> Specifically, every morning, RealPage provides participating Lessors with recommended price levels. ... If Lessors wish to diverge from the “approved pricing” they must submit reasoning for doing so and await approval. ... But RealPage emphasizes the need for discipline among participating Lessors and urges them that for its coordinated algorithmic pricing to be the most successful in increasing rents, participating Lessors must adopt RealPage’s pricing at least 80% of the time.
It's hard to imagine a clearer, more blatant description of cartel price fixing.
This is like calling your pyramid scheme "Pyramidal Inc.".
Gotta love how capital gets all high and mighty about unions, while getting repeatedly caught with various forms of collusion, such as the Big Tech salary collusion a decade ago or cartoon-villain-bad levels of price fixing as we see here. Basically, it boils down to, "do as I say, not as I do."
Is it possible for the suit to result in charges brought against all users of RealPage? They are active participants, after all.
> Basically, it boils down to, "do as I say, not as I do."
I think it's more accurate to say it boils down to "our sole underlying principle is our own advantage, and the privilege of not even having our advantages challenged or negotiated."
This is really insightful, and applies to a lot of things.
Basically we create markets that enable (sometimes force) transactions in which one side has high amounts of leverage, and allow that leverage to increase over time. We don't view this high leverage as a problem. And, instead of fixing the issue of ever-increasing leverage, we instead exhort people to get to a position where they can be exerting it.
It's no wonder many feel like the game is rigged against them.
> It's no wonder many feel like the game is rigged against them.
Unfortunate phrasing? If the system is really rigged, then you don't just feel it is rigged. You discover, understand, realize - know it is rigged against you?
This faux-openminded acceptance of opinion diversity is so silly and useless as a lens for understanding anything at all. As if mere opinions about capital, labor, and power are what we're discussing. As if opinions on these things are just something someone has, completely divorced from their actual relationship to these concepts in the world.
These aren't sports teams, you don't just get together with your buds and see how it plays out over a couple drinks. "Aw dang I really thought we had it but you brought back child labor right at the buzzer there, rough one today."
No, wealthy people are for price collusion because it gives them more power, and they are against unions because they take away some of that power. Some things actually are that simple.
Internet commenters love to group opinions into a camp and then call them hypocritical. (Ex: capitalists love rent market manipulation but hate unions, those hypocrites!)
Of course, that’s not true, most capitalists would not want price fixing - something generally done under centralized planned economies.
I think I see what your saying. It’s common to see statements like “group A believes X but group A also believes Y, that’s hypocritical”, where not everyone said to be in group A universally believes X and Y. It is especially bad with large “us vs then” groups, like left versus right politics or capital versus labor.
I would strongly challenge this. Capitalism is generally oriented around maximizing profit. Any time you can sell a good for more than its cost of production, you make a profit. Competitors, when not prevented by things like IP laws, can undercut prices within that gap and take your market share, provided they have a similar cost of production. The "profit gap" can be exploited.
Price fixing "fixes" that bug, and is a net positive over the alternative of racing to the bottom. Better yet, you can use price fixing to arbitrarily increase that gap, which is exactly what TFA is about.
I used to think this too, since I tend to value interactions that range between autonomy and cooperation. Even where I like competition, it tends to exist within cooperative meta-boundaries. I assumed most people probably weren't too different from me, which is a very cooperative thing to assume.
Over time I've come to realize that while of course there's some common nature to human beings, there's also a varying distribution of personality and outlook, including how agreeable / disagreeable people are as well as how assertive. And it turns out on parts of that distribution there are people who enjoy not finding situations that benefit them but winning benefit and status from others.
I don't know whether that's "most" people. I'd guess not and that the distribution gets thinner the farther from the average disagreeableness and assertiveness you go. But it's enough people that I no longer discard adversarial values as a potential motive.
It is an emergent property of capitalist systems that people who love market manipulation will outcompete those who don't and thus end up in positions of such power that they effectively determine the characteristics and behavior of the system.
There are lots of people playing the capitalism game who don't want to cheat. But the system rewards cheaters who then use their power to produce the world we are all forced to live in.
If organized crime infiltrating particular institutions invalidates them by itself... then you're obligated to disdain or even eliminate large chunks of capitalism. Certainly casinos and night clubs. Lots of restaurants. Probably construction and real estate, definitely certain kinds of banking. Oh yeah -- law enforcement too.
That's the thing about crime: it's pretty much everywhere people are. Churches have cooperated with it. But that association doesn't define what churches are, it doesn't define what law enforcement is, it doesn't define any of the other businesses. In any walk of life, in any kind of organization, there can be people who will organize force and influence for private benefit rather than cooperating for the ideals an institution was created for.
Unions are subject to that too? Well no kidding.
Also "dystopian, Hollywood writeresque prose" -- WTF? The comment you're replying to contains a credible model of how market systems become non-competitive. It's useful whether you like market systems or not (if you like them, you can use it to inform improvements). And what's comes out of creative media production is such a wide variety of content that the only thing that's certain is that you can't keep it all under one umbrella, much less one as tattered as the one you just unfolded. But even if we could imagine some representative-middle it sure wouldn't have a lot of dialogue in it resembling the comment you're responding to. The whole thing just smacks of name-calling driven by unreflective associations.
Most people -- even capitalists -- like to think they aren't taking advantage of people, but most capitalists are willing to overlook the ways that they are taking advantage of people, so the impulse doesn't do much good.
"""One night, on my way home from work, I pushed the wrong elevator button and got out on the floor below mine without realizing it. My key wouldn’t fit the lock to what I had assumed was my door, so I turned the knob and stepped, to my astonishment, into a completely empty, totally untouched one-bedroom. I turned around and beelined to the elevator, worried that I’d get busted for trespassing, when I noticed strips of masking tape covering the door frames on all of the other (presumably empty) apartments on the floor.
This was how I became aware of “warehousing,” the practice by which landlords keep unrented apartments off the market to create artificial scarcity. Building owners have always done this, especially in new constructions with lots of virgin inventory, because why give renters the upper hand if they don’t have to?
But they really started doing it during the pandemic. On a 2022 episode of the real-estate-industry podcast Talking Manhattan, Gary Malin, COO of the Corcoran Group, made a surprising claim: “At one point during the downturn, the vacancy rate in the city was close to 25 percent,” he said. “You had owners who were sitting on hundreds if not thousands of empty apartments.”"""
If there are extremely wealthy entities that can afford to soak up enough supply to meaningfully impact market prices, making it easier to build new housing is likely part of the equation, but it may not be the silver bullet. I don't know how many units are held unoccupied, but as someone from Detroit, I'd advise against letting supply get too far ahead of demand (Context: a major housing surplus developed in Detroit as the population dropped from ~2M in 1960 to ~0.6M today, and this surplus destroyed the value of homeowner's equity and lead to abandonment, blight, and massive arson rates).
The pandemic may have been a one-in-a-lifetime decrease in demand for housing in New York City. Even if the vacancy rate did reach 25% at one point, the price of apartments correspondingly plummeted from the winter of 2020 to 2021 by 24-33%, depending on size. [1]
Now that demand has returned, and vacancy rates have plunged to their normal sub-5% level, rents in the city have hurtled back to their 2020 prices or even higher. [2]
This is exactly what economics would predict of a market system with constrained supply. Demand is almost never as elastic as we recently experienced, and this only serves as further evidence of nonexistent undersupply being the primary cause of high prices. Not "warehousing" or hoarding of vacant housing that already exists somewhere.
Another quote from the curbed article cited by the main post:
"""Look, it’s possible that my suspicions are baseless and all of these buildings are full. Maybe their tenants really did come flooding back to New York last year. Maybe some are former couples who broke up during the pandemic and needed twice as many apartments and others are remote workers from Milwaukee or Akron evading city taxes by claiming residency in their old states. Maybe they came without any furniture so they didn’t have to hire movers. Maybe they’re homeschooling their kids, taking Ubers instead of the subway, avoiding restaurants, and abstaining from all other activities that would expose them to public data collectors. Weirder things have happened here. But if you meet any of these people, give them a change-of-address form for me. They’re probably missing some good mail."""
One of the central points of the main article (exemplified by the opening sentences quoted below) is that demand hasn't returned.
"""I was impressed by most of this article in Curbed, which did some actual reporting on the discrepancy between landlords saying rents in New York City were surging "because people came flooding back" and the fact that, according to all data, people did not actually come flooding back. The reporting goes to impressive shoe-leather lengths -- the author even contacts the New York City Water Board for clarification on how much waste they processed in 2021!"""
This is why I really want to see carrying costs for all types of vacant real estate vastly increased via punitive property taxes triggered by vacancy. Phase it in over a few years to allow large property owners to adjust slowly without crashing markets, but it just doesn't feel right that there are so many vacant units being essentially held off the market to keep pricing far above equilibrium. This applies to homes and commercial properties such as retail and office too. If prices were at equilibrium, vacancy rates would be near-zero, just units which were between tenants.
We have enough housing for the number of people we have.
What we have is a complete lack of top-down management to allocate it efficiently.
If we combined Soviet economics and modern Big Data, we could solve this easily-- mandate that economic engines are sited where housing gluts exist, and assign out housing to optimize things like average commute length.
You need competition, which means you need developers to add more housing units, which means you need to change the regulations that prevent that from happening.
Problems in real-estate are almost always government created IMHO and not "capitalism".
> What stops the new units from being added to the cartel? Cartel members would be the best positioned to acquire them.
If competition is unrestricted, cartels are unstable structures. It only takes one member unwilling to join cartel to ruin them. That's why drug cartels are killing each other and smaller competitors.
There are exceptions, but that's where antitrust laws come in.
> It only takes one member unwilling to join cartel to ruin them.
It only takes one member in an enviroment protected from all other actions of the cartel to ruin them.
If all economic actors only interacted in the marketplace itself, then, yes, cartels are unstable. But businesses are not spherical cows in a vacuum.
In practice, cartels can exert all sorts of forces to insulate themselves. While most don't go to the extreme of drug cartels which you should note are quite adept at maintaining their stability, they can still to plenty without resorting to violence. Off the top of my head:
* Economies of scale, barriers of entry, and other Econ 101 stuff that privilege large entrenched actors over upstarts.
* Threatening to stop giving contracts to builders if they work with the competitor.
* Threat of social sanctions since many of the people who run these businesses all know each other and play together. Pretty awkward to break up a cartel at 10am and then go to your regularly scheduled golf game with its owners at 4pm.
* Buying smaller competitors outright before they defect.
> Economies of scale, barriers of entry, and other Econ 101 stuff that privilege large entrenched actors over upstarts.
All of those already exist without cartels.
> Threatening to stop giving contracts to builders if they work with the competitor
This assumes that pool of builders is somehow limited, but if that's the case, builders have leverage. How exactly do you see this conversation going?
- If you work for our competitor, we won't give you any contracts!
- But he can just hire other builders.
- He can't, you're the only builders in the area.
- Oh. Well then, how about we go work for both you and your competitor, and you have to pay us more. What are you going to do, we're the only builders in the area.
> Threat of social sanctions since many of the people who run these businesses all know each other and play together
There's potentially billions of dollars to chase, but what's stopping you is that this will piss of your golf buddies. Right.
> Buying smaller competitors outright before they defect
You can't just assume you can buy any company. Why don't drug cartels just "buy" each other? Surely it's preferable to non-stop murdering.
Well, sure, but in an environment with a cartel, they will privilege the cartel over other actors in the system.
> This assumes that pool of builders is somehow limited
And it is. It's limited to the builders who operate within the geographic area the cartel operates in.
In general, you're just dismissing these very practical criticisms with more "idealized market theory" that only works when it doesn't have to take real frictions into account, or by just saying what boils down to "nuh-uh".
At some point the cartel will run out of capital. Before then, the mispricing becomes evident enough that speculators come in on the other side and burst the bubble.
> At some point the cartel will run out of capital
They can't really though, at least not anytime soon -- the cycle itself gives the cartel more capital. If they buy units as they come onto the market, they hold the equity in those units, which they can instantly mortgage out to get more capital, which they can spend on more units, which they can instantly mortgage out to get more capital. This is especially true when interest rates are low, (the lower rates are, the cheaper this cycle is to continue -- at interest rates below the real inflation rate, they effectively get given free money to do this)
And yes, it exposes them to the risk that eventually this bubble could pop, but it could take many years (decades even?) before that happens.
What are "capitalism laws"? My point is that the government is preventing the transactions. Doesn't matter if we are talking about a republic, a parliamentary system, a monarchy, a socialist country, authoritarian, feudal, local gangs, organized crime, etc.
It requires power to prevent voluntary transactions and that comes in lots of flavors.
I misspelled capitalist - defined as laws that benefit those with capital.
My point is you are distinguishing between government and capitalism - capitalism is an attribute of the government and power structure. The people with capital are the ones preventing the transactions (to their own benefit of course).
There are plenty of housing units in the USA. Housing is extremely affordable in parts of many major American cities such as Detroit and Baltimore to name just a couple. For example you can buy a house in lovely Baltimore for under $25,000 in a neighborhood with amenities like a walkable park, and tennis and basketball courts[1]. The complaint is never really "housing isn't affordable," it's more along the lines of "I can't afford to live in the most desirable coastal real estate in the entire world" or "I can't afford to live in a safe place with a good school district" (a classism/racism dog whistle if ever there was one).
I see some 'houses' in the area that you're looking at for $130k, built in WWII and likely have heating bills high enough to bankrupt the wealthy unless the place is ripped apart and modern insulation is put in.
As a native Detroiter I can confidently tell you that any house you can get for $25,000 will come with externalities that will make the house undesirable on balance.
Large back tax bill, lack of city services (e.g. if live in Springwells, good luck getting a reasonable response time from Detroit PD if you're being burgled) and an unsafe transit situation are the most common ones I can think of.
The houses are cheap for a reason. Its not as though Detroit is filled with provincial oafs that don't know what they're selling.
Land is pretty much the definitive natural monopoly. If you want land rights you're going to end up with monopolies formed around the use of land and natural resources.
