I think when they take the step of requiring subscribers to let them set prices, they are clearly violating the law. I’m skeptical that analysis reports telling landlords to raise rent are illegal, but writing in the contract that you have to follow the rules of the association is obvious collusion/cartel behavior.
I worked for a company that started using YieldStar back in 2006 and at least back then there was no contractual requirement to use the recommended prices. RealPage did heavily push the idea that you needed to work within YieldStar at all times. If a manager disagreed with a recommended price, our in-house revenue management would work with the manager to see if there is a configuration error in YieldStar (wrong amenities, wrong unit type, wrong target vacancy, etc). If there isn't a configuration error, then the recommended price would usually stand.
Yep, on one level it could just be automating the task of scanning Zillow and other sites and seeing what other landlords are asking. Any landlord is going to be doing that to some degree.
But the price-fixing amongst "competing" landlords is where it goes wrong.
Wouldn't that happen organically? The underlying principle of "you want to leave a certain % of your units empty to maximize profits" is microeconomics 101 and doesn't require any coordination between landlords. Without realpage there will probably be a "rule of thumb" to follow, which most landlords will use. They'll in turn set their prices to hit that number, thereby ensuring that the empty units are spread around evenly.
Even if they're not colluding, they are acting in a antisocial manner in that they're maximizing profit and not occupancy.
If they were a utility, this would resemble selling all your water to las Vegas because they could pay the most and not selling to anyone else even if las vegas' usage drops.
Sidelining things to artificially create scarcity is bad for everyone.
Correct, and even YieldStar has a customer-set vacancy and lease expiration targets that it works towards. RealPage trains the customers to accept a little more vacancy to gain higher lease pricing.
Which can be corrected via property taxes that increase at increasing rates for the time period that any given property remains unused, including non residential rentals.
Landowners get the biggest subsidy of all in the US, where they pay proportionally very little to the local government’s operational costs, and benefit the most from the law and order, judiciously systems, and education of the local populace.
And instead of going after landowners for reaping the rewards of sitting on unproductive uses of land that everyone has to spend extra time and energy to travel around, the government even gives them tax breaks (1031 exchange, property tax caps), and instead goes after people who actually perform work (income tax).
You have the problem backwards. We shouldn’t care what the vacancy rate is for residential properties at least, we should be focused on minimising the percentage of the population who are “seeking but unable to find housing” and yes that is deliberately constructed to avoid dragging the whole cycles and causes of homelessness into the mix. If you are actively trying to get some kind of dwelling, buying or renting, and have not yet managed to do so, then you count for the statistics.
Speculation driven rises in residential real estate prices buy/rent are a plague on society and we need to stop framing the problem so that we lose sight of the purpose of housing, it’s to house people…
What's the right period of vacancy to allow for 1, 2, 3, and 4-bedroom units as a function of floor level, direction faced, time of year, elevator or not, age of building, distance to school and transit, etc?
The unit can provide utility as long as it is fit to live in. The only question is what price people are willing to pay for it.
We can even generously set it at 1 year just to start things off. If landlords are still too comfortable keeping units empty for the sole purpose of holding out for another price, then it can be revised lower.
Not that that doesn't make it worse, but also gathering the pricing data of an entire customer base of landlords and selling them analysis back is, on the face of it, just collusion as a service
> I’m skeptical that analysis reports telling landlords to raise rent are illegal, but writing in the contract that you have to follow the rules of the association is obvious collusion/cartel behavior.
Very seldom collusion is so blatant to be written in contracts. "Reports" and "recommendations" and "market color" are well established ways for competitors to communicate and coordinate illegally. Without additional evidence it would be difficult to build a case from that only, but large conspiracies leave large traces. The FBI will find something, if the conspiracy existed.
I appreciate that this investigation/raid is being conducted without becoming a major political talking point. Refreshing to see the government simply doing its job.
Looks like most of it kicked off in 2022, first flag was in 2017 and did not make a lot of movement.
"Though some career DOJ staff members were concerned about the merger, political appointees leading the agency at the time under Trump chose not to challenge it in court, according to the source with knowledge of the matter."
Imagine a job where you only undergo a performance review and the risk of not having your contract renewed once every two years. You have to be George Santos levels of untrustworthy to get ejected by your fellow legislators.
This rather misses the point that it's very easy for an incumbent to pass a biannual performance review unless they're massively corrupt or out of touch, which translates to giving politicians an undeserved level of job security.
Far more than enough. We're basically always in an election cycle, and always being subjected to all the electioneering BS that brings. It's utterly exhausting and infuriating.
In practice nobody party is going to call a motion of no confidence over trivial stuff like this, so it's a poor substitute. Those mostly get triggered over failure to pass a budget, or over a deeply unpopular law/executive order.
the whole real page situation irks me to no end. As if being a landlord wasn’t easy enough just milking people they needed even more money by colluding? It’s just obnoxious and I hope it gets the book thrown at it (and its corporate officers, but that might be too much to ask)
> As if being a landlord wasn’t easy enough just milking people they needed even more money by colluding?
"It's not enough for them to make a lot of money, they need to make ALL the money"
(James Stephanie Sterling pretty much whenever a triple-A game company does something shady)
We just had a Bloomsburg story earlier showing how fast food companies are using apps and gathering data to make sure they don't "leave money on the table" by using differential pricing.
Like air travel and hotel rooms. Even market based approaches like eBay have different prices for the same things. I'm not for dynamic pricing but it's pretty common.
>That's why landlords are able to own hundreds to thousands of properties / units.
Presumably they have dozens/hundreds of workers to manage those units? I'm not sure how "number of units owned" is indicative of easiness. A quantitative trading firm has billions of dollars under management. Does that mean it's even easier to be a quantitative trading firm?
>Presumably they have dozens/hundreds of workers to manage those units?
Correct... which makes being a landlord exceptionally easy. All you have to do is have enough money. There is no cognitive or physical load that a landlord is required to carry, you simply open your checkbook.
The difference is, investments can go bad if the company fails.
