HVAC filters to clean, etc. Keep adding these small tasks to the list, and when the list gets long or something urgent comes up, call the handyman out for a half-day.
- kelseyfrog 2y ago
  It's a problem whether the occupier is a renter or homeowner. The landlord is, in my experience, just going to call a handyman anyway. May as well cut out the middleman as thats something I can do myself.
- _DeadFred_ 2y ago
  Funny the same people that say stuff like this say that the person who can't even clean their own drain should plan their own retirement using a 401K as the vehicle and if they fail at it and starve well that's their fault, there's no way we could have seen it not working out.
BeetleB 2y ago
> Imagine all of them dying tomorrow, what happens? The majority of landlords in the US (at least in the small scale - not sure about big complexes) do not own the property outright. They have a loan (e.g. mortgage) just like anyone else. So what will happen? The banks will become the new owners. And they'll sell it at a discount to someone else (with a loan, of course). I know it's easy to complain about landlords, but if you suddenly kill all landlords and ban landlording, you'll get a lot more homeless people.

ethbr1 2y ago

Also: Up to 30% of app pricing is due to price-fixing. We (including the companies cannibalizing their own ecosystems for profit) would all be better off with a refresh of competition enhancing laws that (a) decrease barriers to entry & (b) apply increasing competitive restrictions as market share and absolute company size grow.

ppeetteerr 2y ago
You could say the same about prices in general increasing due to credit card fees ($.30 per transaction + 3%).

lifeisstillgood 2y ago

It’s not realpage causing inflation. Come on Look, the first most important totally big thing is that at the beginning of covid governments around the world printed a boatload of cash and gave it out as furlough for waiters and nurses and construction workers. And that was a Good Thing. People could eat and pay rent. But that took a boatload of cash - US printed 10 trillion dollars - the UK a trillion. 27 European nations all did something similar - the Middle East. Noone knows how much but it’s tens of trillions - perhaps let’s say 50 trillion. With a T. Then that money went to the landlords and the supermarkets and the. Went up to the supermarket shareholders and the owners of the office buildings and eventually the wealthy - those who can live without salary - they got almost all of it. And they have to spend that money on something - property, stocks, gold, land It’s inflation because there is an extra fifty trillion floating around. Real page is doing nothing amazing - collating price information and telling landlords “hey a flat like this is renting for 20% on the next street”. Well that’s because some part of that fifty trillion just got invested in a company that hired a guy who moved into the neighbourhood- it’s going to chnage the character of the neighbourhood and those who are unlucky get squeezed out the bottom and sleep in a park looking over the Golden Gate. Look at any article in MMT. This is something we solve with 1. Taxation (equal tax treatments for capital gains etc) and 2. Sane social policies (education, health etc) The DOJ is looking for a culprit who is breaking a system that otherwise would work - that’s the point of anti-cartel laws. Ut the system is broken - and it has a simple fix. Tax the rich - we did it for Russian Olivarchs, now spread the love

pfannkuchen 2y ago
> printed a boatload of cash and gave it out as furlough for waiters and nurses and construction workers … US printed 10 trillion dollars Well, I don’t think 10 trillion was paid to waiters and nurses and construction workers, etc. I’m curious what that actual number was. I’d be surprised if it touched 1 trillion. Something like 250 billion sounds more plausible to me, but if anyone has a source that would be interesting. 10 trillion was added to the money supply, but I believe the vast majority of it went somewhere else and never passed through the sort of people you mention. The money supply expansion did juice the stock market and avoided a recession on paper, while shifting real value from savers and earners over to asset holders. Working as intended, I suppose. I think the biggest BS aspect of inflation is that wages are set in USD basically universally and are therefore subject to inflation. You can choose to move your savings out of USD and into something more stable, but if you are a worker you can’t move your comp into anything else. The second most BS part is being taxed on inflation whenever you sell assets. Even if the asset doesn’t have any real appreciation, you get to pay tax on whatever the government decided to inflate the currency by. Absolute nonsense.

cousin_it 2y ago

I think the biggest culprit behind rent inflation isn't companies like RealPage (evil as they may be), nor landlords, but homeowners. Who vote for laws that make housing harder to build.

bagels 2y ago
It's the only rational thing to do to the next generation as our parents did to us. As a homeowner when you've already been forced to pay a tremendous premium to own a house, you are not going to want to have the value of that asset decrease.
- zeroCalories 2y ago
  [flagged]

Workaccount2 2y ago

There is a housing shortage. That's it. Fix it by building more housing. Nothing else is gonna do anything.

HarryHirsch 2y ago
That, and people who were born this century have no idea about the immensity of housing inflation. In 2007, a 1-BR apartment in Hanover, NH was USD 750. With official inflation at 3 % that would be now something like USD 1325. Good luck finding anything below USD 2250 these days. That's 7 %, more than double headline inflation. It's a complete policy failure, also because housing is about the most unproductive kind of investment there is.
PlunderBunny 2y ago
Even if you fix all the zoning and land supply problems, you still need to qualify this as building the right kind of housing. Building more large, expensive homes that are gobbled up by investors or people 'parking' money isn't going to help people that need cheap dwellings to actually live in. I'm not saying you're not aware of this or that your statement doesn't include the possibility, but (housing) developers will follow the money, and that doesn't mean making small affordable homes when the profit margins on other types of dwelling are higher.
- maxerickson 2y ago
  It's been demonstrated over and over again that building high end housing does have an impact on the prices of lower end stuff. It is of course likely to have a greater impact to build lower cost stuff, but blocking a development because you don't like the sort of houses they want to build is more or less stupid (it's not like a developer is going to do a project there is no demand for, and that demand is probably already looking elsewhere near the proposed development...).
- wolpoli 2y ago
  > Building more large, expensive homes that are gobbled up by investors or people 'parking' money isn't going to help people that need cheap dwellings to actually live in. Investors that gobbled up properties are renting them to renters (assuming it isn't on airbnb) to pay their holding costs (mortgage, tax, maintenance), since they are by definition investors. They actually increase the pool of property for renters, keeping rent price lower, which fights rental inflation. This does drive up purchase price for the home itself, but that's a separate topic. Same with people parking money, why would they be leaving the homes empty when they could rent it out for additional cash flow?

TacticalCoder 2y ago

> From 2020-2024, rent prices spiked by a third. How much of that is due to collusion by corporate landlords and a software coordinator? > And where is the Fed? Printing shitload of money. Which accounts for the other 75%.

BizarroLand 2y ago
I'm surprised you believe that.