It's easy to convince them to lower their prices when its in their self interest to do so. Collectively the landlords benefit from holding empty inventory and raising the prices but individually they can benefit from breaking the cartel and filling their inventory.
Make empty apartments untenable. Not by passing a law but just raising interest rates so that money locked in an illiquid asset is worse off than cash in a bank.
Prices are set on the margin, you need a few landlords to start to feel capital pressure to drop rents.
> Not by passing a law but just raising interest rates
Yeah, I can't imagine there would be any unintended consequences to that.
In what world does raising the cost of providing housing cause landlords to reduce rents? More likely it causes landlords to stop renting. See the consequences of the rent control regulations in NYC, for example.
By not renting from them. A vacant house will pressure the rent downward. But this only works if there is a free market. If the regulations are limiting supply, prices will continue to go up.
Low availability keeps prices high with no need to worry about things like quality. There is therefore no incentive to build to increase supply. When a market is this dysfunctional, state intervention is the only way forward. Build publicly owned housing and rent it affordably.
This probably won’t happen either, because so many in government are also landlords.
Edit: Wow, so many downvotes for advocating public housing.
It's worth pointing out that the software will recommend leaving apartments empty for the sake of keeping rents high. This is briefly mentioned in the article, but implies that we would need a lot of excess supply to make a difference in areas dominated by a small number of companies utilizing this product.
Once additional supply is added, all the dynamics change though. The cartel can restrict their own supply at the price of profits, but cartel members will see that investors who are not part of the cartel enjoy the same high rents while having much higher utilization because they don't need to keep flats empty. The only way for the cartel to ensure that doesn't happen is to either make sure every (new) landlord becomes a member, or make sure there can be no new landlords.
So far, they've use the latter option, and that's most likely because the first one is hard: if the cartel controls the market and keeps the prices high, new investors have no incentive to join, they'll make more money if they don't.
How convenient it is that, whenever capitalism has a negative effect, people rush to say "oh but its not real capitalism, they're doing it wrong. That would never happen"
I think it's weird people are stuck on treating the real-world system of capitalism and ideals about how markets should work as synonymous. It's possible to criticize capitalism for its failures without necessarily questioning the underlying ideals about markets. They're not the same thing. Markets and market-thinking predate capitalism, and exist in and affect all kinds of non-capitalist systems, today and historically. They aren't solely a feature of capitalism, and capitalism isn't the same thing as markets.
Capitalism doesn't just happen. The natural state of nature is cartels, that's what markets will trend towards without government regulation.
If this effect isn't intuitive to you, consider what happens when the market for something is completely removed from government involvement, like the global market for cocaine. Or a market that develops in the absence of any kind of centralized authority, like Somalia.
That's what happens to every market unless a state intervenes. The invisible hand of the market trends towards long term warlord/mafia type arrangements unless the public is organized enough to stop it.
No, that's "free market economics", which is slightly different.
Cartels are very much capitalist, because they create more profits for everyone involved. The more parties you get involved, the better it is for all of them, and the worse is it for any competitors who do not join.
The Dutch East India Company is often considered integral to the history of capitalism, if not the start of capitalism itself, and was granted a 21-year monopoly on trade by the Dutch government.
The real reason the Dutch East India Company is integral to the history of capitalism has less to do with trade and more to do with the innovative legal structure which for the first time separated the owners from the managers, and unlike all prior enterprises allowed for tradable claims on the ownership in the form of equity shares rather than an ownership governed by a partnership.
The problem with using 'capitalism' in discussions like this is that there isn't a precise definition of it. To some people it simply means private ownership of the means of production, to others in includes free trade, to others (and to my thinking, the most precise, but YMMV) its about the separation of management and ownership and tradable claims on the firm.
The Pythagoreans are often considered integral to the history of mathematics, if not the start of mathematics itself, and they murdered the guy who proved that the square root of two is irrational.
Hard to say for sure, but probably correct: Orwell seemed to be a critic of totalist ideologies, certainly totalitarian communism but he also had words for unrestrained laissez-faire capitalism.
I've been convinced lately that we have no collective agreement about what the term "capitalism" means any more. Yes there are text book definitions but none of those are used in typical public discussions like HN.
Power tends to accumulate when government actions restrict voluntary trade that would have otherwise proceeded. That is a characteristic of governments not of "capitalism", IMHO.
There is no clear line between government and business in a place where spending money is protected speech. Much of the US government at all levels, but especially state and local, is fully captured by private interests.
I fail to see why unions need to be brought in to this issue. Not every problem needs to be framed in the form of class struggle. Exactly what sort of "union" would represent tenants? It just seems like a unhelpful way to discuss this particular issue.
yeah why, when discussing large powerful groups of capital owners colluding to screw the working class, why would we discuss the most successful tool at stopping them: groups of working class people large enough to claw back a tiny amount of power?
Worker unions have provided housing to their members before.
The capitalist class is likely to be the owner both of the corporation you work for, and of the housing you live in, so you have the same power struggle with the same people.
People owning their own homes, and small landlords push back against that, but the trend is that the owning class owns everything
I was all ready to come into the comments with "Sure this is annoying, but it's a symptom of the underlying problem of a lack of housing caused by poor housing policy." Then I got to this paragraph, and yeah, no, this just clearly price fixing. You have to convince your software provider to let you charge a price that's different than what they want you to charge? That is truly bananas.
If you take the plaintiff's allegations at face value, of course the defendant is going to sound guilty. The reason why I'm skeptical is because "cartel as a service" doesn't make any sense as a business model. Realpage doesn't gain anything from creating a cartel because they don't own the homes. They advertise that they maximize profits for landlords. If they are indeed price fixing, they aren't fulfilling their promise to their customers.
Edit: As with all just about anything. It looks like, people are hostile of the idea of "presumption of innocence" when that requires them to question their priors.
> If they are indeed price fixing, they aren't fulfilling their promise to their customers.
They definitely are! Price fixing ensures higher rent for the whole cartel (which is comprised of their customers). And enforcing cooperation is decidedly a good thing, because cooperation is required to keep prices artificially inflated.
What Realpage gains from creating a cartel is a really sticky customer base. I don't think it makes sense as a model because it seems to be clearly illegal, but putting that aside they're delivering a lot of value to their customers and are getting paid for it - it's definitely a sensible business model.
> Price fixing ensures higher rent for the whole cartel (which is comprised of their customers)
Price fixing ensures higher profits for the entire market, not just the cartels. Those outside the cartel equally benefit from the price fixing as cartel members, but that no pressure to constrain supply, which puts them in a strictly better position. For example, OPEC enabled the fracking industry and when OPEC loosened their price fixing, in 2019, many of these companies went bankrupt.
> What Realpage gains from creating a cartel is a really sticky customer base.
So that's why they allegedly threaten to fire their customers when they don't follow their pricing recommendation? It would make much more sense to simply offer the best pricing product.
Tragedy of the commons is a problem cartels face, that doesn't mean the cartels aren't providing value though. Sure some will defect, but everyone in the cartel is still better off than the otherwise would be.
> Tragedy of the commons is a problem cartels face,
That's my point. If RealPage were creating a cartel, they would be creating themselves problems without any upside. They aren't receiving the rent. They're receiving money from landlords who are happy with their pricing model. The fact the RealPage does not seem to experience the same problems common to cartels suggests that they aren't facilitating a cartel.
Signing up for the service gives the members immediate access to the price the cartel is setting. Defecters have to wait for the market to react to RealPages updates, so there is a disadvantage to defecting. Even if there wasn't, the biggest landlords would want to join the cartel because they know that fixing prices makes them richer, even if some of the value the cartel creates isn't captured.
In this case, we would be taking the defendants own words at face value, which seems reasonable to me.
> The reason why I'm skeptical is because "cartel as a service" doesn't make any sense as a business model.
It absolutely does. The challenge with a cartel is communication and coordination: ensuring the members know what prices they are supposed to set, and pressuring them all to follow along. Realpage provides exactly that.
I thought maybe the article was cutting out context from the source, so I read the source[1], and not only was the article not taking it out of context, there are even more damning quotes:
> As one Lessor explains, while “we are all technically competitors,” RealPage “helps us work together,” “to work with a community in pricing strategies, not to work separately.”
I think landlords have already been doing this even before software existed.
There is an additional mechanism that creates this dynamic, where properties (especially commercial ones) are valued based on the price of leases. For this reason, it can be better for landlords to let a property stay empty with a higher listed rent than to let it open up, if they are renewing their lease or borrowing against it.
I’ve heard from non-authorities sources that loans for the comercial properties have covenants that would severely financially punish the landlord for lowering the rent. Enough of these restrictions in a single location would have a monopolistic effect on pricing paid for by landlords who now have to carry these loans without tenants. Usually it’s expensive to distort a market enough to maintain monopoly pricing but not if you can get someone else that is optimistic, naive, or desperate to pay for it.
Your revenue in commercial real estate is imaginary. If your building is vacant 100% of the time for the year, your revenue is 12 months x your desired rent.
Then you have an expense of 12 months vacancy.
You can get loans based on your revenue.
Additionally, it's the reason you see concessions of 1-2 months free all the time - but landlords will never reduce the rent.
concessions are expenses. Revenue is 100% of their desired rent.
Would that be a covenant on revenue vs a covenant on rental price? Wouldn’t that amount to the same thing. I’m not in that industry nor have I paid particular attention to it, just going by a rumor I head from a friend.
Perhaps instead of a covenant it could be more implicitly enforced by suggesting if there is a revenue drop they’ll revalue the property and force the landlord to make up the difference which could be financially ruinous for some.
Claiming revenue that you never actually had sounds fraudulent?
Can't they extend the trick, so that they have one unit that rents at $100B that always has the vacancy expense of $100B? Then they can set the other rents as they like with little impact to their revenue
Having rented commercial properties, the way around this is to agree to the lease rent, but then negotiate a bunch of rent vacations, financed renovations, etc. which even out to having a much lower lease.
The commercial landlord financial infrastructure is broken, but gameable.
Also, a land value tax would fix this (and many other real estate market distortions)
Doesn’t matter, now they are openly colluding through a company. A competent government can create a RICO equivalent and penalize these animals, if it wanted to.
There’s two different types of price collusion, and only one is illegal. The first is using public signals (ie looking at competitors prices) and setting yours to match. This is perfectly acceptable, and is usually unspokenly enforced by tit-for-tat strategies.
The second is when you get together and say, “1bd studios are $1200, agreed?” This explicit coordination is illegal. IANAL, but this looks closer to the second.
What's described here is significantly worse, in that it's not just landlords deciding to leave things vacant instead of lowering lease prices, it's a third party software that's coming in and telling a large number of landlords across a market what they're allowed to charge.
The approval wouldn't be from RealPage, it would be from that employee's supervisor.
Essentially, one can configure RealPage (and RealPage seems to make this suggestion) to use their auto-price tool by default and require management approvals if employees want to set the price to something else.
If I'm buying a Playstation at Walmart, chances are the person at the checkout counter can't change the price directly and give me a discount. They probably can call over a manager who could approve a price change because they can see I'm a really cool person who should get $50 off this Playstation.
No, the article is very clear. There is approvals team that that has to press the button in addition to management. To slow down/increase friction the process even more.
> There is approvals team that that has to press the button in addition to management.
I agree the article is very clear. The approvals team is the management of the property.
From the article:
> If there is a disagreement between the participating Lessor and the RealPage Pricing Advisor, the dispute is often elevated to the Lessor’s management for resolution, and specific reasons justifying a departure from RealPage’s pricing level are usually required.
This snippet is in the "..." from the above comment. Funny they snipped out this extremely critical part of the quote to show who does the approval.
Where does it say RealPage employees need to approve the price?
> Specifically, every morning, RealPage provides participating Lessors with recommended price levels. Lessors typically must communicate to a RealPage “Pricing Advisor” that they have “accept[ed]” or “confirm[ed] the “approved pricing” within a specified time frame. If Lessors wish to diverge from the “approved pricing” they must submit reasoning for doing so and await approval. RealPage encourages participating Lessors to have daily calls between the Lessors’ employees with pricing responsibility and the RealPage Pricing Advisor.
So every day an employee at the Lessor must tell a Pricing Advisor -- a flesh-and-blood RealPage employee -- that they accept the pricing provided by RealPage. Further, to reject the pricing, they must explain to the Pricing Advisor why they are rejecting the pricing in writing.
It IS confusing because it goes on to say in the following paragraph that said requests also require further approval from a manager at the Lessor.
This is a bit vague, but "wait for approval" here doesn't necessarily mean its the Pricing Advisor that's approving it. I definitely take it to mean its the management approval as mentioned later. Which makes sense, you'd normally want deviances from established prices to be approved by management.
Given that it says "If there is a disagreement between the participating Lessor and the RealPage Pricing Advisor..." I'd say the Pricing Advisor isn't able to just wholesale deny it or delay it. As the leasing agent, you'd just choose to deny that price, put in a comment about how its a unit that we haven't been able to move in forever and every tour over the last six months leads to people saying the unit is way overpriced", and then that comment would get sent to your manager for approval or rejection.
> How could this same Lessor be getting approval from anyone other than that employee?
Because it tells you who the dispute gets escalated to in that next paragraph, and it's not that RP employee.
> If there is a disagreement between the participating Lessor and the RealPage Pricing Advisor, the dispute is often elevated to the Lessor’s management for resolution
If the employee has permissions to just set the price, they can just set the price. If they don't, which a lot don't, the dispute gets sent to their manager who does have the rights to set the prices.
RP knows there's a disagreement on the price, so they can update their models and understand why the property disagrees with the generated prices, but they're not directly enforcing their generated prices. They do strongly encourage the generated prices though and do pressure the property to stick to the price, but ultimately it does not require approval from the RP employee.
...but that's still not approval by Realpage employees. The employees of the property management company do not need realpage approval to change prices from the suggested prices. They need management approval from their own company to do so.