A landlord never loses their money because they own the land. If a resident trashes their place, well they have insurance for that, better call the contractors to fix it up.
A friend of mine manages money for a multi-billionaire that made his money in real estate. He told me once they were walking by a block of brownstones in Manhattan and the guy didn't even know he owned most of the block.
So you don't even need to know what you own as a landlord, you just pay other people to know it for you!
The problem is that there is no incentive to "make less profit" by hiring management companies, they just jack up all rent (and dozens of other dirty tricks like collusion) to cover it
If you are working full-time and have your own house maintenance _and_ you are trying to assess tenants, fill out paperwork, fix issues at the rental property, travel to and from rental property, coordinate contractors, paint in between tenants, etc., it's work.
My (ex)mother-in-law went in to a retirement home, during the first year we wanted her condo to be available (eventually) if it didn't work out. Being a landlord for that year sucked.
But this is work that almost all [0] landlords could just pay people to do for them, making it easy again.
Out in the real world, the cost a landlord would pay a management company to deal with all of this is absolutely baked into the cost of rent charged to the consumer. A landlord may choose to do it themselves to pocket that margin as profit, but they need not.
The only job requirement for "landlord" is "own an asset."
[0] And yes, there are exceptions that prove the rule - e.g. people in declining areas with decreasing demand for housing who don't have enough margin, or people who dramatically underprice their rent for some reason
I once moved away from a condo I owned, and I thought it would make financial sense to rent it out, but I didn't want to really be a landlord, so I hired a management company to manage the rental. They charged I don't know, 15% or something of the rent, but did almost nothing for me. They collected the check and sent me 85% of it, and that's it.
Toilet overflowing? The tenant would call the management company, and the management company would call me and say the toilet was overflowing, do I want to do anything about it? If yes, they would give me a few plumbers' phone numbers and I had to take time out of my day, call around, arrange and pay for everything.
Air Conditioning broke? The tenant would call the management company, and the management company would call me and say the A/C was broke, do I want to do anything about it? Same story as above, they didn't actually do anything.
After the tenants moved out, the management company would call me and suggest a few cleaners, which I'd have to arrange and pay.
They charged me 15% to act as a phone middleman. I eventually concluded I didn't have the time/energy to be a landlord so I sold the place.
Yeah that's about what I discovered when I considered hiring a management company. Some will have plumbers and electricians and HVAC people on staff and they can deal with issues (up to a point) but you will be billed for it, on top of the percentage of the rent they keep.
In my situation, their fees would have skimmed basically all the positive cash flow out of the property.
It's incredibly easy, almost every landlord I've ever had did it in addition to a normal full-time job, and spent maybe a few hours a week on it. One didn't even live in the same country as the property. Of course it is risky, as you might get a bad tenant and have to spend money getting rid of them, but risky is not the same as hard.
True, if you are an investor landlord who outsources the property management entirely that's I guess about as easy as any other investing.
I was thinking more from the perspective of a more hands-on landlord who is invovled in marketing their property, doing or managing maintenance, and dealing with tennants.
> marketing their property, doing or managing maintenance, and dealing with tenants
This is property management, not being a landlord. The fact that landlords exist who can fully outsource the management and still turn a significant profit is a sign that our housing market is deeply flawed.
So this is a fairly recent development: an effective cartel when all the players use the same software that spits out the same numbers. The defense is that they're acting independently and some can choose to use the software or not but that doesn't stand up to reality
Unfettered markets create monopoloies and oligopolies.
Housing isn't like other goods. If you don't want to buy an air fryer or can't because of price or supply, that's OK. You won't starve. But people need housing and we've built our economy entirely on ever-increasing housing prices.
This is a Ponzi scheme. The next generation has to work 3 times as hard or long to pay for your house to get that pricing increase. It's quite literally just theft from the next generation. Except it's worse than that because that threat is backed by state violence: evictions and homelessness.
We are quite literally choosing to kill people by witholding a basic human need: shelter.
Saying "my software said to do x" isn't a defense when you are accused of x. In fact, it may be seen as negligent or systemic, both of which are bad places to be. I'm not sure where people think they can get off the hook for criminal behavior because they outsourced pulling the trigger.
This is only true to some degree though. People can (and do) move to other areas of the country when cost of living becomes too expensive. They buy land and build on it themselves. It's not like there is a fixed housing stock and a fixed set of players has control over it (although it can be close to that in specific geographic areas, ie cities).
this has become less of an option though because pretty much all semi-decent job markets are really frothy now.
one could theoretically maybe move to the barren wilderness of Nevada or Alaska or somewhere else desolate but given the lack of services, job, etc. it's not very practical. WFH didn't really lower home prices in the Bay, but it did make a bunch of attractive rural towns really expensive.
Health care has a similar provider that tells insurances how much they should pay for out of network providers. We really need to reduce the data that entities can hold. There is way too much power in having so much data.
I think this is more correctly described as cartel behavior (also illegal under anti-trust laws and likely what the FBI is investigating here).
I do think there are far too many players involved for it to fit the reasonable description of an oligopoly. (I am not the upthread objector to the use of that word, though I think the objection is valid.)
"*opolies" =/= price fixing/collusion, which is what the FBI is investigating them for. Even if you don't have a monopoly but you agree to fix prices with a competitor, it's still illegal.
>"encompassing 70% of multi-family apartment buildings"
You conveniently left out the part before: "at least 21 large landlords and institutional investors [...]". Wikipedia says the definition of oligopoly is:
"An oligopoly (from Ancient Greek ὀλίγος (olígos) 'few', and πωλέω (pōléō) 'to sell') is a market in which control over an industry lies in the hands of a few large sellers who own a dominant share of the market."
"at least 21" is not "a few" by any stretch of the imagination.
21 is too many? Is it not relative to the market size and ownership of the "product"/"service" for the market? How many landlords are there and much of the market do they own?
Yes? At some point you have to draw the line between "oligopoly" and "normal market". I don't know what the number is, but it's safe to say that for most industries "at least 21" would make up the majority of market share and therefore it would be absurd to call that "oligopoly".