> But RealPage emphasizes the need for discipline among participating Lessors and urges them that for its coordinated algorithmic pricing to be the most successful in increasing rents, participating Lessors must adopt RealPage’s pricing at least 80% of the time.
Sure, I'm not trying to make any argument here that this is a good system or that it isn't afoul of any antitrust/price fixing or anything along those lines.
I'm just stating this idea that many seem to have here that these prices are being enforced behind RealPage support agents manually approving price changes is incorrect. In fact, property managers can choose to just not use this price tool at all, and manually set their prices, which can also require employees to submit approvals for price changes.
The whole "await approval" thing isn't the problem, that's just normal for lots of places. Lots of places require some kind of management approval to adjust prices.
The rub is that the suggested pricing is the default that doesn't require extra layers of approval with an included reasoning for deviating. All the pressure is for using the price derived from the proprietary information of other companies-that would be price fixing. It's not the process, so much as the source except that the process is set up to encourage as universal adoption as possible to keep the scam going.
As mentioned elsewhere, chances are even if the property management manually set prices for every unit these same leasing agents would still have to submit approvals for changes to these prices. Its just that those with actual price authority for the building chose to set the prices for those units to be whatever the algorithm suggests by default.
Just like the person at the checkout counter can't just arbitrarily sell me a PS5 for $5.
I'm not saying they are DOING anything or a "real" team. It could just be a queue that creates a delay. The objective is to increase the friction to the maximum degree when deviating from the algorithmic pricing.
Still, the impression given to the property's management team is that a person (possibly a customer service grunt) is doing some kind of "final review," manually clicking a box or even just making sure they don't drop below 80% acceptance.
> Still, the impression given to the property's management team is that a person (possibly a customer service grunt) is doing some kind of "final review," manually clicking a box or even just making sure they don't drop below 80% acceptance.
Or making sure their leasing agents aren't issuing leases that will lose the company money.
If the building's budgets are based around leasing apartments at at least $2/sqft, and leasing agents start issuing leases at $1.50/sqft without anyone else knowing or approving, there's going to be a problem. Those leasing agents aren't always privy (or even care to know) about the budgets of the building.
If a waiter starts selling the $5 hamburgers for $1, do you think the business is going to do well? Should the waiter have the ability to arbitrarily decide menu prices?
Yeah and you could have the manager at the restaurant inspect everyone's checks or you can just standardize price strategies for the location and auto-approve leases which meet established criteria.
Both the article and the court filing are unclear about who "the Lessor's management" is, but the Lessor is quite clearly defined as the party which is making property available for lease
It's difficult to imagine a reason why a property owner should have to appeal to "management" to vary the prices of their own asset that doesn't involve "management" being an cartel body.
Yeah, its unclear because the Lessor's management could be a property management company, the ownership of the property, a leasing team supervisor, etc. There's a lot of ways you can set up your property ownership/management/leasing teams, so there wouldn't be a single point to say "the lessor's manager". However, that management is not RealPage.
But, according to the filing, there is a person called a "RealPage Pricing Advisor" who is typically the only party in the loop with the ability to settle the disagreement without seeking further approvals. And it's not exactly a normal arrangement for the "Lessor's employees with pricing responsibility" to have prices dictated to them by a third party company which also sets the Lessor's competitors' prices.
Similarly, if that store manager at Walmart you mentioned had to seek approval from the same advisor that does prices for K-mart and Target to adjust the amount on the till, I don't think one could argue that this wasn't price fixing so long as he was still able to get you the discount by petitioning the Walton Family...
Nowhere in here did it say these people needing to submit the approvals had pricing responsibility. Even if you did have people manually create the prices you'd probably still require your front line leasing agents to submit approvals for listed prices. In this case, those with the pricing responsibility configured their tool to use the algorithmic pricing to automatically set the price instead of manually setting the prices, and deviating from that automatic price requires approval.
> who is typically the only party in the loop with the ability to settle the disagreement
This is not true as well. If the person does have pricing responsibility, they can just set the price to whatever. If they don't, it gets set to approvals for whoever does, which would probably be someone in that employee's management chain. And by management I mean the leasing company or management company or ownership. Not RealPage.
> Similarly, that store manager at Walmart you mentioned should have to seek approval from the same advisor that does prices for K-mart and Target
Once again, this isn't requiring approval from the RealPage Pricing Advsior. Nowhere does this article actually state the approval has to come from RealPage or that RealPage actually has the power to block price changes. This is requiring approval from whoever at the property actually has pricing responsibility, whoever that may be. Chances are it isn't the front of line leasing agent though.
> Nowhere in here did it say these people needing to submit the approvals had pricing responsibility.
It's right there in the text of the lawsuit:
>> ...If Lessors wish to diverge from the “approved pricing” they must submit reasoning for doing so and await approval. RealPage encourages participating Lessors to have daily calls between the Lessors’ employees with pricing responsibility and the RealPage Pricing Advisor.
>> 52. If there is a disagreement between the participating Lessor and the
RealPage Pricing Advisor, the dispute is often elevated to the Lessor’s management for resolution, and specific reasons justifying a departure from RealPage’s pricing level are usually required. But RealPage emphasizes the need for discipline among participating Lessors and urges them that for its coordinated algorithmic pricing to be the most successful in increasing rents, participating Lessors must adopt RealPage’s pricing at least 80% of the time
Now you can reasonably dispute whether the Lessor employee carrying out day to day responsibilities actually has pricing responsibility if they're unable to vary prices by themselves, but what is not normal is that the higher pricing authority which usually doesn't need an approval process appears to sit with employees of what is notionally a third party software vendor for a lot of notionally competing landlords
[nb I edited my previous post slightly whilst you were replying. Slight change of phrasing but I don't think it materially affects your reply]
> Now you can reasonably dispute whether the Lessor employee carrying out day to day responsibilities actually has pricing responsibility
I do dispute it, because it even suggests later that "the dispute is often elevated to the Lessor’s management for resolution". It implies some percentage of these disputes don't bother getting elevated, probably because that user actually did have pricing authority and could just change the price. Most users of the system would not have this permission. Just like most employees at the checkout counter can't change the price without approval.
Do I agree this market is a bit strange for having these algorithmically generated prices? Sure. Should it be investigated for potentially illegal business practices? Sure. Is requiring a manager approval for changing the price from what those with pricing authority originally set it to, even if that price is essentially "auto", strange? No.
> It implies some percentage of these disputes don't bother getting elevated, probably because that user actually did have pricing authority and could just change the price
Or it implies that when the Pricing Advisor won't change the model, they are persuaded to back down and accept the prices given, by a company that insists its valuation model will only work if clients adhere to its prices >80% of the time[1]. Or that sometimes the "Pricing Advisor", notionally a customer success employee of an ISV, has some sort of executive authority to adjust the price which that Lessor's own employee doesn't. Certainly those two outcomes are those the drafter of the lawsuit intended to imply, regardless of which is actually the most frequent.
It'd be odd if a company put the equivalent of a checkout operative on the call with a third party "Pricing Advisor" to discuss the price (both in general and in the context that RealPage supposedly encourages daily calls with employees "with pricing responsibility").
[1]I sold an algorithmic valuation model once. It's something of an understatement to say that this is not how valuation models ordinarily work or the sort of feedback a valuation professional behind the model would ordinarily give to clients...
Your argument is quickly drifting away from what you were originally suggesting, which was that RealPage had some power to arbitrarily block their customers from changing their prices and truly enforce their suggested prices (see your statement "is typically the only party in the loop with the ability to settle the disagreement"). Now its just that they have a lot of persuasion to those with pricing authority. Which sure, investigate that, I agree.
So yeah, investigate those calls. Investigate how the pricing algorithm comes up with its price. Investigate how much the marketing is pushing cartel-like behavior. Smash it with a hammer if they're breaking the law.
But the fact that requiring front of line employee pricing changes to be approved by someone in management at the property management/ownership as something wrong or needing investigation, that's pretty normal. Most users of RealPage wouldn't have pricing authority! They're front of house salespeople. Its these kinds of requests to change the prices that would come under review, and that approval wouldn't be at the decision by RealPage. Sure, maybe RealPage has a lot of persuasion over the person making that final decision, but ultimately whoever has pricing authority at that property (not a RealPage employee) isn't the one that clicks "Approve" either way.
Awaiting approval from your manager to change the price is not evidence of price fixing, which is what I originally replied to.
Your argument is quickly drifting away from the actual process described in the document
>> 51. Specifically, every morning, RealPage provides participating Lessors
with recommended price levels. Lessors typically must communicate to a RealPage
“Pricing Advisor” that they have “accept[ed]” or “confirm[ed] the “approved
pricing” within a specified time frame. If Lessors wish to diverge from the “approved pricing” they must submit reasoning for doing so and await approval. RealPage encourages participating Lessors to have daily calls between the Lessors’ employees with pricing responsibility and the RealPage Pricing Advisor.
>> 52. If there is a disagreement between the participating Lessor and the
RealPage Pricing Advisor, the dispute is often elevated to the Lessor’s management
for resolution, and specific reasons justifying a departure from RealPage’s pricing level are usually required. But RealPage emphasizes the need for discipline among participating Lessors and urges them that for its coordinated algorithmic pricing to be the most successful in increasing rents, participating Lessors must adopt RealPage’s pricing at least 80% of the time
There is nothing remotely normal about someone having the executive decision making authority to authorise a price variation a third party is trying to make to their inventory but not the executive authority to keep prices as they were. Nor is there anything remotely normal about a person seeking approval to retain or change price contacting a third party company's "Pricing Advisor" in the first instance rather than the approver within their own company. If the "Pricing Advisor" didn't have greater ability to resolve this "dispute" than the staff member who has the ability to "approve" a price change but apparently not to hold prices as they are, why would they be contacted?
Nobody has argued there isn't some ultimate beneficial owner of a property with the power to tell RealPage to bugger off, they're arguing that as described this resembles a normal chain of authority and consultation of third party experts in roughly the same way an MLM resembles a regular sales team. Now if you want to argue that this is deceptive wording on the part of the firm drafting the lawsuit stitching lots of discrete elements together into the appearance of a single process of questionable legality, I'll agree that may be possible (putting the worst possible spin on things is a class action lawyer's job) but then, some evidence of that would be nice...
My argument hasn't drifted away from what this process is. Combining the logic here in an easier to follow workflow:
Ownership/management chooses to buy RealPage for their property management solution for a building. They decide to configure it and contract out Pricing Advisor services. They've now established the default prices are whatever RealPage suggests it should be.
They then hire a lot of leasing agents (or they hire a leasing agency who hires these people). These are front of line sales people. These people are getting the day to day updates on changes to these prices, which are supposedly algorithmically generated. These are the people you'd want to review these prices, because these are the people who are actually dealing with the day to day of trying to sell these units. If these prices that the advisor is suggesting are unreasonable, they should probably push back and make a recommendation to change the price. They're the ones hearing customers argue the prices are overpriced and what not, they're a bit closer to the ground truth of the price in many ways.
However, those front line workers probably should not have arbitrary pricing powers. They're just focusing on signing leases, not necessarily broader picture of the building's business.
So talking about the approval process (which was the whole point I was originally replying to, not the algorithmic pricing or the whole weird relationship of RP to lessors which I've agreed should be investigated), lets just remove the whole algorithmic side of things. Upper management said units lease for $2/sqft. Front of line leasing agent decides to start signing leases for $1.75/sqft. Should that front of line leasing agent have been able to change the price from what upper management wanted without seeking an approval? Should they have probably given a written reason for going against the established pricing structure upper management chose?
So now lets enter back the idea of the algorithmic pricing. Upper management likes this dynamic algorithmic pricing. They say, whatever the algorithm sets, that's the price today. Algorithm says $2/sqft. Front of line leasing agent thinks a more realistic price is $1.75/sqft. Should that front of line leasing agent just be able to arbitrarily decide what the price is without seeking some approval? Ultimately, that review isn't some RP agent; that review is the same manager as before.
I think you're conflating the people with pricing authority on the call with the Pricing Advisor and the people who would often be submitting pricing changes for approvals. If they're having to get the pricing change approved by their management, then by definition they didn't have pricing authority. The people with pricing authority are the ones who made the decision to use this whole Pricing Advisor system, and are continuing to allow the Pricing Advisor use their black box to tell them what the price is today. The ones on that call are the ones that can tell RP to bugger off, as by definition they have pricing authority.
I do agree the algorithmic pricing is weird, and a lot of markets don't behave this way. I do think there's some bad relationships what with the pricing advisors and the large market presence of RP. These things should be investigated and potentially have judgements against. The fact its literally saying "coordinated algorithmic pricing" is a major red flag there's something bad happening here. The "coordinated" part is the part is the thing that's bad, not that front of line employees need approvals to change prices or even just the basic idea of using algorithms to set prices.
Sure, if you remove the features which are problematic, the process ceases to be problematic!
But the actual process as described involves an algorithm operated by a third party varying an organization's price, a representative of that company being required to communicate their acceptance or disagreement with reasons to the third party, the staff member with that executive responsibility being encouraged to speak to a representative of the third party, and escalate to unspecified management only in the case a "dispute" is not resolved by that third party.
That's not at all similar to how a regular approval process works with even the most junior staff members, and the idea it applies only to front of house staff is entirely your invention.
Every member of every unlawful cartel ever had senior decision makers who chose to sign up to the cartel and could tell it to bugger off or make the odd exception. That doesn't mean they can't be accused of price fixing in the event they take the decision to delegate day to day pricing to an organization also setting their competitors' prices, or even worse involve them in the review/approval chain for exceptions to those prices.
> Awaiting approval from your manager to change the price is not evidence of price fixing, which is what I originally replied to.
This is ultimately all I'm arguing. I'm entirely in agreement the relationship between RP and a significant chunk of the market, and the fact they're naming the pricing strategy as coordinated sounds exactly like price fixing.
But, requiring a manager to approve a change in pricing, that isn't odd. That singular thing, that's all I'm talking about, because that's what I originally replied to here.
> > await approval
> Sure seems like RealPage is price fixing then
Awaiting approval from your manager to change the price is not evidence of price fixing. Do you disagree with this basic premise?
I disagree with the basic premise that what is actually described in the situation described - a third party called a "RealParty Pricing Advisor" does not need approval from a manager to change prices, whilst an employee tasked with the responsibility of confirming the day's prices is presented with the options of either confirming the change (to the third party) or entering into a dispute resolution process (involving the third party) even just to keep one of the prices the same - represents a normal process of price changes being signed off by a manager.
Usually the owner of the building is the one who insist on using the pricing software, because it increases rents. The management company usually prefers lower rents, because it is less work to fill units.
By whom? It's rather ambiguous (as is so oftent he case with the passive voice), I can see how you and the other person drew different interpretations.
From what I gather, this was training for a leasing sales agent. So this would be the reasons why that sales agent thinks this person that's trying to get the lease should get the lease for something other than the list price. Those reasons would then get sent to that agent's management team for approval. Which is good to have those reasons, like "we've been having trouble leasing that corner unit as people are often concerned about road noise, it has been vacant for over six months at current pricing."
First, how do you not have a 'you're posting too fast' cooldown with all the posts you are making on this thread?
Second, this isn't playstation though is it? But staying with this example, if I go get a $50 meal my server very much can adjust my bill 'I removed X', 'I comped Y' happens all the time. If I go to a matress store/furniture store the sales person very much has the ability to lower my price arbitrarily on items way more expensive than a Playstation. Your 1 example isn't really all that relevant.
> First, how do you not have a 'you're posting too fast' cooldown with all the posts you are making on this thread?
I dunno, I definitely have some posts where I have to wait for the reply link to show up to write a reply.
> if I go get a $50 meal my server very much can adjust my bill 'I removed X', 'I comped Y' happens all the time.
And usually behind the scenes they got a supervisor or manager approval for doing such a thing, or will probably have to explain the deviance from normal pricing later.
> If I go to a matress store/furniture store the sales person very much has the ability to lower my price arbitrarily on items way more expensive than a Playstation.
Most times that I've negotiated pricing for things (cars, mattresses, etc.) outside of private party the final price was subject to some kind of supervisor/manager approval. I can't think of a single time where the final sale for some negotiated price didn't have some approval process to it.
If a business just allows their front of line employees to arbitrarily set prices without any kind of review, their business probably isn't going to do too well. The front of line sales people probably don't have all the information as to why the company is wanting to set the prices a certain way, and without that information they're setting prices rather arbitrarily. This could lead to some pretty massive damages to the company.
If a waiter just decides to start only charging $1 for the $5 burgers, the business is going to have a problem.
> This is like calling your pyramid scheme "Pyramidal Inc.".
(in Coach Z voice) "That happened one time!"
TransAmerica owns an insurance MLM called World Financial Group. I was unfortunate enough to be approached by one of their salespeople at a meetup, and the number on the business card he gave me was, I shit you not, 1-800-PYRAMID. A reference to the TransAmerica Pyramid Building in San Francisco, but still.
While OPEC is a cartel, it does not fix prices. It reduces or increases supply, and then the market decides price organically based on laws of supply & demand. So not quite the same.
That's like saying the sky isn't really blue, when someone asks you the color. "As far as wavelengths go, Earth's sky really is a bluish violet. But because of our eyes we see it as pale blue." [1]
Saying OPEC doesn't fix prices is a nonsense statement that does nothing but split hairs. OPEC engages in price fixing as set forth by the FTC, though they are not subject to the FTC. [2]
Price fixing is a term of art that doesn't just mean the specific price of a sale is fixed. Price fixing can also mean that prices are indirectly fixed by production quotas or capacity. OPEC exists for the very reason to set production quotas or capacity. "OPEC's objective is to co-ordinate and unify petroleum policies among Member Countries" [3]
The key to price fixing is being an entity larger than the government can control and having something the government desperately needs. It also helps when is a globally desirable product and the ability to ship it anywhere.
Still, you can find more examples of OPEC members going against the wishes of OPEC than you can find landlords going against the wishes of RealPage. Good thinking though!
Here's a doc that was recently scrubbed from the marketing page of the company, Entrata, that provides software to my property manager (thank you, Archive.org).
This is the smoking gun, imo. It doesn’t matter if it’s accomplished via software, AI, or anything else—a blatant attempt to coordinate and coerce landlords into a given pricing regime is the definition of price fixing.
I suspect there’s a lot of other price coordination schemes going on under the surface of our society just like this. The pandemic gave them cover, but the coordinated effort to raise prices destroys the efficient market hypothesis as does the gargantuan nature (and influence) of single actors within industries.
There is no future for capitalism without harsh enforcement and trust-busting on this front.
My honest opinion -- We don't need an efficient market. We don't need extreme capitalism. We need housing for everyone.
We need government to step in and cap housing prices, build more housing, and drive away the 80-year-old farts with 15 houses still trying to extract money from poor college students.
Housing should be built to LIVE in, not as an investment.
Capping housing prices will cause less houses to be built, which is the opposite of your stated goal.
Look, if you want more housing we have to let developers build more housing. Many areas in the country put in restrictions like limiting the height of new buildings because it's 'nice' not to have the views of the sky by blocked by a new building.
Well nice costs something, and in this case it's housing scarcity.
> Capping housing prices will cause less houses to be built
Not if you have the government build housing.
We need something like Singapore's Housing Development Board (HDB) which keeps reusing the same architectural designs and elements for simple, functional, repeatable housing that just works.
Singapore also has private-built condos, for those who want luxury, but the HDB flats are perfectly functional, dignified, clean, and comfortable. About 80% of Singaporeans live in government-built housing. Homelessness is almost nonexistent.
If you tax land value, but not development value, that incentivizes greatest productive use of land, and penalizes unproductive use of land.
It incentivizes multi-unit construction, as the more productive the land is, the less onerous the land taxes become. (Wheres currently, developing land normally increases the property tax.)
Increasing units per land both provides more housing, and reduces the tax/renter pass through.
It disincentivizes holding unproductive land as an investment, since unproductive land gets taxed as highly as productive land.
Removing the dysfunctional use of land as a store of value asset, would greatly reduce land and rent prices.
Removing the store of value aspect, would also better align landlords incentives with their renters. As their business model would now purely revolve around their paying customers, without the subsidy of land prices going up due to investment mania. And improving rental properties would be cheaper, without the tax increases that entails today.
All these benefits probably accrue from good economic alignment, because a land tax, instead of total property value tax, reflects that it is land, not its development, which is the finite resource.
Land is finite, yet we all absolutely need land, along with food, air, and water. (Finite in a soft way, given different land is more or less usable). We only "own" land in passing. So those holding it shouldn't be lightly excluding better uses of an absolutely necessary resource.
Land taxes are also morally well aligned. It is land (not development) that is a joint inheritance to us all. Land owners share a bit of that inheritance value with all of us, while still being allowed to manage it according to self-interest, opportunity and competition.
Finally, property tax is part land tax, part wealth (development value) tax. Only taxing land eliminates a wealth tax. Upgrading your home won't increase your taxes.
The humanitarian and economic benefits of properly aligned land taxes would directly accrue to everyone in society from the bottom to the top.
It would improve overall economic efficiency and equality.
It would eliminate a lot of local and national political conflicts.
This would be a disaster for the ruling class. If there was any risk of such a tax reform coming to pass, they would nuke the whole country long before any such thing could happen.
How much of the "ruling class" actually get most of their power from the land they control? I get that price of property affects a lot of people, but I also think the "landlords" are a fraction of the political and economic power.
You seem to be forgetting that over here in the US we're all a bunch of "temporarily depressed millionaires", the wealthy landowners have and will continue to convince the voting public that any of the above rules would be detrimental to the not currently a millionaire class, and such rules should be prevented at all costs, less the dreams of them being rich will be permanently dashed.
> this unfortunately leads to them passing on the taxes to renters
No, this is not how this works. Rent is set by demand and (very insufficient) supply.
If landlord could increase rent by $X - they would have increased it already (software in TFA speeds up the process, but doesn't set market clearing price). A simple thought experiment would be something akin "98% tax on rental income". "Pass it to renter" would imply 50x increase in rent to preserve existing income.
Bottom line: make it easier to build more housing. it doesn't have to be subsidized/affordable/below market rate[0]. Any addition of units has downward effect on rent across all range of prices.
[0] > [In Helsinki] The supply of new market rate units triggers moving chains that quickly reach middle- and low-income neighborhoods and individuals. Thus, new market-rate construction loosens the housing market in middle- and low-income areas even in the short run.
> software in TFA speeds up the process, but doesn't set market clearing price
This software can affect the market price beyond just accelerating the speed at which it reaches equilibrium. The software can help create an inefficient market where suppliers of housing are no longer competing against each other and instead all, together, take a 5-20% hit on "volume" for a larger increase in price that more than offsets the rate of empty units.
Similar to OPEC when OPEC was overwhelmingly dominant (before shale oil/shale gas explosion in USA/Russia).
In a competitive market without this software, each individual player would try harder to reach 0% vacancy because each marginal unit sold would be nearly pure profit, and this could drive prices lower than leaving any units empty.
> software can help create an inefficient market where ... suppliers of housing take a 5-20% hit on "volume" for a larger increase in price that more than offsets the rate of empty units.
Right, if one can get majority of the landlords to collude and government doesn't crack on collusion - this software would create such market.
Until we're in such dire situation: software is expediting price discovery, discovered prices are high because we don't build enough, we don't build enough because there's ridiculous amount of red tape, and doing anything that doesn't lead to more housing being built is spending time and effort on wrong problem.
the advantage of taxing land value is that you can pass on less tax for higher density which means higher density housing gets higher returns for landlords incentivizing construction.
LVT is usually meant to be paired with abolition of parking minimums and single-family zoning, so that the impact of the tax can be spread out among more people.
The problem with housing for everyone is that location demand is not distributed equally. How exactly would you provide housing for everyone who wants to live in Manhattan?
First of all, no one is going to benefit if 25% of US population moves to NYC.
Second, if we build millions of houses and they stay vacant, we just wasted a ton of money.
Third, if we just give away all those houses for free, we're going to destroy the real estate market, which will have a cascading effect and cause a huge crisis in all sectors (and if you think that only billionaires will be affected, think harder).
Fourth, due to misaligned incentives, governments are known to be way less efficient than private companies.
So our best option is to be smart: build only so many houses to meet the demand and so that the utility they provide is roughly equal to their cost, and let private companies build those houses. Now we only need two things: a tool to measure the utility of something, and some incentives for private companies.
The gov't had a crappy track record when it comes to making the market behave as it wants. Especially when the reasons are moral and not universal.
How about we just build a lot more housing and let the chips fall where they may. Shouldn't even need to tax empty housing, either, if we build enough then the market can fix the rest pretty easily.
The whole reason we have a housing problem to begin with isn't capitalism, it's government restrictions on building. Urban grown boundaries, zoning, you name it.
Geez. I thought it was borderline when I thought they were just providing pricing stats but to put even the smallest of barriers that prevents the user from setting a price outside of their recommendation is ludicrous.
RealPage basically just put themselves in the position of running the market.
I worry about time passing for any existing stable industry where MBAs want to come in and “exploit inefficiencies.” It reminds me of Warren Buffet noticing how he can keep raising the price of See’s candies without losing customers. “Look at all that price elasticity l!” Meanwhile ordinary people become poorer.
There are a lot of reasons for wealth inequality, but finding ways to extract more profits off the same product or industry erodes society over time. I don’t know what could practically be done about all of this, but left unchecked, this will continue well into the future.
It’s an erosion of good will, lots of companies go through build vs exploit cycles where they build up a brand with marketing, good quality, and value. Then they exploit it by cutting any of those. As it’s difficult to know the maximally profitable steady state it’s much easier to slowly oscillate between the two taking measurements on the way. A savvy consumer can pay attention to this and specifically try to buy from companies in a build phase. Often less savvy consumers get stuck with brand loyalty and they get exploited. Unless of course the company is a monopoly or oligopoly at which point it’s most profitable to stay in the exploit phase. It should be noted that some times prices in a build phase are not long term sustainable without a subsequent exploit phase.
> Here is how platforms die: first, they are good to their users; then they abuse their users to make things better for their business customers; finally, they abuse those business customers to claw back all the value for themselves. Then, they die.
I think your idea of this happening in a cycle, with the company switching back to diverting its surplus back to its customers at the end before going back around again is an interesting one. I don't doubt it's possible, and that some companies have pulled it off from time to time. But the ability to win back trust from customers are you've spent two phases of the cycle abusing them seems like a tough hill to climb, and I think it's likely a lot of companies will fail there.
It's probably easiest for a company at the end of the cycle, to be acquired by a new up-and-comer who is still on its first round of diverting surpluses to its customers, to best leave its toxic reputation behind.
You make a good point, I do think having a dysfunctional financial industry makes the build -> exploit -> sell/dump such an attractive option that it would be crazy not to chose it. The problem is that people are buying these companies at overvalued prices. Probably a side effect of low interest rates among other things. In theory those who keep buying overvalued companies would long term lose money and will be less able to keep doing so. That doesn't work with negative real interest rates.
I think in software the exploit phase negatively impacts the culture of the developers in a way that is difficult to recover from. The best have left and the most of those who remain probably should be fired. Probably easier to start a new company from scratch, "Don't boil the ocean".
Maybe a good example could be in chip manufacturing where hiring someone like Jim Keller sends a signal that the company is entering a build phase.
Lacoste is a brand that was exploited to near death and explicitly went through a build phase a few years ago and revived itself. Huge marketing spend, lowered prices to target younger people, and I have no idea if they changed quality - not my field. I think it's more obvious trend in fashion where the underlying product doesn't fundamentally change.
Then there are B2B markets which have high volumes and low margins and in these industries reputations would be paramount and the customers more savvy and less exploitable. It would make sense to try to find a profitable steady state as soon as possible and only make minor changes.
So I guess the build-exploit cycle makes sense if assuming an efficient markets devoid of people with money willing to over pay for things they shouldn't.