As far as the rental.market being an oligopoly, there's an argument to be made that the existence of things like RealPage makes large sections of the market act as it would with an oligopoly, even if it doesn't quite meet the definition.
That is an interesting conversation to have, separate from the illegal price fixing.
An oligopoly does not imply price fixing, but does a monopoly imply price fixing/collusion because the entity group is size 1, an entity colludes with itself, always?
We've moved well beyond the traditional monopoly like Standard Oil. We moved onto conglomerates: about everything you buy comes from like ~8 conglomerates. We then recognized the user of market power for an effective monopoly (eg Paramount [1]).
So what we have now is a whole bunch of landlords who largely all use the same software. That doesn't sound illegal. Now if it happens to spit out the same results for all the users, that's one thing (and problematic all on it's own). But the allegation here is that landlords bought into and use the software knowing this would be the outcome.
This is just an evolution of the old cartel of 10 or so CEOs scheming to fix prices in a dark cigar-filled room except now companies attempt to remove their own responsibility by waving their hands at The Algorithm [tm].
The fundamental problem here is investment cash flows eclipsing operational cash flows. This invalidates basic economics of supply and demand price equilibrium. In this case, it means that the landlords can restrict supply without losses.
Heh, on Twitter, I was arguing against someone who thought that a corporation buying up apts and renting them out would result in lower rents. C'mon really?
I worked at a bank, in equities. There were Ethics and similar online courses every week, with exams. We just shared exam answers in our group chat. With that, blindly clicking through the course and clicking the right answers was ~10 minutes.
Yeah, seems like there's a majority at the top of the ladder who want to pretend all this stuff is naive meanderings of capitalism and not a concerted effort to pull up the latter of prosocialism that worked for many decades until black people got equal rights.
If I have 100 units and set the price such that no unit is ever vacant, that price is surely lower than if I set the price such that 90 or 95 of them are occupied at any given time.
If the rent to leave 10% vacant is 11% higher, I basically break-even on cash-flow and have a higher building valuation (on a multiple of rents when fully-rented basis).
If it's 12% higher, I make more cashflow (plus giving myself an easier job with more freedom in operations to do medium maintenance between tenants and have units free for temporary dislocations, etc;).
Right, and it works best for large landlords that have hundreds or thousands of units.
The small landlord/owner with a couple of houses or condo units is going to want them 100% rented because leaving even one of them vacant is going to be significant impact on revenue.
A large number of small landlords buy their units for appreciation rather than rental income.
Just as much, small landlords are terrified of the damage a bad tenant can do and might not have the resources and experience needed to quickly get rid of such a tenant and finding a tenant can be expensive and time-consuming giving them further incentive to leave the place vacant. And also having less knowledge and experience, small landlord aim to follow the market and they'd aim to have an apartment as "market rate". Certainly, lowering an existing unit's price would only bring in "less desirable people" since "desirability" is very much a function of income.
It actually works out for the small landlord also. Let's assume there's a "fair rent" for the house - $1000 a month to make it easy.
If you rent that out for $900 a month, you will basically never have it empty, because those in it won't want to move (they lose the $100 bonus) and if they do, someone will grab it right away.
If you rent it for $1000 a month, it'll fill up relatively easy (compared to the market it is in) so you'll often have relatively low vacancy (but even one month empty is paid for by ten months rented.
If you rent it for $1100 a month, it'll be vacant much longer, perhaps forever depending on supply.
"it'll fill up relatively easy (compared to the market it is in) so you'll often have relatively low vacancy (but even one month empty is paid for by ten months rented."
You are assuming that the marginal cost of turnover is zero, which it definitely isn't. Putting a unit on the market, showing it to prospective tenants, processing applications, background checks, income verification, etc is labor intensive and expensive. This is during the period where you have 0 income from the unit.
The real trick is to find good tenants who are, in turn, convinced that you're a good landlord. Then you're in better shape for both turnover and rent amount.
1. You won't increase rents for existing leases, these need to be up for renewal so you can make changes to them.
2. You are assuming that you control the whole market. Even if 70% of landlords use RealPage and their pricing recommendations, the remaining 30% should be able to absorb some of the people moving out as a result of this if the new rent is substantially over market.
3. This creates somewhat of a prisoner's dilemma problem. Any non-compliant landlords inside the 70% bucket could only raise their rent by 5% instead of 10%, get full occupancy rates and come out ahead of their competitors.
> Even if 70% of landlords use RealPage and their pricing recommendations, the remaining 30% should be able to absorb some of the people moving out as a result of this if the new rent is substantially over market.
It means that 30% people will get market-determined terms and other 70% will have no choice but to accept RealPage pricing. Because they need to live somewhere.
If enough sellers band together and set a minimum price level for a good with low elasticity of demand (meaning people need it no matter what and will sacrifice other parts of their budget to obtain it, like shelter), then the higher prices could lead to higher revenue even though fewer units are sold (due to higher per unit prices).
The model would be, this company RealPage, controls a significant fraction of the ready to rent housing stock in some portion of the market. "Control" because their contracts with landlords include provisions that say landlords will use the prices dictated by RealPage, and RealPage will exclude or ban the landlord from its services if they rent below the rate set by RealPage. A cartel by contract.
It increases revenue with fewer units rented, the claim is not "maximize" revenue, but, for a property manager, that they "increase" revenue, in step with a sizable portion of that local market. It's a marketing claim to property owners, not a global/overview claim to the public.
Holding housing stock level constant, they can set prices that a renters moving in, in the coming years, can't improve on.
This is artificially limiting supply so instead of saying you have "100 units for rent" you only show 3 or 4. Done strategically this can give the appearance of a limited supply, even when the supply is not limited.
Imagine you go to 5 different complexes and they all say "Oh man, we only have 1 unit left and it's $$$". You're going to behave differently, especially if you're in need for a room then if you go to those 5 complexes and they say "Oh, yea, we have 40-50 units vacant at the moment". A sense of urgency is put on the renter.
The law of supply and demand observes that when price rises, people (and other animals!) tend to have more willingness to sell a good or service and less willingness to buy said good or service.