It is a lot of work as the big companies will buy brands with good names because of this reason (and will proceed to make them shitty).
After this phase the few remaining companies will attempt to find a way to entrench a regulatory monopoly and survive off of rent seeking behaviors rather than actual work.
Another thought I had just now is that historically prices were static until an event happened to cause in increase, now prices are becoming dynamic and monotonically increasing unless an event happens.
Edit: The price collusion is greed/growing pains for prices being dynamic by default.
This is another social norm that is being discarded by modern society. You don’t go to a store two days in a row and see different prices without a good reason.
> This is another social norm that is being discarded by modern society. You don’t go to a store two days in a row and see different prices without a good reason.
… Unless that “store” is Amazon, but maybe that’s in support of your point as it’s “modern” relative to legacy retail. However, in this case it’s maybe more that pricing reflects fundamental shifts in the marketing/retail/fulfillment backend over the past decade-plus than a “social norm” being discarded. No profit seeking business would leave money on the table willingly —- greed has always been the default, new tools will always come along to enable it as old tools become less effective.
Prices should roughly double every two decades with “normal” inflation. However over past decade or two we haven’t quite had “normal inflation” and we’ve also had somewhat weirdly static prices for some consumer goods (thanks easy capital + efficiencies from MBAs/offshoring/etc?) and yet unhinged price increases in other areas (college ed, medical care). The overall system has some rebounding/balancing to go (both at micro and macro level) before pricing changes have a clearer relationship to the fed rate. There’s an entire generation of people only knowing zero-percent-interest and sub-two-percent inflation rates as the norm and some thinks those days will return once [whatever now is] passes.
Sure, you’re explaining the mechanism of what I’m talking about.
And yet this generation of low interest rates has gotten progressively and significantly poorer than previous generations. There’s lots of pieces of this at work.
I would not advocate for such a thing... but I'm honestly surprised that there haven't been attempts on the lives of executives/management/boards of companies like in TFA... I mean the whole "one bad day" is all it takes. People/society seems to be far more resilient than people give credit for... of course, this is countered by the massive homeless population. Maybe we're just far more docile.
It's hard to imagine this being tolerated a century or more ago.
They live behind a bland cover, so their names aren't known. Also, they don't seem evil enough. They mostly seem like middle management types.
In other words, they blend in too well.
> Maybe we're just far more docile.
I think it's far more sinister than that. People and companies have learned how far they can push things without invoking outrage and how to release tensions by pretending to have a change of heart. So now they're constantly toeing the line and while each push is small, they are almost constant. Resulting in far greater violations in total.
Of course, that relies on the bread of the bread and circuses staying cheap enough to keep the plebians pacified. If not...a recent example would be the Arab Spring.
Saying just buy from a competitor to See’s is completely missing the point. The point isn’t See’s candies specifically (which I’m so surprised everyone really held onto), but rather the mindset of the MBA type (doesn’t matter if they actually have an MBA) that says let’s just keep increasing prices on this commodity forever until we’ve squeezed all the juice, and once we have, we’ll do it some more. When you apply this to every sector, over time you disproportionally hurt those at the bottom and make them poorer. You also cause inflation, which dwindles the power of savings. This software in the article is doing it for housing, and worse, it seems that it does it more than a human would. You especially see it in entertainment, where now a basketball game is something well beyond the capacity of most. It’s very unfair to me as a society that we say only rich kids can go to Disneyland, and NBA game, or a concert. Or if they do, it’s far less often and they’ve had to save for a long time for it. But you also see it with eating out, car insurance, almost every good except fast fashion, TVs (which are largely subsidized by monetizing your viewing), and some other consumer electronics. The percent of people’s average income spent on most sectors has gone up over time.
Funny that you decided to include fast fashion. Fast fashion by definition is a cheap alternative to high fashion. Similarly, there are cheap alternatives to all of the goods that you mentioned.
I suggest you to get out of your first-world bubble. Somehow you seem to think that everyone is entitled to luxury.
> The percent of people’s average income spent on most sectors has gone up over time.
First of all, that's a weird statement. The percent of people average income spent on most sectors is close to 100%. Ratios will change, but they don't indicate anything if you don't know how to read them.
What's your interpretation of this graph? Is it "billionaires are making movies more expensive and people are forced to save on food"?
'MBA types' have been punished for illegal activity, such as price-fixing, in the past. No one has granted them immunity from all future prosecution. So then what's your point?
That currently legal actions such as raising prices because a brand wants to move up-market should be made illegal?
I don’t know what I said that made you jump to the conclusion about legality. I never suggested it was illegal. I’m suggesting despite legality, society suffers and wealth inequality grows.
The implications of your previous comment suggests so?
> Saying just buy from a competitor to See’s is completely missing the point. The point isn’t See’s candies specifically (which I’m so surprised everyone really held onto), but rather the mindset of the MBA type (doesn’t matter if they actually have an MBA) that says let’s just keep increasing prices on this commodity forever until we’ve squeezed all the juice, and once we have, we’ll do it some more. When you apply this to every sector, over time you disproportionally hurt those at the bottom and make them poorer. You also cause inflation, which dwindles the power of savings. This software in the article is doing it for housing, and worse, it seems that it does it more than a human would. You especially see it in entertainment, where now a basketball game is something well beyond the capacity of most. It’s very unfair to me as a society that we say only rich kids can go to Disneyland, and NBA game, or a concert. Or if they do, it’s far less often and they’ve had to save for a long time for it. But you also see it with eating out, car insurance, almost every good except fast fashion, TVs (which are largely subsidized by monetizing your viewing), and some other consumer electronics. The percent of people’s average income spent on most sectors has gone up over time.
I’ll leave you with this: https://youtu.be/X29p13cAT1g?t=17
It appears to be trying to argue some point, advance some claim, advocate for some cause, etc., relating to organizations increasing their pricing for their goods and services.
It's not price-fixing if they don't communicate. AWS is fully allowed to publicly publish their planned price increases for the next 3 years and Azure is allowed to react to that information by doing the same thing -- or announce they won't or whatever.
The problem is not that companies are able to increase prices and improve their margins. That's good!
The problem is that our institutions (government, journalism, small business entrepreneurship) have reneged on their role of promoting competition, leading to a lack of fear of competitors in companies, leading to an increased ability by them to increase prices.
There should be more self-reflection on why price increases are possible, and redress of those causes, versus attempting to treat the symptom.
#1 place to start looking -- how to balance the ultra-high efficiency of consolidated firms with their ability to deploy overwhelming capital in novel industries to crush competition.
Or in other words: "How do we make it so that starting up a Facebook or Google or Microsoft competitor today is a reasonable?"
E.g. instead of putting price caps on necessary-but-low-volume medications, look into why it was able to collapse into a single-supplier market
> The problem is not that companies are able to increase prices and improve their margins. That's good!
That's going a bit too far. Under perfect competition there aren't any profit margins: everything sells at marginal cost. Real-world markets won't be like this, but they can get reasonably close. If there are large and increasing profit margins, that's a sign something has gone wrong.
Also, we need to be realistic about natural monopolies. Sometimes the competition we want isn't in the cards, and treating the symptoms really is the right answer. If that necessary-but-low-volume medication has sharply declining costs with increasing production, as many things do, there just aren't going to be enough suppliers to build a competitive market. Competition policy is great, but it can't do everything.
Point. I should have more accurately said "The problem is not that companies are attempting to increase prices and improve their margins..."
Obviously the goal of a functioning system would be that they run into competition restraining them from doing so.
And 100% agreed on natural monopolies, although I believe the classification should be the exception rather than risk being a rule for "things we don't like."
Under perfect competition there aren't any profit margins: everything sells at marginal cost.
True, but that includes the cost of capital, so liquidity theoretically remains adequate and capital provision/replacement is just a business function rather than the business function.
The problem with capitalism is that it's totalizing; the idea that the whole point of society should be making more and more wealth forever is kind of ridiculous when you think about it, like deciding that it'd be great for your social body to get diabetes. It's ridiculous in the same way that pure laborism would be (everyone should work hard, never mind at what) or pure consumerism (everyone should have all the stuff they want, all the time).
Yeah... I think that the FTC needs to get back into trust busting a lot more frequently. I've been saying for over a decade, and amplified since covid supply issues, that the FDA should absolutely require dual sourcing and at least 50% domestic production. Many industries should require at least some percentage of domestic production, just for security concerns regarding supply.
I think the various government agencies, but especially the FTC, have taken the position that its America vs the world, and thus have looked the other way as tech giants have engaged in anti-competitive and consumer hostile behavior that earlier would have resulted in at least raps on the wrist, if not more (MS antitrust suit).
Now the position seems to be to let them do whatever they want and shield them from other governments and competition if necessary.
>Public Opinion Has "near-zero" Impact On U.S. Law.
>Professors Martin Gilens (Princeton University) and Benjamin I. Page (Northwestern University)’s study found that the number of Americans for or against any idea has no impact on the likelihood that Congress will make it law.
>One thing that does have an influence? Money.
>While the opinions of the bottom 90% of income earners in America have a “statistically non-significant impact,” economic elites, business interests, and people who can afford lobbyists still carry major influence.
America is a republic only on paper. It's a de facto oligarchy.
I mean look at how TurboTax, Intuit, H&R Block have been able for decades to keep the IRS from doing our taxes for us. Literal rent seeking behavior and the only people it benefits are the tax filing companies. Literally everyone else in America loses. https://sunlightfoundation.com/2013/04/15/tax-preparers-lobb...
The biggest trick capitalism ever pulled is convincing people that it's not a system of government where whoever has the most money, rules. The plague of rampant regulatory capture just further proves it.
The need to actively defend competitiveness from erosion seems like a vulnerability in the capitalist system. Anticompetitive behavior is a natural tendency in the system; it is advantageous for everybody all the time to be doing as much of it as they can get away with, and the gov has to actively exercise energy to determine when it gets too bad and needs to be reversed. Governments are fundamentally not very good at holding a line like this, they get tired... they greatly prefer to let things just play out on their own. They prefer to have a private company managing e.g. a local utility monopoly rather than do it themselves.
It always feels like there is some element that should exist-by-default in our economic system to organically oppose monopolistic behavior, without active government attention. Roughly this looks like consumer unions: the more monopolistic an organization, the more it looks like a governmental agency, and correspondingly the more power the public should have over it—putting a ceiling on the ability of private enterprises to extract value from the public.
Yeah, private equity is a plague on humanity. I've heard so many stories of industries made worse for workers and customers just so some dicks can extract a steady stream of cash along the way to destroying everything.
This is a shame, because I think markets can be amazing engines for optimization. But unless we're going to work to make sure there are strong markets for a given good, we're not going to see much of that.
> can keep raising the price of See’s candies without losing customers. “Look at all that price elasticity l!” Meanwhile ordinary people become poorer.
Minor nit - See's candies is a luxury good and shouldn't affect the average customer from becoming poorer.
Healthcare, hosing, education, etc. on the other hand...
Personally I don’t consider it a luxury good. It’s candy, not bread, but it’s there for the masses. It’s just an example being done to literally everything.
Give the actual product didn’t change, just the pricing, it actively takes money away from ordinary people and gives it to a few. Would you consider Disneyland similarly a luxury? It’s sad how expensive it’s gotten to keep Wall Street happy, meanwhile it allows for rich kids to go but not poor. Same with baseball games. Same with literally everything. Raising prices to make more profit disproportionally hurts the poor, and makes them poorer.
A 'luxury good' in the technical sense is one where when your income goes up your spending on that good goes up disproportionately. So:
* Rice, Buses: 'inferior goods', because as people get richer they shift their spending to other goods.
* Bread, Cars: 'normal goods', because as people get richer they spend more on them.
* Caviar, Sports Cars: 'luxury goods', a category of normal goods where as as people get richer they spend a much larger percentage of their income on them.
See's Candy is a high-end candy brand, and I would expect it to function as a luxury good here.
I wouldn’t equate it with caviar or sports cars. It used to be a treat for the masses. My grandparents would often have a box, and were anything but luxury - sharecropping farmers retired and living on social security. I don’t think they ever bought a “luxury” item. But perhaps this is regional as it’s HQed in South SF.
Luxury goods have a definition and has little do with how luxurious the potential buyer is:
In economics, a luxury good (or upmarket good) is a good for which demand increases more than what is proportional as income rises, so that expenditures on the good become a greater proportion of overall spending. Luxury goods are in contrast to necessity goods, where demand increases proportionally less than income.
The etymology is interesting, and even more emphatic:
c. 1300, "sexual intercourse;" mid-14c., "lasciviousness, sinful self-indulgence;" late 14c., "sensual pleasure," from Old French luxurie "debauchery, dissoluteness, lust" (12c., Modern French luxure), from Latin luxuria "excess, extravagant living, profusion; delicacy" (source also of Spanish lujuria, Italian lussuria), from luxus "excess, extravagance; magnificence," probably a figurative use of luxus (adj.) "dislocated," which is related to luctari "wrestle, strain" (see reluctance).
Etymology informs. It is not definition, but does show sense evolution.
That said, this etymology tends to support your position, given that at the heart of luxury is the sense of self-indulgence. Which would seem to apply to the non-essential nature of See's Candies.
Regardless, I wasn't arguing for or against your view, only providing what seems to be an interesting datapoint.
I do think it's likely more of a luxury item nationally, yeah; I didn't realize you were talking specifically about Sees in its local area.
But even then, I wouldn't be surprised at all if had your grandparents suddenly had 20% more money their spending on Sees would have gone up by more than 20%.
I think one of the problems is that people will treat these as the same. They follow Buffet's lead because the end goal is money. Everything else is a number on a spreadsheet
But yet here the same principal is being applied to housing. Keep raising prices until you can’t, but in the mean time, make people poorer.
I don’t know if See’s candies are expensive now, but they didn’t used to be. That’s my point. Same with going to the ball game. Same with Disneyland (or at least not at this level). Movies. Going out to eat. Etc.
Same principle, different markets, different outcomes.