But you seem to be suggesting the opposite: As price rises, landlords are less willing to sell a lease, and tenants more willing to buy a lease.
> The law of supply and demand observes that when price rises, people tend to be more willing to sell and less willing to buy.
The law of supply and demand observes that when people are more willing to sell or less willing yo buy, the price declines. (And, when they are less willing to sell or more willing to buy, price increases.) Supply (willingness to sell) and demand (willingneess to buy) determine price
But that's in a perfect market with perfect and symmetric information and pure rationality, and the upthread poster is talking about psychological tactics that leverage the fact that the real world doesn't feature perfect and symmetric information or pure rationality.
The law of supply and demand is not an enacting force, it's an observation of behaviour. Just like the law of universal gravitation does not determine gravity, the law of supply and demand does not determine price. People (or other animals, I suppose) determine price.
When you get into the meat of it, what the previous commenter is trying to say is that rent is quite inelastic and thus people will happily pay a lot more than is necessary when you can employ some clever marketing tricks. But the strange wording has it going all over the place.
>The law of supply and demand is not an enacting force, it's an observation of behaviour.
Economic behavior is not physical law. Awareness of economic behavior can change behaviors. For example if you observed that ice cream stocks went up the day that hot weather was forecast you'd quickly find yourself in a battle to predict when it was going to be hot at earlier and earlier dates.
>happily pay a lot more than is necessary when you can employ some clever marketing tricks.
And the marketing trick is called lowering supply.
>People (or other animals, I suppose) determine price.
> And the marketing trick is called lowering supply.
The original contextual comment indicated that there was no reduction in supply, merely false claims of the "there is only one unit left!" nature. Normally a buyer would look around to make sure the claim is true, but I guess the idea is that people get so emotional about housing that they don't give it a second thought, which plays into why there is such inelasticity to exploit.
Any actor outside of this cartel could exploit this by creating more supply and getting ahead of the cartel members by renting units out at (real) market rate though.
If creating more supply were a strong effect resulting from this activity, surely housing advocates would be strongly in favor of this and asking the FBI to back off on this obviously pro-housing action.
I lived in a dry county at one point in my life, and seemingly the biggest churches around there did a lot of campaigning against removing the existing laws. Eventually the voters voted in liquor sales, but one of the most telling things to come out of all of it was the liquor store owners on the county lines were some of the biggest donors to the large churches in that area.
I wonder how many of these large property owners engage in such rent seeking behavior too.
Lower supply means the price of existing offerings goes up.
Obviously, it's not holding all units off the market but collusion to hold enough units off the market to get a maximum value of the units times price, what they called in econ back in the day the monopoly equation.
How can even a large share (70% are mentioned in the article) of landlords have full control over supply? This is different from the railroad or telco cartels of the past where it is really hard for new players to get into the market. Getting into Atlanta's housing market is as easy as buying some land and building some apartments on it, buying up and renting out single family homes, etc. The barrier to entry is really low.
Read another way, they fix prices where perhaps the unit sits vacant. Since they have dominant control over some markets they can do this and keep units vacant and know that people will have to rent at $x instead of $x-y
> Landlords adopt RealPage recommendations on pricing 80-90% of the time, which explicitly drives up revenue by holding apartments off the market. As the architect of RealPage once explained, “[i]f you have idiots undervaluing, it costs the whole system.” It’s not just an information-sharing and price recommendation engine. RealPage has ‘pricing advisors’ that monitor landlords and encourage them to accept suggested pricing, it works to get employees at landlord companies fired who try to move rents lower, and it even threatens to drop clients who don’t accept its high price recommendations. This one’s a very clear conspiracy. Allegedly.
This raid is potentially glorious. Faith in the system tentatively renewed.
I'll keep my fingers crossed for not only certain parties going to prison, but also certain parties being forced to compensate for the huge harm to entire markets and the people in them that they knowingly caused.
(IIUC, if a lot of owners collude to manipulate prices, then the rest will also tend go up, because they notice the new "market" price, and they see their costs are going up. And then this has other economic effects, including payroll and retention for small businesses. And presumably also the various costs to society of health and happiness problems, since the economic stresses can be pretty bad for some.)
I doubt much punishment will actually happen, beyond some nominal reparations; but it could establish a legacy in the field of SaaS antitrust, which could cool down some of the worst animal instincts in the market.
In an ideal world, supply would rise because landlords would want to make more money in total.
So the question is why isn't supply rising? Is it because existing landlords aren't funding housing construction or the difficulty of entering the market?
Surely it cannot be that the supply of land is that limited. Or is it? Due to zoning regulations?
Landlords lobbying against new development under various guises (environmental, "character", "history"); landlords very cheaply withholding vacant land from use (minimal taxes to pay, no rent to pay, no penalties for vacancy); landlords utilizing zoning regulations to prevent effective use of other people's land
In LA, you used to have a ton of extremely cheap studio apartments. We're talking $600 for a nice studio apartment with its own bathroom, you had SROs as well which while not luxury apartments, provided housing.
But the vast majority of this housing stock was very old and created before there was thousands upon thousands of regulations, for example most apartments in Los Angeles need to be constructed with parking. You have to have a certain amount of outdoor space, etc. So you end up having housing cost twice as much as it really needs to .
It's really sad too, because just 15 years ago or so you could have a minimum wage job and afford your own place. Now that's not really obtainable anywhere in the United States. I've met tons of young adults, some even ranging into their 30s who have really bad home lives but can't afford to move out .
Solutions to this are often really short-sighted, you have affordable housing units going up which are costing $600 to $700,000 for the city to build. Obviously this just doesn't work so you have a bizarre lottery system just to have a roof over your head.
Personally I think the solution would be a combination of subsidized high speed rail and an aggressive rethinking of what a town needs to be. Imagine being able to hop on a high speed train that goes about 150 miles an hour.
You could have a community of affordable housing that's a short train ride away from San Francisco, LA, or any other unaffordable city.
I've also noticed you have a very bizarre system where many working-class people, rail operators, firefighters, teachers, etc. They have super commutes which are ranging from 1 to 2 hours each way just to get to work.
Land in desirable areas is limited and zoning and other government red-tape prevents high-density housing from being built (or any housing being built period in cases like San Francisco).
At the macro level, landlords and property owners stand on one side opposed to developers on the other. Developers are incentivized to add housing supply and the others are incentivized to secure it against competition. Tenants _should_ stand on the side of developers but I’m not sure that’s true in general, given the anti-developer sentiment in some of most dense and progressive cities in America.
It’s zoning, it’s environmental review, it’s historic/landmark review, it’s good neighbor agreements, it’s disorganized and/or corrupt permitting departments, etc. All of this gets weaponized against new supply. Ultimately. City electeds answer to voters, not builders, so they get the government they deserve.
Some places are building, adding supply, and consequently lowering prices. Austin is a prime example.
From JosephPolitano on X:
Last year, Austin MSA (population: 2.4M) permitted 21,300 units worth of 5+ unit apartment buildings—more than LA (pop: 12.8M) and SF (pop: 4.6M) combined.
San Francisco permitted 1,151 housing units over the last 15 months. Austin permitted 1,248 in January alone.
Austin averages 28+ units per day this year. San Francisco has allowed 15 units total in all of 2024.
And yet its skyline is blowing up with high density replacing low density. Meanwhile California and Oregon are too busy raging against macroeconomic forces with central planning committees and their obstructionist, well-connected nonprofit partners.
New construction is rapidly getting more expensive in many of the markets where it's needed the most. While it'd be cool to point to a single factor, it's a combination of several things. People are expecting more (more square footage, higher-end finish), the government is demanding more (environmental and energy regulations), labor is getting costlier, and yes - there's NIMBYism manifesting through zoning laws and other "conservation" rules.
Not entirely, but either way, land value is tied to all of that. If the city can't grow due to zoning and conservation rules, and if you can't subdivide existing parcels, you basically have more and more money chasing the same lots.
By "not entirely", I mean that while land value often dominates, lowering it doesn't solve the problem, because even if you somehow acquired a city lot for $50k in the Bay Area, you wouldn't be able to build a house on that lot for $100k. So, solving one problem doesn't make it affordable.
There are a wide variety of issues at play: high interest rates, localized shortages of construction workers, rising material costs, zoning restrictions, local opposition and years of underbuilding.
It doesn't always work smoothly, sometimes players can corner the market, or become too big and own both side of development, and rental. That is why we need an agency to look at price fixing, monopoly and stuff like that.
In a good system, government doesn't subsidize cost. It just enters whenever the system is broken to work based on supply and demand of market.
I wish they would look into wage fixing across companies too - where at least "big tech" shares / buys salary data across all their competitors, so they don't have to increase wages - they fix them by being consistent across that dataset.
Seems to be the same thing, just in a different "market"
The DOJ had safe harbor guidelines for the sharing of price and wage surveys through a third-party intermediary as long as it was sufficiently old and aggregated to prevent determining the prices/wages of a specific competitor.
Those guidelines were rescinded by the Biden administration last year due to concerns that algorithms eroded the distinctions between past/aggregated and current/disaggregated data.
>I wish they would look into wage fixing across companies too - where at least "big tech" shares / buys salary data across all their competitors, so they don't have to increase wages - they fix them by being consistent across that dataset.
If this is "wage fixing" by the employer, what does this say about sites like levels.fyi for employees? Is that also "wage fixing"?
It's weird thinking of FBI raids like this. Like, what's even in the office that matters? All the data, all the systems will be in AWS or some other cloud. No one's gonna be slowed down for a second by not being at their desk.
I can scarcely imagine what would be required to try to prevent this. Call up AWS and order them to block a bunch of ports, hope there's no jumpboxes or vpns on odd ports? Run deep packet inspection and hope there aren't web terminals in use?
Assuming you do get network access, assuming you're not afraid of employees messing around while you are raiding, it's still a nightmare. The office systems and the product are probably just so convoluted & interwoven in most companies.
While this seems like a legal (and moral/ethical) win, I can't help assume there will be no meaningful justice for anyone directly affected by the conspiracy. At best there might eventually be a class action lawsuit filed on behalf of the victims, resulting in a meager payout.
Meanwhile the perpetrators will reorganize and lobby their misdeeds into legality.
Justice is an ongoing effort. Its effects span restitution, retribution, and deterrence. If no one in the system ever pursued justice without figuring out how it gets him paid for this transaction, this time, there would be no justice. And all the way down that sliding scale of justice, where the global minimum is basically Haiti, you have increasingly heavy-handed chances to stop the bleeding (e.g. El Salvador.)
For more concrete specifics, reorgs and lobbying are both costs, so you can rest content that this effort imposes costs.
genuine question here, apologies if i missed it in the article, but what's RealPage's crime in this? how is using an algorithm to set prices on apartments more criminal than using an algorithm for anything else we use algorithms for?
i'm not saying it's not criminal, i just don't think i understand what american laws they're breaking by doing this.
They get data from all the subscribers, including non-public data like vacancy/rent agreement length/units being taken off the market for various reasons than use that data to determine prices for the subscribers. DoJ is investigating this as Price Fixing which is criminally illegal in United States.
so based on this context and some other comments, it seems like the potential crime isn't so much that they use these sources to algorithmically suggest a price or contrived vacancy, it's that their agreement enforces that any of their subscribers has to use their suggestions on price and availability, thus making it likely price fixing. correct?
They're using non-publicly data provided by their friends/partners to set rental rates. This data includes lease length terms, de-marketing reasons, etc. They then use this data to set a price on a specific unit. If I used their software and was putting a unit up on the market, they would have the price they recommend. If I disagreed with that price, I wouldn't be able to change it. I had to submit an appeal to RealPage, they would review my appeal, and decide if the rental rate was correct or not. I, as the property owner/management company, have lost all ability to set rental rates myself to the complex I own or work for.
And due to their pricing being compared to their own units, or to their partners units, this amounts to price fixing.