> Keep raising prices until you can’t, but in the mean time, make people poorer
That's a primitive model employed by people that are unable to think long term and at scale. More than half of US population lived in poverty in 1900. You know what changed that? "Keep raising prices until you can’t" combined with competition.
I want good products to have higher prices - this ensures I'll get access to even better products at lower price in the long term.
There are dangerous exceptions of course, we learned what those are long time ago: essential goods and monopolized industries. Arguably, housing is both. Candies and "going out to eat" are neither.
I couldn't care less if some billionaire is becoming 10x wealthier if I'm also becoming wealthier at the same time. Complain about inequality all you want, but if I was born 100 years ago, my diet would likely be shit. Today and can eat the same (or even better) food than the richest man in the world. Think about it for a minute.
unaltered housing markets have the same market signals of candy markets. If housing is "artificially expensive", others can build new housing and collect all of the customers. In this instance, find "Real Page" communities and build similar housing next to them and offer 5-10% less than Real Page and take all of the renters. The big problem in housing is the NIMBY and regulations surrounding it.
You would be right if housing location (mostly) didn't matter. But people generally want housing close to where they work and "location" is not a fungible input.
To use an extreme example, if every landlord in Manhattan was using Real Page where would you build your competing housing? Manhattan is already pretty densely developed and housing in the other boroughs involves a much longer commute for someone working in Manhattan.
Edit: Another point is that, unlike something like a web service, you can't collect all the customers. You could only steal as many customers as your buildings can hold. Meanwhile the landlords using Real Page are collecting higher rents and can squeeze you out of building additional property by bidding up the cost of the land you would have to build on.
Real estate is the only asset that is absolutely limited in quantity. With all other businesses you can compete if you are smart and resourceful, with real estate you have to first pay those who are sitting on the land. And they all demand a payout like winning the lottery to let go.
In other businesses you have the very common occurrence that an old small/medium size business owner wants to sell his business and retire, but he's stuck because the actual value of his company is close to 0, and any new person is at best interested in the real estate or parts of the inventory. So the old person doesn't sell and the business continues to deteriorate until nothing is left. With real estate it is different, because there's always some old person sitting on it. You can't create it from nothing like you can any other asset.
Japanese culture seems to have workarounds for this, with many businesses that have run for many centuries. It's harder to become rich in Japan; wealth concentrations are less encouraged, and many people are arguably underpaid to the point of exploitation. Political capital is (imho) much more concentrated, and the relative difficulty of wealth concentration reduces sociopolitical mobility. Arguably the social ethos is one of preserving a harmonious balance, partly because it's profitable for incumbents but perhaps also because it's emergent from geographic factors.
I’ve been saying for a long time that the U.S. likes to treat all problems as if they just need money, when in reality a huge portion of our societal ills are cultural and thus “free.” Worse, most often money won’t actually solve them at all and just wastes everyone’s treasure and time. No one wants an honest debate or meaningful change, nor does it seem possible when everyone just wants to pick a team and parrot the teams opinions.
Japan has many good and bad things about it. There is no utopia, and I’d rather live in the U.S., but I wish we had a bigger mix of harmony as a cultural North Star. Covid demonstrated to me over the past 3 years significant weaknesses of a individualist culture.
I think it's a cultural hangover from getting a thinly populated continent for free at a stage in the civilizational game when you have all the technology to settle and develop it, but still early enough to feel like it's infinite in extent and that there's enough for anyone who wants it.
An interesting comparison is Saudi Arabia, which liberated itself from external rule just a few years prior to the discovery of its vast oil reserves (and just a few years after the realization that oil would fuel industry for the century to come).
The cannibalistic nature of Capitalism requires a "Big New Thing". The internet and tech at large has propped up power structures in the United States, for example I think without computing and the internet the American middle-class would've degraded much faster then it has.
I don't know what the next "Big New Thing" will be, but I doubt it will have the same impact as computing/internet. I think things are just going to get pretty bleak for the lower classes as more and more of the world is consumed by oligopolies.
Historically you get uprisings and revolts when the lower classes are trampled. I don't even think that can happen anymore with even small police departments getting tanks and access to drag-net surveillance at global scale.
The internet was transformational because it (1) decreased communication friction by orders of magnitude & (2) enabled digital business operations, powered by computation instead of people.
And specifically, these were both things that applied to every business on the planet.
A lot of job roles disappeared as a result of that, but it made business much more efficient and scalable. And allowed the remaining employees to be more highly compensated (same_revenue / fewer_employees = more salary space).
Looking around for similar future potentials, I see 3.
1: Applied AI integrates itself into businesses (specifically, in finance, operations, and analytics) enabling another increase in efficiency by an order of magnitude
2: Remote working (and specifically international) allows use of a wider range of talent, at competitive salaries, which permits businesses to hire specific skillsets they previously lacked access to (didn't exist or unaffordable)
3: Driverless over-the-road freight vehicles increase shipping efficiency by an order of magnitude
> The cannibalistic nature of Capitalism requires a "Big New Thing".
That's completely false. Just look at all the convenience stores spread across the world. Or, if my neighbor sells widgets, I can still go into the business of selling widgets.
Housing as a for-profit business kinda makes sense, but I think the main takeaway of the article is this:
> The thing is, "the algorithm" should have very little to do with that sick feeling. The coldness of the interface and robotic voice certainly make for a stark contrast with the thing you are doing, but they aren't the cause. The moment you start thinking about someone's longtime home as something that can "align with strategy," and about pricing someone out of their longtime home as "an adjustment that would be more beneficial," you have morally lost. It doesn't really matter how you go about making that adjustment.
The tool and the training for the tool definitely matters, but the truth is, making business decisions about housing will necessarily hurt people in ways that are disproportionate to the amount of additional income a landlord gets.
This sucks for everyone, but especially for less mobile or financially-secure tenants. I don't think there's a great solution for the American rental system yet other than less profit-maximizing owners or schemes like HDB flats in Singapore.
> I don't think there's a great solution for the American rental system yet other than less profit-maximizing owners or schemes like HDB flats in Singapore.
Fundamentally, the solution is to allow much, much more building.
So far voters are not a fan. Perhaps that will change with the increasing rise of corporate ownership.
While I’m always uncomfortable with violent rhetoric, the very public antipathy around “rent-seeking parasites” does give me hope that in the future, fewer voters will see themselves as “temporarily embarrassed landlords”.
I don't think it's that many people aspire to be a landlord. It's just that homeowners have put a large amount of their net worth into real estate and declaring open season on new building directly hurts them.
We can easily see this as millenials have gotten into owning homes themselves. People are quite good at tending to their own self interest.
For sure. I have no aspiration to be a landlord, but I bought a place last year with a mortgage payment a bit higher than what I was paying to rent an equivalent place before. This made good financial sense.
Now, let's suppose somehow we build all over my neighborhood over the next three years and rent craters. Instead of paying, say, 1200 on my mortgage to own a place instead of 1000 in rent, I could now be paying 600 in rent vs. 1200 on a mortgage. I'm now in a bind where I'm losing money every month over renting the place next door and there's a good chance my property even when I pay it off is worth less than I've paid.
I'm certainly not against building, but if somehow every YIMBY dream came through for them near me, I've definitely just made a really terrible financial decision that's going to dramatically change the trajectory of my life. Moving to another city for a job is now borderline impossible if I'm tens or hundreds of thousands of dollars underwater on my mortgage, and couldn't rent the property for anything close to what I'm paying.
Like many fixes to societal ills, it's easy to look at the end result and see how it's better for most people, but it's likely to hurt a lot of people who made totally reasonable choices.
> Like many fixes to societal ills, it's easy to look at the end result and see how it's better for most people, but it's likely to hurt a lot of people who made totally reasonable choices.
The US Government sets policy all the time that hurts people who own stocks and bonds. And mostly people are fine with that. I don't see why home owners ought to be afforded a special level of protection for their investment.
The fundamental difference is that I can't sleep and shower in my bond portfolio. I didn't buy my house as an investment, I bought it because I have to live somewhere and it made financial sense vs. renting. I'd be perfectly happy selling it for roughly the same amount in 5, 10, or 30 years.
I also was explicitly saying that I want there to be policies in place that will "hurt my investment" because I think it's a good thing in general, but it's important to not just assume that building more is only going to hurt rich rent seeking landlords that are easy to rally people against.
There's a lot of financial and cultural incentives towards home purchasing in the US, so to quickly move to instead make renting the preferred option in policy is going to hurt a lot of people and cause issues that may not be easy to predict. It doesn't mean it's not worth doing, but it's important to look at it holistically and not just see it as only punishing bad rich cartel owners who deserve to be hurt.
Note even right now the Fed has trillions backing the real estate markets from collapsing. The govt creating winners and losers in a free market despite any fundamentals, was never supposed to be the design but here we are.
It's illogical for the value of your land to decrease if your neighborhood has been substantially upzoned.
Instead of being able to fit a single house worth an imputed rent of $1000 on your lot, you'd instead be able to fit a duplex, renting for $600 + $600 = $1200. If supply has increased so much to lower equivalent rents a whopping 40%, then you're probably looking at a situation more like now being able to build a quadplex or small six-unit apartment building on your lot. At $600 x 4 = $2400 or $600 x 6 = $3600 you've actually seen the value of your land double or triple in this scenario.
In this hypothetical scenario you'll now have so much extra money, that you could easily move to more expensive, quieter neighborhood that hasn't been upzoned yet. If you're lucky, you'll be able to repeat the process there as well.
Or you purchased a condo or townhouse where there's no way to sell the land under it or redevelop it without getting a large number of other people to all decide to move/leave at the same time.
If you're one of the first people in an upzoning neighborhood, you're the one who loses value as the rest of the area upzones.
The price to buy 1/100 of the condo/duplex/quad supply in a zipcode is almost definitely higher than in a few years when there's 1000 available. Sure, there's ways it could appreciate enough to offset it if it also becomes a nicer and more desirable neighborhood at a counteracting rate, but that's not for-sure.
This situation specifically screws the people who are doing what you'd want and not over-purchasing a single family home as an investment and instead buying a smaller part of some complex.
> I don't think it's that many people aspire to be a landlord.
I think it was a reference to this famous quote:
> John Steinbeck once said that socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires. -- Ronald Wright, A Short History of Progress
For more, the more infuriating rhetoric is the supposedly-YIMBY types who act like property developers are evil scum for constructing and selling buildings at anything other than a loss.
Correction...voters are a fan of more housing being built (affordable housing even), just not in their neighborhoods where it will negatively impact their property values and status quo.
There are tons of things America could do for the rental and home-ownership market, but we won’t because people will scream that it’s unfair and it will hurt the upper class and existing home owners.
The government could force and pay for construction of massive numbers of condos/townhouses in/around large cities (say 20-40million). Sell them to first time home-owners for extremely cheap (say 200k) with all types of restrictions on it being owner occupied and only allowing the owner to recoup a certain % of appreciation after X numbers of years if sold (say 3% each year lived in).
I’m sure that’s problematic and a team of people smarter than me could come up with a much better system, but there are very tenable solutions with the ability to change laws/policies and a massive pocket-book.
The US used to give away large parcels of land to people just to move out west. So it’s not like there’s not precedence for helping citizens with real estate.
Nothing significant will be done in our lifetimes though, oh well.
> I’m sure that’s problematic and a team of people smarter than me could come up with a much better system
Agree, and disagree. Distortions of the market rarely go as planned, so trying a massive intervention is likely to have a whole bunch of negative side effects. And I don't believe smarter people are more likely to be successful with their own attempts.
Keep it simple. Build more. Drop the zoning restrictions, reimagine the purpose of urban growth boundaries. Supply and demand actually does work.
And to those who may balk: Dense housing doesn't need to be cheap. If you think to yourself "Gosh these walls are thin", that should not be a given in a long-term investment like a multistory complex. High quality, somewhat private housing is possible!
While "any housing" is better than an extreme like homelessness, I align with those who think ever expanding suburbs is a big waste of concrete, infrastructure buildout and promotes the use of needless daily private transport.
I lament (rental) apartments being built all over my city's downtown, but I support increasing the density of living in urban areas.
Japan style zoning and LVT completely solves the problem. Maybe throw in a vacancy tax in some areas to keep the progressives happy and environmental standards deregulation for conservatives.
The HDB system's outcomes aren't great if not paired with abundant supply. Singapore market rents are growing fast, HDBs have all sorts of unsavory (to Americans) queueing and prioritization rules, and there are plenty of rent seeking HDB owners who sublet their flats at high prices.
The whole point of the HDB system was to streamline and standardize the creation of decent quality housing. It worked spectacularly at creating abundant supply. Compared to the 1950s the supply has taken off like a rocket.
The "problem" was that population growth kept up with supply - initially through an extremely high birth rate and then, when that collapsed, through extremely high immigration rates.
Given the high population growth and low availability of land the growth in housing stock has been pretty amazing. Both the quality and the quantity certainly blows the US and Europe out of the water.
I don’t think Singapore has run out of (re-)developable land. It has lots of low rise homes that have very low land value tax assessments. In any case, I agree their current situation is better than ours, but my point that the HDB model cannot solve housing costs without abundant supply stands.
HDBs are high quality and safe. I don’t think most Americans would object to owning their own apartment if the builder and operator happened to be a government agency.
I suspect plenty of Americans would object just to the "apartment" bit! A successful housing solution for Singapore's situation but one that's a million miles from the suburban American Dream.
The safety of HDBs, apart from reflecting Singapore's low crime rate in general, also reflects Singapore not having the idea that high rise government housing projects are somewhere only the poor and desperate would want to live and their condition a reflection of Singapore not having the belief that government budgets are things to be slashed....
At the very least, the apartments would have to be quite large, closer to a house in floor area, for Americans to accept them. Few Americans would be willing to raise 2 children in an apartment less than 200 m^2.
A significant fraction of Americans would object explicitly on that point, yeah. Wouldn't matter if the apartments had solid gold toilets.
Neoconservatism is a hell of a drug.