Agreement is problematic as well as requirement that they get all this non public data.
If they scraped apartment complexes websites and got public facing pricing data available there, that would be one thing. It's the fact they get all this non public data is extremely problematic part.
What is legal with 40% of the market might well not be legal with 80-90% of the market. That's the entire point of antitrust laws. If 90% of a market is composed of companies that explicitly coordinate to fix prices, that's an antitrust violation in most developed countries, so I expect it will be in the US too.
They are actively facilitating dozens of companies, who are meant to be competitors, into using the same process for deriving prices to ensure that all these companies have increased profits at the expense of the consumer, i.e. removing competition due to price fixing.
It'd be one thing (still not good, but less problematic) if it was merely informational. But you also have RP requiring 90-95% compliance with their prices (including mystery shopping), requiring landlords to get RP's "approval" to go against the recommendation ("you mess with everyone when you don't", which if you're actually competing in a free market, why would you care?), and even up to and including advising their customer's execs of "problematic" property managers (those who are not complying).
> concerted action can take many forms—including, inter alia, competitors’ jointly delegating key aspects of their decisionmaking to a common algorithm, because doing so “joins together separate decisionmakers” and thus “deprives the marketplace of independent centers of decisionmaking.”
> As technology has developed in the 133 years since the Sherman Act created a federal prohibition on price fixing, firms have evolved the mechanisms they use for reaching unlawful price-fixing agreements. In-person handshakes gave way to phone and fax, and later to email. Algorithms are the new frontier. And, given the amount of information an algorithm can access and digest, this new frontier poses an even greater anticompetitive threat than the last.
> The question in this case is whether the defendants have violated Section 1 of the Sherman Act by allegedly knowingly combining their sensitive, nonpublic pricing and supply information in an algorithm that they rely upon in making pricing decisions, with the knowledge and expectation that other competitors will do the same. Although not every use of an algorithm to set price qualifies as a per se violation of Section 1, taking the allegations set forth in the complaints as true, the alleged scheme meets the legal criteria for per se unlawful price fixing.
(emphasis mine)
> To begin, the complaints allege that RealPage’s proposal “contemplated” and “invited” concerted action among the landlords. In fact, its “intent to create coordination among users,” including its “aim” of “increasing revenues by raising rents,” was “transparent to all.” Among other things, RealPage required each user to submit real-time pricing and supply data to it, and RealPage’s marketing materials allegedly “touted” its use of “non-public data from other RealPage clients,” enabling them to “raise rents in concert”; as well as the algorithms’ ability to “facilitate collaboration among operations” and “track your competition’s rent with precision.”
> Indeed, the complaints also contain ample allegations on how RealPage directly constrained the “deviations” from its suggested prices, including by enforcing and monitoring compliance with those prices, so the landlords effectively delegated aspects of their pricing decisions to RealPage.
> Indeed, RealPage allegedly touted this feature—stating in a press release that it gives clients “the ability to ‘outsource daily pricing and ongoing revenue oversight,’” such that RealPage could “set prices”
as though it “own[ed]” the clients’ properties “ourselves.’”
You can think of RealPage's role as a facilitator that gathers competitors together and says "let me set all of your prices, if enough of you agree then you won't need to compete and we'll all make a lot of money together." That is illegal under antitrust law.
> Let’s just change the terms of the hypothetical slightly to understand why. Everywhere the word “algorithm” appears, please just insert the words “a guy named Bob”. Is it ok for a guy named Bob to collect confidential price strategy information from all the participants in a market, and then tell everybody how they should price? If it isn’t ok for a guy named Bob to do it, then it probably isn’t ok for an algorithm to do it either.
> And rent in that city has exploded, up 80% since 2016. What’s odd about this price increase is that vacancy rates have been inching up, and when there’s more supply, prices should come down. But they aren’t.
I live in Atlanta so I'm familiar with vacancy rates here. This data from Costar shows it's the highest in the nation and has gone up around 60% around 7.5% to 12% since Q1 2021.
Wow. That sounds like a LOT more than "inching up". I got the feeling from the article it must be significant, but their use of the term "inching up" made me think maybe it was somehow not all that great.
Wow. Maybe some folks will consider having their money managers blacklist Thomas Bravo. If this egregious behavior is in the portfolio it may be an outlier, but probably isn't.
Yeah, I seriously doubt the majority financeBros will give 2 shits about the ethics of this company. The only thing they care about is the bottom lines look good on paper. Sure, there maybe funds out there that have some sort of ethics/morals about their investments, but I'm guessing they are very much in the minority
I’m curious what RealPage gets out of all this. Based upon the alleged activities it sounds like price fixing to the layperson but why? Realpage should just be concerned with keeping their saas customers by making a good product. Coordinating this conspiracy sounds like a lot of work for little gain of a software company.
As someone who has been the target of an overzealous law enforcement investigation, these investigators love to come up with a larger conspiracy to fit their narrative.
It could just be too many properties are owned by a few people and they have too much pricing control over entire regional markets… too bad we don’t have a choice but to pay when you need somewhere to live.
I suppose all we can do is speculate until the evidence is shown.
> Realpage should just be concerned with keeping their saas customers by making a good product
The coordination is the service. Realpage is literally offering CaaS (cartel as a service). The "market insight" would be nearly valueless without the guarantee that Realpage was signing contacts with your competitors that prevents them from undercutting your prices (and vice versa).
As a landlord, you want to know what to price your rental so it rents relatively quickly. You need to know the "fair market rent" for the unit.
If you're familiar with the area, do your research, and have some experience, you can get a number pretty quickly.
RealPage offered to do that work for you - but once they are doing for a certain percentage of the market in an area, they become controlling of that market, and you can get "harmonic errors" that don't get corrected, because they control too much of the supply pricing.
it is not "harmonic errors" thats don't get corrected. Rather, it is willful collusion, knowing you can follow Realpage's recommended price and you are comfortably assured you won't be undercut, because your should-be competition is doing the same.
They essentially turn what should be a competitive market to a monopoly via collusion.