Wouldn't matter for the areas that could actually use more housing (dense urban ares), but there is an extremely strong anti-government streak in the U.S.
> I don't think there's a great solution for the American rental system yet other than less profit-maximizing owners or schemes like HDB flats in Singapore.
There are various co-ops that exist in the US to buy things like apartment complexes that the tenants then take ownership in.
There are things such as Council housing in the UK.
There are various alternate reality types of systems that basically haven't been tried, or have only been tried in small numbers.
Once you bring in profit-maximizers into a larger, mostly free-market sector you tend the entire industry in the one direction of profit-maximizing (as the profit-maximizers can outbid the others on newly entering housing).
Yeah, but it's an ownership alternative for people who are otherwise stuck being long-term renters. And for long-term renters I think ownership is the better alternative in many cases.
> but especially for less mobile or [less] financially-secure tenants
the burden of taking care of people who are less able to take care of themselves is not a burden that the government should place on certain individual people or individual companies, so rest of us can go on about our days happy that we don't have to think about it any more. If you want us to redistribute money to people so they don't need to move, the bite should equally come out of your and my income and bank accounts, not just landlords'. If you think that the govt should buy all this property so it can do a great job of being a landlord and tenants will be happier that way, get those laws passed. Till then, the fallback is not to simply punish rental property owners. (disclosure, I own property but I don't rent it out because I don't want the hassle, the money is not worth it)
Y'all see this rhetorical jump right? arciini made no mention of any action against landlords but to get out ahead of any possibility even as small as social-pressure against raising rents fsckboy has both escalated the framing language to "punishing" them and also shifted the frame from the plight of renters to the plight of rentiers.
It's not that big a rhetorical jump, though, is it? There's already a lot of anti-landlord rhetoric in this discussion, and historically it heads that way every time.
It's not about punishing, it's about constraining power, and aligning power with particular responsibilities. Is allocating certain powers to certain branches of government "punishing" the other branches? Is requiring certain duties from certain industries "punishing" those industries? I guess we're punishing Norfolk Southern by requiring them to pay for the cleanup in East Palestine, OH.
"If you want us to redistribute money to people in East Palestine so they don't need to move, the bite should equally come out of your and my income and bank accounts, not just Norfolk Southern's."
> If you want us to redistribute money to people so they don't need to move, the bite should equally come out of your and my income and bank accounts, not just landlords'.
So you're saying everyone should pay for an externality of a particular industry? Socialize the costs?
This conclusion hinges on viewing landlord as a range of human identity, like mother or craftsman. Landlords aren't a type of people, it's an activity, an economic relationship.
Deciding that the correct place for that burden is on landlords is a valid and consistent view. That this is part of the risk and responsibility incurred by the action of landlording. No one is forced to be a landlord and so in this view if you don't like that responsibility you simply don't landlord.
It's not "punishment" to reevaluate where we let burdens fall, and require that some roles now carry burdens that they were once free of. And if it is, shit, we punish lots of people for all kinds of things, why are landlords exempt.
Car companies shouldn't be required to add safety features. If the market wants it car companies will add them. Seatbelts should be an add on expense like they were in the 1960s. Get the government out of the business of looking after citizens!
Holy shit, how bad is that? People have been saying that market demand is the reason for rising rents, but in reality it's just landlords colluding to fix prices and leaving units empty to create artificial scarcity?
They’ve been doing this manually with NYC storefronts forever. Now the automation exists (and has for at least 10 years) to do it globally. Yikes. i say at least 10 years as that’s the last time I rented. My apartment definitely used this software then and realpage hq is just across the street.
if you search nybits.com (i think the last nyc apartment aggregator that sorts by date), you can see a daily flood of realpage-adminstered buildings shifting their units' prices up or down a few dollars every day
I don't think they do this on purpose; when I called one of the buildings I was interested in, their leasing agent was surprised I could even see the 'real price'...
NYC vacancy rate is currently 4.5%, less than 1% above all time lows. Yes, artificial vacancy exists, especially in the ultra luxury market, but the data seems to show the extent is overblown.
It's not just landlords, no. Some people want to force urbanization, so the government creates urban growth boundaries to limit sprawl. But then many of the people inside the boundary don't want high density housing near them, so they support zoning to keep it away. And mostly I don't think landlords are the ones leaving units empty -- it's investment groups that don't want to have tenants in the first place, they don't want to be landlords, they just want an asset that grows in value.
There is a very legitimate supply problem, and blaming landlords won't solve it. They only have the leverage they do because the government gave it to them. We could make the gov't back off if we wanted to, but by and large we don't seem to want to.
With investment groups, I've seen a few convincing theories that most of the mass investment group housing purchases were a result of the zero interest rate for an extended period and the effect of that on other investments, and that big investors are likely to try and divest themselves of all those houses over time now that interest rates are back up all at once.
That still leaves landlords, but the only reason landlords have outsized power in the first place is that there's a massive housing deficit in every place in the US people actually want to live.
And housing prices are spiking... because more people, not to mention corporations, see a market opportunity to profit from skyrocketing rents.
Which pushes priced yet higher, because demand increases.
I really hope the government intervenes. The situation is dire for renters across the country right now in a way I've never seen. Rent rising everywhere seemingly regardless of desirability, wage gains, or cost of living. Or I could hope for a housing crash, I guess, when they finally drive rent too high and nobody can afford it.
This post hits close to home and could not be more accurate satire of the pains of property management. I spent a number of years building a competitor to RealPage's Resident Portal, ActiveBuilding (shoutout https://henrihome.com).
RealPage and Yardi dominate the industry with some of the worst software imaginable. The price fixing and competitiveness in the industry is a feature not a bug.
ActiveBuilding basically built thefacebook.com for residents where the sticky feature was online rent payment. They of course got bought by RealPage which continued to operate it as is for a long time with few improvements, but landlords were tied to the ecosystem and didn't really care about the resident experience as long as they could pay rent online and submit maintenance requests. Also who the F decided that they don't need spaces in Product names over there?! ActiveBuilding RealPage.
When rent gets like this (very high and controlled by a cartel as appears to be the case here) then there needs to be a remedy and the free market isn't going to be it. If the subject were some luxury good that was being impacted it would be of much less concern but this is housing. It's a fundamental human necessity and it's being manipulated.
The ideal here should be to cause the least harm. To everyone involved. Landlords should not be ruined but even more important should be the right of people to reasonable housing costs. Again, this is not a luxury... it's a basic human requirement and since it appears to be getting out of hand there needs to be a remedy. The only group powerful enough to provide that remedy, in our system, is the government.
The remedy would be taking every city over a certain population, slam dunking local restrictive zoning and permitting straight into the trash, and replacing it with permissive "shall issue" zoning at the state or national level, in the style of Japan [1].
There's no great mystery here. There just aren't enough housing units in the places people actually want to live, and local cities are keeping it that way.
So should I just take my valuable but older real estate and have it leveled to rebuild similar amount of units but now luxury versions for much higher rent or sell to future land developers?
I suspect there's plenty providing market value estimates based on what other customers are pricing at, but the computerised voice begging people not to price below what the algorithm says and requirements for property managers to seek "approval" to vary their own prices are unusually blatant...
In sports betting, you can buy a service that tells you what you should set your odds at [0], in order to match the market. Since hundreds of betting sites buy from the same company, they quickly converge on some set price.
The parking lots owned by an entertainment company in the large city near where I live (Detroit) prices all their parking lots dynamically. There's a TV at each unmanned lot with a different price dependent on the distance from the event (different venues at different distances) and depending on event and time. Seems made to extract as much as absolutely possible.
This is exactly what RealPage is doing. It's asking rental companies to increase prices. It's then turning around and marketing those percentage increases as a reason to use its software.
So yeah, "you" can, if you're one of those AI SaaS companies.
Of course. When other landlords are jacking up the rental prices in price fixing schemes you can undercut them with more reasonable profit margins and steal more business.
Sellers hate a free market where they have to compete on price. They don't want to live in fear of the other guy cutting their price and stealing their market share. You need a monopoly to win. That's the whole
premise of Thiel's "Zero to One", and indeed, the VC community. YCombinator would never fund something that had to compete on price, unless there was some huge price advantage possible.
A thought I had just now is that historically prices were static until an event happened to cause in increase, now prices are becoming dynamic and monotonically increasing unless an event happens.
The price collusion is greed/growing pains for prices being dynamic by default.
This is another social norm that is being discarded by modern society. In the past, you didn’t go to a store two days in a row and see different prices without a good reason.
I go to the grocery store multiple times a week and see different prices for things I buy. They are constantly changing prices, with sales and offers and 2-for-1. I know this is to confuse me into not knowing what the "real" price of a good is, so that when I run out of ketchup I'm somehow fine paying $8 for a bottle.
I check my NYC apartment website at least 2-3x per week since my renewal is coming up soon. The variance between pricing is insane. There is a 2k delta between 1br apartments on the SAME FLOOR, and the cheaper one is the better layout. They change every week though by hundreds of dollars. It makes absolutely zero sense to me.
I got a rental raise for a 1 bedroom in Bushwick from $2700 to $3500.
I told them this was unreasonable for the area, but they refused to budge on the price, offering a paltry $50 discount.
That apartment eventually got re-rented for $2700 according to StreetEasy as they couldn't find tenants at the price point they (or the "algorithm") wanted.
Many people are willing to pay more to not move, especially if they're in a walk up. Forcing returning tenants to pay more seems like one of the first moves landlords would try.
You know, there just aren't that many vacancies. If you want to break this cartel you need inventory.
I recently crawled all the listings in my county that are hosted by marketing company Engrain, and the problem is there just aren't that many. The only buildings with a lot of vacancies are new ones that are still leasing up. https://observablehq.com/@jwb/survey-of-east-bay-apartment-v...
Housing is not a right in the US. It's a for-profit endeavor. Unless that fundamental thing changes expect rents to go up as much as the market will bear and landlords to do everything to make as much profit as possible.
Side note: I doubt this is actually "AI". Probably some heuristics.
Price-fixing is not a right in the US. It's explicitly illegal.
We as citizens should be strongly opposed to anything that makes housing more expensive because it contributes to homelessness, which is much more expensive than just forcing landlords to actually compete with each other (you know, like the free market is supposed to).
The biggest threat to a competitive market isn't the government in the US. It's the accumulation of power by a small number of actors who control the majority of the supply side.
Well, no, not to defend it really, but the premise is that your use of the amenities of modern society, which people put a lot of effort into creating, is earned by providing profit to others, not merely an entitlement.
This conflicts with our moral sense (in part because there's nowhere you can go to opt out) so we backstop it with entitlement programs. But the premise is a least in principle fairly sound; not as evil as what you articulated.
Though, even if the supply side was immediately opened up, some redistribution is justified to make up for the historical lack of capacity and the inevitable decade it would take to catch up with demand.
Software like this is why I agreed to a rent of $X prior while applying for a lease, and after income verification was returned a rent of $X+30% on the final lease agreement, with an excuse that "it took us several business days to process and rents are recalculated daily based on current market conditions." Which, I knew, intuitively was utter bullshit and they just wanted to fuck me over some more than they already were because they found out I made decent money as a tech worker. Of course, I'm in a bad rental market, and this place was a better option than others, so we sucked it up and took it, and that's why I'm paying nearly $4k/mo in rent when it should be around $3k/mo in the current market (and since prices have fallen, probably closer to $2500/mo).
It's super-scummy behavior and if it weren't "washed" through this software, would be blatantly illegal. Why do we allow these "loopholes" where a company exists to essentially help other companies directly break the law in spirit, but barely not in letter?
Just had a tangentially related conversation about a similar-ish process that restaurant managers/chains use to figure out viability of new locations. They just blindly use software to tell them if the community size/traffic flow will generate revenue relative to costs.
Seeing this article, too, along with a dozen other personal anecdotes (and seeing the early stages of blind-trust in AI), I'm realizing we're moving toward a point where over-trust in "what the computer says" is going to have material effects on civilization.
Ironically, the "Terminator Scenario," won't be what destroys us. Instead, it will be people's brains turning to mush due to over-reliance on AI/algos/etc. We'll simply hit a point where few if any people exist who understand the analog side of what the software is automating.
What you see here is not price-fixing, but expedited price-discovery. What is problematic (to society generally and renters specifically) is the fact that this price-discovery is done in the market with artificially constrained supply.
Prices raise because people are willing to pay that much for dwelling. People are willing to pay that much, because supply doesn't keep with demand.
## Why I don't consider this a case of price-fixing
Price-fixing that is not done via consolidation is ultimately unstable from game theory point of view.
There's very strong incentive to defect from "optimal vacancy rate" and eat outsized profit compared to the rest of competition. Making building easier makes consolidation harder, as outsiders are now potential defectors as well. AFAIK we're not in monopoly situation (yet?) for rental properties.
If I had to give an example of the difference between price-fixing and expedited price discovery, I'd say software used by vendors with significant market power that not only suggests a price based on other clients' prices, but actually sets it and bills based on it, whilst actively resisting clients trying to bill lower amounts would be a pretty good example of when it becomes fixing (the fact it's apparently documented in training programmes with cheesy computer voices saying, in essence "think of the long term benefits of the cartel, not your tenants or vacancy rate" and implemented by demanding clients seek "approval" for their own prices and not just through poor UX is the icing on the cake)
What you see here is literally the definition of cartel price fixing.
OPEC engages in price fixing. It is unstable, as you say, but nobody would say "OPEC is a perfect example of the free market functioning exactly as it should, with no price fixing or market manipulation going on."
The biggest beneficiary of cartels are competitors that are outside the cartel. For example, OPEC enabled fracking to be profitable. To hurt fracking, they loosened their price fixing.
If RealPage were price fixing rather than simply facilitating price discovery, landlords would have no incentive pay for the service.
> The biggest beneficiary of cartels are competitors that are outside the cartel.
This is just... obviously wrong. If this were true, nobody would ever join a cartel, since membership is voluntary. All antitrust legislation and enforcement would be rendered entirely moot, because nobody would ever collude to fix prices.