I share your skepticism. The fact that there's so much blame being put on the algorithm is very strange to me. Why shouldn't landlords have access to that data? I think that the case for somehow limiting the algorithm is quite weak. However, if what the complaint says about the advisors is true, then I think that is a much stronger case.
>Coordinating this conspiracy sounds like a lot of work for little gain of a software company.
Presumably, RealPage can sell its services for a far higher price with the conspiracy than without. It doesn’t take a genius to periodically poll competing landlord’s rental prices, either via telephone or internet search.
What does take a genius is to deliver the benefits of being a cartel and also deliver plausible deniability to avoid legal/punitive costs.
> Realpage should just be concerned with keeping their saas customers by making a good product.
That's not how late stage capitalism works. Quite often it's closer to winner take all.
Think about it this way, you need to buy a piece of management software that costs $1000 per month (or $10,000 whatever, just a healthy chunk of your revenue). They both do the job well enough so they aren't completing on capability. Now imagine one of them earns you 25% more by using it. Well, everyone that rents is going to be interested in that sales pitch. Capitalists like more money for the same expenses.
Very black and white take, no rent control also implies no monopolies/price fixing behavior which is illegal and the point of this post.
“Rent Control” is just price fixing in favor of the consumer, but has also a litany of issues including the quality of the community formed
Example if rent control forces prices down, but inflation makes the cost of maintenance high, then cost cutting will be done (poor service, poor landscaping, outdated appliances, less renovations, less security).
Saying to just do rent control is just as bad as saying let free market run wild regardless of price fixing/collusion
"""
Well, there’s a civil antitrust action in Tennessee that’s been going on since 2023, where the argument is that RealPage has been working with at least 21 large landlords and institutional investors, encompassing 70% of multi-family apartment buildings and 16 million units nationwide, to systematically push up rents. And RealPage isn’t just some software company distorting rental markets, it’s also owned by Thoma Bravo, one of the biggest private equity firms in the U.S.
"""
wake me when someone actually get indicted. i highly doubt anything comes of this especially when the article mentions that realpage has lobbying going on.
Most of my holdings are VTI, so I surely own some of RealPage and any other publicly traded firm like this. I don't care. Burn that entire part of the market. I cannot stomach that my investment returns are on the backs of the homeless.
I had never really considered how a bunch of similar companies using the same SaaS might actually turn into a monopoly whether intentionally or not. Nice catch FBI or somebody;)
Wonder if this is just the tip of an iceberg? What other industries might be doing similar things?
Not sure about stateside but can confirm in Europe the competition law regulators are very hot on this - SaaS platforms being used (willingly or unwittingly) as hub & spoke cartels
This sounds like a clear criminal conspiracy, but nothing in this is directly about homelessness. This notion that homelessness is primarily driven by high rents stands up to zero scrutiny. Especially visible homelessness as in, the people you see sleeping on the street. That is driven by other public health epidemics such as drug addiction and untreated mental health issues.
It’s important to get this right, or we won’t be able to solve either of these problems (skyrocketing rents & homelessness).
It stands up both to intellectual review and research studies. It’s a very clear idea that higher rents are harder to pay for, so it’s more likely you can’t pay. It’s conceptually sound AND backed by research.
> Especially visible homelessness
In many parts of the country visible homelessness is a small fraction of the total homelessness. For example, historically Boston had 5% of the homeless population on the street.
Homelessness doesn’t look like what people see. For every homeless person laying on the sidewalk having a health crisis there are 10-20 more people in homeless shelters or cars. This is where the homeless families are.
If you have bad luck (eg medical expenses, car crash etc) and suddenly can’t afford rent, high rents make it hard to get enough money to bridge that gap. This is a real risk for low-income workers - one surprise bill could easily deplete savings and risk not paying rent.
If you’re just irresponsible or handicapped and can’t work full time (eg mental health issues, physical health issues) and have trouble maintaining income and savings, then expensive rent makes it more likely you won’t earn enough any given month.
Hell, if you’re a drug addict and barely able to hold a job and always looking for your fix, high rent makes it harder to find a slummy house to get out of the rain.
You can find PLENTY of data on homelessness from your city’s homeless Census which they do every year. It’s a rigorous process and it’s done in a controlled manner in every major city in America.
Not taking a side one way or the other, but what you linked to is literally the definition of "correlation is not causation". They noted that in a handful of cities that over a 5 year period housing prices increased and homelessness increased. There's a (weak) correlation. That does not imply causation. There could be any number of explanations for why two things increased in the same time period without one causing the other.
What GP said is it stands up "to zero scrutiny." That is an absolutely absurd claim. There is a mountain of evidence pointing to exactly this.
Sure, correlation vs causation blah blah. This correlation persists even when controlling for most other variables people can think of:
> A large body of academic research has consistently found that homelessness in an area is driven by housing costs, whether expressed in terms of rents, rent-to-income ratios, price-to-income ratios, or home prices. Further, changes in rents precipitate changes in rates of homelessness: homelessness increases when rents rise by amounts that low-income households cannot afford. Similarly, interventions to address housing costs by providing housing directly or through subsidies have been effective in reducing homelessness. That makes sense if housing costs are the main driver of homelessness, but not if other reasons are to blame. Studies show that other factors have a much smaller impact on homelessness.
> Much of the research looks at the variation in homelessness among geographies and finds that housing costs explain far more of the difference in rates of homelessness than variables such as substance use disorder, mental health, weather, the strength of the social safety net, poverty, or economic conditions. Some vulnerabilities strongly influence which people are susceptible to homelessness, but research has repeatedly concluded that these factors play only a minor role in driving rates of homelessness compared with the role of housing costs.
A platitude about correlation vs causation is downplaying what we know about this specific situation.
The startup I worked for, MyNewPlace based in San Francisco, was acquired by RealPage in 2011.
The execs were from Texas and when they presented to the MyNewPlace team, they told us SFers with smug self-satisfaction that drug testing would be required as a condition of employment.
I was not and am not a heavy drug user; I am anti-surveillance state.
I helped a bunch of fellow devs (including myself) apply for medical marijuana prescriptions (cannabis was not recreationally legal in CA at the time) and when proffered the RealPage offer of employment, I resigned on the spot.
This is my look of smug self-satisfaction that the RealPage execs are now under Federal scrutiny for monopoly price-fixing.
I'm in the same boat: I don't partake, but neither do I want my boss watching me on my day off. Two related stories:
1. A friend went through the same process as you. The whole Bay Area team refused to take the tests. New corporate boss: "But we test everyone!" Local team: "Not here, you don't!" Faced with a choice between firing the entire new acquisition or getting some sanity, the buyer modified their supposedly inviolable policy to exempt CA employees.
2. I was the CISO at a prior gig when an enterprise customer was evaluating our service. They checked all the usual boxes and then asked, "oh, and you do drug test all your employees, right?" The CTO and I looked at each other and I had the privilege of being the one to say, no, we do not and will not test our employees. Either they're performing up to expectations or they're not. That felt great.
I had a beer yesterday and I know I won't be in trouble for that. Why should I remotely care whether a coworker smoked a joint at the same time? We're both sober and working today.
Edit: CTO and I laughed about it later. What counts as a passing score locally? Is there a minimum value, too, or just a max?
I worked for a video/audio/graphics production company that was purchased by a corporate entity. The new corporate daddy has a drug-free policy, and wanted to implement that with the newly purchased employees. I joked and said that anyone that passes that test in this type of industry should be fired. Like, you're just not trying to very hard to be creative if cannabis isn't part of the process.
Ultimately, the tests were never administered after tremendous push back. The policy was not revised, but just not bothered with. The funny thing, is this was in a state that I swear will be the absolute last state to allow for any kind of legalized use.
I first heard about the RealPage price fixing conspiracy on TikTok. It wasn't this video, but very similar (he swears at the 1:35 mark so use headphones if needed):
What's going on is that Vanguard, BlackRock and (other?) private equity firms have bought up huge swaths of real estate in the US as secure investments. This started around 20 years ago when financial advisers like Suze Orman recommended Vanguard as a vehicle for retirement savings alongside a 401k, Roth IRA, etc:
Now during a slow housing market, private equity firms are holding land and housing, rather than selling for a loss like banks did when the 2008 housing bubble popped. Due to a weak economy post-pandemic, inflation driven by corporate greed to prevent losses by the wealthy during those ~2 years that labor stayed home from the workplace, and high interest rates which resulted from the Federal Reserve trying to slow that inflation. Their infinite holds have resulted in record high rents and mortgages due to low volatility from lack of competition.
Depending on how the presidential election goes, and if there's a recession or stagflation in the following year(s), private equity firms will likely find themselves under increasingly high pressure to sell and free up capital to pay their investors dividends. Then private equity firms may go to the federal government for a bailout just like Fannie Mae and Freddie Mac did.
Basically Gen X, Millennials and Gen Z on Main Street will be asked to bail out private equity firms on Wall Street to save the retirements of Boomers. The key difference between the Housing Bubble popping and today being that people under 50 have been under the yoke this whole millennium: underemployed, working excessive hours and multiple jobs while being denied raises/savings/retirements and even having their social safety net slowly dismantled (for example the unemployment work search requirement used to deny benefits after the mid-2000s) since the economy became financialized after the 2000 Dot Bomb.
At every turn, rather than investing in stuff like automation and renewable energy, prioritizing work/life balance like in Scandinavian countries, or even promoting unions/guilds/cooperatives, the US outsourced 100,000 factories under the GW Bush Administration and stonewalled nearly all pro-labor programs under the Obama Administration. Leaving us with a monopolized and duopolized economy that nickel and dimes working people and blocks them from participating in capital investment by labeling low-dollar trades as "pattern day trading" in 2001, for example:
After a lifetime of exploitation, it's a bit like the Lannisters having to go to the Iron Bank when their gold mines stopped producing. Or billionaires who can't find where all of the money went, begging young people for their last penny so their grandparents can retire in dignity. It.. raises some eyebrows to say the least.
RealPage may be the first in a long chain of dominoes that leads to young people having real leverage over moneyed interests. It will be curious to see how they respond - whether they bow to the status quo or organize to demand structural changes in the economy like during the Progressive Era, New Deal and post-WWII economic expansion before trickle-down Reaganomics flatlined wages as productivity increased after 1980.
>Leaving us with a monopolized and duopolized economy that nickel and dimes working people and blocks them from participating in capital investment by labeling low-dollar trades as "pattern day trading" in 2001, for example:
wtf are you talking about? I don't see how that meaningfully prevents working people from "participating in capital investment". It only applies to day trades (ie. buying and selling the stock in the same day) on margin accounts (ie. you're taking out a loan to buy the stock). If you're doing that, chances are it's gambling, not "investment".
Other apps are not just price fixing but property management and reporting though I've seen Realpage type behavior from them.
My guess is since Realpage is biggest and their business is all about price fixing, Feds figure convict them, shut them down and MAYBE send exec or two to jail and rest will fall in line so quickly.
There are several issues with RealPage versus something like a public-data analytics tool:
* RealPage actively suggests a price for each unit without exposing the underlying fundamentals to the customer, rather than displaying aggregate data and allowing the customer to make a pricing decision.
* RealPage incorporates private data, including vacancy data, from all participating companies into their pricing model in order to generate a shared agreement about pricing. This information is being voluntarily shared in order to manipulate the market - that is, they broker horizontal collusion between players in a vertical industry. A group of landlords calling each other to say "we're going to make sure the vacancy rate stays at 5.5% this year" or "hey let's make sure we don't let these units go for under market value even though they're empty" would also be illegal collusion, it's just being laundered through an algorithm.
This is the big smoking gun that makes it a hub-and-spoke price fixing ring (also called vertically integrated horizontal collusion - ie, a cartel).
There's also the part where RealPage bought their main large-scale competitor, Lease Rent Options (who claimed to use only public data, in contrast to RealPage), in a 2017 deal that probably shouldn't have passed antitrust review, so there isn't anyone else to blame (they also own Buildium).