OPEC technically engages in supply fixing - the market then sets the price driven by the intersection of the demand curve and the (fixed) supply. If OPEC reduced supply and users of oil reduced demand by more than that same percentage, prices would likely drop.
IMO "fixing" is the act of forcibly setting prices across a market, whereas "discovery" is informing your customers with up-to-date pricing info and letting them decide whether to adopt it or not.
If you need to get on the phone with RealPage every single morning and either adopt their suggested pricing or jump through beuracratic hoops to exclude yourself from doing so, that seems much more like fixing. They're not saying "here's the data, go about your day," they're saying "you are to charge tenants this much rent and you better have a good goddamned reason if you refuse."
Why do you consider that "Price-fixing that is not done via consolidation is ultimately unstable from game theory point of view." + "there is a very strong incentive to defect" would imply that this is not price fixing?
Quoting FTC, price fixing is an agreement (written, verbal, or inferred from conduct) among competitors to raise, lower, maintain, or stabilize prices or price levels; Generally, the antitrust laws require that each company establish prices and other competitive terms on its own, without agreeing with a competitor.
It doesn't matter if we're in a monopoly situation, it doesn't matter if the agreement is effective or if many participants defect - if some participants agree to coordinate prices, that is prohibited and punishable.
In the training tools covered in the article it mentioned that it was difficult (as in, you had to contact a support rep) to set a price other than the one recommended by RealPage. By making it difficult to manually set prices, the tendency towards defection is mitigated.
This is untrue. The escalation would be to the property's management team, which is the same group which configured the tool to use the recommended pricing.
> If there is a disagreement between the participating Lessor and the RealPage Pricing Advisor, the dispute is often elevated to the Lessor’s management for resolution, and specific reasons justifying a departure from RealPage’s pricing level are usually required.
If I take a Playstation to the checkout counter at Walmart and say "Instead of $500, how about $450?", the person at the checkout counter doesn't have the authorization to change the price from the price enforced by the checkout system. They'd have to call over a manager and make the case as to why I should be able to buy it for $450 instead of the enforced price the system already set.
From skimming over the relevant portions of the complaint that this quote is excerpted from, it looks like "Lessor's management" is probably the management team employed by RealPage to manage the Lessor's property (Lessor having ceded management from themselves to RealPage). Please explain if this is not the case.
See sections 46 and 47 in the complaint:
46. RealPage and participating Lessors have provided one another with such mutual assurances, agreeing among themselves not to compete on price for the sale of multifamily residential real estate leases. They have effectuated their agreement through two mutually reinforcing mechanisms. First, participating Lessors have agreed to set prices using RealPage’s coordinated algorithmic pricing. Second, participating Lessors have agreed to stagger their lease renewal dates through RealPage, to avoid (otherwise natural) oversupplies in rental properties.
47. RealPage’s coordinated algorithmic pricing allows participating Lessors, in RealPage’s words, to “outsource [their] daily pricing and ongoing revenue oversight” to RealPage, with RealPage pricing participating Lessors’ “properties as if we [RealPage] own them ourselves”—that is, as if RealPage and its participating Lessors were operating as a monopolist.
Then why are "Lessors" mentioned as the ones agreeing to RealPage's policies and not "Property Managers"? And why is the term used "Lessor's management team", and not "Lessor's property management team"?
I think you might be right, it just doesn't seem obvious to me.
You'd probably need to understand a bit more about the basics of these large property ownership and management to kind of get what all is at play here. I'm more versed in commercial property management, but large scale apartment residential isn't often far off.
So you'll have some group of investors which pool together a bunch of money (like REITs, not always) and buy a building (normally the people who build these things don't hold on to them very long, lots of specialization). This organization is the "ownership".
The ownership usually doesn't know/doesn't want to deal with the day to day management of the property, they're just the financials kind of people. They hire a management company. The management company works with the ownership to understand budgets for the building, expected revenues, etc. Management deals with all the contractors to make the building operate.
Often, the management company then hires a leasing company, or might have a leasing arm of the company. This is then the sales side of the whole business of the building. These people are then in charge of finding tenants and be a bit of the outward customer facing side of the operation. These are the people you'd talk to when you're wanting to negotiate on pricing. However, they don't directly control the prices. Remember, ownership wants to ensure certain revenues for the building, and management is in charge of hitting budgets. So that front line agent just making up numbers all willy-nilly can have a lot of effects on not just that leasing company, but the management company that contracted them, and the ownership company that contracted the management company. That person you're talking to about the lease might be a contractor of a contractor of the ownership of the building, and ultimately it's the ownership's money on the line.
All of these groups are often different organizations and companies, and this structure is just one example out of many. As mentioned, sometimes management teams have their own leasing arms. Sometimes ownerships have preferred leasing partners and will push management to use some other leasing company. So its not always a single "this person always reports to that person" kind of structure, so that's why its pretty vague in these filings.
I used to work for a large property management company that used YieldStar, the initial approval went through an in-house team and final approval happened by on-site staff. Smaller companies that couldn't justify an in-house team would use YieldStar for the initial review/approval.
I know plenty of software engineers that are also landlords. It seems like a clever sort of hack to earn a paycheck from a company that is increasing the value of your investments.
This is the natural result of policies that make it difficult to build new housing. Landlords only have immense power in areas where demand outstrips supply.
This is not true. Landlords have immense power everywhere, even in markets where supply far outstrips demand. (Much of the non-coastal US are places where supply far outstrips demand for many years, and landlords are still immensely powerful here)
You still have to break up price fixing cartels like this. You can't just lean back and pretend "moar supply" will magically fix anything.
As a landlord, I can tell you this is false. A good tenant for cheap rent is worth much more than a few extra bucks. Have you owned rental housing before? Didn't think so.
The cute comments ("moar supply") signify your ignorance on the various aspect of the housing market at large. And that is an unproductive comment that demonstrates your overall lack of understanding of the issue at hand.
This "cartel" is a symptom, not a cause. Nobody is price fixing sedans, are they? I wonder why. Oh, supply of hundreds of options and price points? Hmmmm....
Policymakers are not giving enough attention to the impact of phony pricing signals like this. See also Zillow Score / Redfin price. You can inflate prices if you have a broad effect .
A good example is a study of payday loans that tend to move upward due to price signals set by local lawsn
I don't really think that's how software works. When software meshes with society, it greases the skids on existing power structures, with a few notable exceptions. So software is really good at enabling landlords to be more extractive, because landlords were already holding all the cards in the first place. You could write software that helps people, say, form a tenant's union, or lobby their legislators to create more protections, but it's the union or the government - other power structures - that are enhancing the power of tenants by directly opposing the power of this cartel.
There's literally nothing that software could do to enhance their market power. The most you could do is help them to communicate about who the worst actors are, to try and level out the information asymmetry. But everyone still needs housing and there's still only so many units - someone is going to end up a tenant of the extractive landlords, whether we all know they're extractive or not. It's not like tenants of slumlords don't understand that that is their situation, it's poverty keeping them there, not a lack of market data.
> When software meshes with society, it greases the skids on existing power structures,
Ah, so that's why YouTube content is mostly from the television companies that were powerful around the year 2000. And also why long distance telephone calls are the same price and most of the revenue is being captured by AT&T. And e-commerce, of course, is dominated by the same companies that ruled the malls in the 1990s.
The music industry cartel structure has re-formed multiple times since the 1950s. If not necessarily with the same participants, then with the same dynamic and general shape.
I've noted this previously using Charles Perrow's description in Complex Organizations (1972, 1985), here:
The idea that technology is not socially or politically neutral, and specifically that it very often acts as a power multiplier, is widely understood, if not particularly accepted among HN's commentariat.
A "same dynamic and general shape" argument is a pretty different animal than what I'm addressing.
I agree that tech often acts as a power multiplier, but I think that's because it is typically deployed by those who have power and want more. That doesn't mean that contra-power uses are impossible, which is the claim that I think is pretty suspicious.
I think you'll find I said it that it enhances existing power structures, and suggested some alternative power structures it could enhance to act contrary to a given power structure, rather than saying it was "impossible." I also acknowledged that it does sometimes buck this general observation.
I'll draw attention to the final paragraph I quote from Perrow:
How did they do it? The major companies asserted “increasing central control over the creative process”[352] through deliberate creation and extensive promotion of new groups, long-range contracts for groups, and reduced autonomy for producers. In addition, legal and illegal promotion costs (drug payola to disc jockeys, for example) rose in the competitive race and now exceeded the resources of small independents. Finally, the majors “have also moved to regain a controlling position in record distribution by buying chains of retail stores.”[353] The diversity is still greater than it had been in the past, and may remain high, but it is ominous that the majors have all the segments covered. As an executive said, “Columbia Records will have a major entry into whatever new area is broached by the vagaries of public tastes.” But for a concentrated industry, the “vagaries of public tastes” are not economical; it is preferable to stabilize and consolidate them. This would be possible through further control over the creative process and marketing.
That is:
- Market concentration, when disrupted, eventually re-emerged.
- The result was that "'vagaries of public tastes' are not economical", and that media power prefers to direct rather than follow these.
- That numerous mechanisms for subverting public preference and market mechanisms emerged.
Those with power virtually always want more, particularly when viewed through that favourite economist lens, expressed preferences. But there are market structures in which those powers are capable of expressing that desire, most especially in monpolised media, and those in which they are not ... usually small-scale businesses with low barriers to entry and high mobility costs. Classic exemplars are personal and on-site services (plumbing, electrical, hair and nail salons, much healthcare), commodities which are not easily light-weighted, such as milk, concrete, and structural stone, high-touch services, and the like.
Understanding that there are economic segments which do repeatedly manifest with highly-centralised monopolies, such as recorded music, broadcast media, and software and online services, is a useful and powerful mental model, in my experience.
In the case of real estate, the underlying commodity (land) is not portable, but it correlates strongly to other non-portable phenomena (employment, residence, education, general services, recreation & entertainment, education), and frequently extracts much of the surplus value of those attributes for itself, without having meaningfully contributed to their provisioning or existence in the first place.
I did say there were exceptions. How about how traditional media can easily take all the money from your YouTube video if you have a 30s clip of copyrighted music, or end your YouTube career entirely with spurious copyright claims? How about surveillance technology enabling repressive regimes? Or how AirBNB enabled landlords to effectively charge higher rents by moving to short term rentals, and to run hotels while shirking regulations?
Most of the examples you've listed are just changing hats (and others aren't power structures - long distance rates are not a power structure). Amazon wasn't around in the age of malls? Okay, sure, but is "malls/department stores, but really big, and online" really a different arrangement than before, or the same thing with more centralization? I view that as a consolidation of power among broadly the same group of people (American corporations & investors).
This is a special case of, "technology solutions don't solve social problems." Technology improves and gets cheaper, no contest. That doesn't mean I can write software that will change my relationship to society anymore than I can write software that makes my computer levitate.
If you're interested in proving me wrong, it seems to me that the counterargument wouldn't be an example of technological change, but a theoretical framework that would enable you to analyze a social problem or power structure and come up with a piece of software that would radically alter the outcome, with results better than chance. Obviously it wouldn't be reasonable for me to demand a fully developed theoretical framework from you in a casual conversation, so I'm happy to concede I may be mistaken if presented with a convincing seed or intuition that framework could be crystalized from.
Alternatively, I'd absolutely concede I was wrong if presented with a convincing hypothetical piece of software that would radically change the relationship between tenants and landlords.
You don't have to do any of that of course, I'm not trying to move goalposts, I'm trying to point out where my argument might be vulnerable in the interest of good faith, and because I'd love to be wrong about this.
That's a very convenient way to make entirely unfalsifiable claims. Any contradictory evidence? Just more entirely unimportant exceptions.
> long distance rates are not a power structure
Ah, right, except for the fact that they were maintained by a monopoly. And that was broken up mainly due to advances in technology demonstrating that society would function just fine when it wasn't a monopoly, plus a moment history where people believed in regulation as useful.
> If you're interested in proving me wrong
Not particularly. I'm just interested in you not immediately shitting on the exploration of possibilities by making overblown, unevidenced claims and then voluminously handwaving away evidence to the contrary. Maybe let it breathe a bit.
Your responses aren't a particularly fair reading, so I'm going to decline to address them.
I'm sorry you felt I shat on your idea. I was actually very interested in it. My contribution to the conversation was critical, but not intended to be dismissive. I thought it was a great question and a topic I'm interested in & think about often. So I formed a substantive comment expressing my thoughts on it.
I'm sorry this was a frustrating experience for you. If there's something I could have done differently (other than just stay silent) to make it more clear that I thought this was a good discussion or to be clearer, please let me know, and I'll consider it going forward.
Most people have options... A single person can rent a whole house, a 2 bedroom apartment, a 1 bedroom, a studio, or just a room out of a larger unit (or part of a shared room). And choose from a range of locations.
A wealthy single person can muse between renting an entire house or subletting a single room, sure. For most people these options are worlds apart, and they wouldn't entertain both of them at once.
Leases can definitely be negotiable, even as an individual. I've done it! But I'm wondering what could be done if, like RealPage, we enable collaboration.
Good points. I also wonder if we could take it further. Traditional tenants unions tend to deal with landlords only after somebody has signed up. What if we could get people together beforehand?
E.g., we put together a rental listings platform that is free and comprehensive, so we have a lot of eyeballs for renters in the market. Could we organize them? Could we push for member discounts? Could we penalize landlords found to be using market manipulation software?
Realpage isn't the only software in that space. A software which finds the lowest possible rents and keeps Realpage as a last resort would be useful. It'd be difficult to monetize.
I just rented an apartment in a building that uses RealPage. Somehow a 3 bedroom in the building was priced less than a 1 bedroom. When I asked why, the leasing agent said they had no idea and also no control over prices.
Just like last time RealPage came up, submit complaints to the FTC against that people! It only works if you actually use the system. The system isn't just magic.
It's hard to imagine a clearer, more blatant description of cartel price fixing.
This is like calling your pyramid scheme "Pyramidal Inc.".