Right at the end it mentions the complex’s pool has been closed for two years… which I guess you can tie to the algorithm telling the landlord they don’t need to service the pool to get the rent they think they can charge, but yeah… the article doesn’t really justify the title.
Physical pools do also turn an ominous shade of green from algae when they’re not maintained, as apparently a Google review indicates happened at one of the property complexes mentioned in the piece.
I read it as trying to imply that the price fixing algorithm incentivized management firms to neglect maintenance.
It would be nice to read an article about this from an econ standpoint. Is it really possible for this yieldstar “algorithm” to convince independent actors to agree to lower their occupancy rate in return for higher average income? It seems like they’re analogizing this to a monopoly, where one entity controls all the assets so it can raise prices and still sell. But in this case if you’re one landlord at 80% occupancy with high prices, it’s a prisoners dilemma and you’d just make more money if you lowered rates a bit.
I guess one explanation would be that yieldstar had leverage over the landlords. If it said “it’s all or nothing, either you blindly follow our pricing model or you are on your own” then perhaps the benefits outweigh the costs. But that’s not the claim in these lawsuits though, they’re just arguing that “landlords used the algorithm price 90% of the time”. This might just be indicative that the algorithm is good at pricing housing.
Asa side note, the article covers another explanation for high vacancy rates - developers building huge apartments with loan structures that have penalties if rents don’t hit targets. So they’d rather leave units unoccupied and stay in business instead of lowering rents to make money. But why would the lenders agree to such a stupid structure? I don’t know if I can believe that either.
Overall I’m inclined to believe a simpler story that inflation has been really high, housing demand outpaced supply, and yieldstar helped determine optimal prices in this dynamic market.
As for why occupancy % has gone down, I think it’s a really specific story of how these new huge “luxury” (in extreme quotes) buildings are managed. They just try to keep liquidity high so that they can rent out 3-6 months in advance, which high-payers really like.
From a pro publica article on the same story:
“Such agents sometimes hesitated to push rents higher. Roper said they were often peers of the people they were renting to. “We said there’s way too much empathy going on here,” he said. “This is one of the reasons we wanted to get pricing off-site.”
I've worked in tech in this industry, and it is filled with scammy, no good people at the top, companies pushing rent-fixing software at the expense of quality property management, prop management companies paying peanuts to their own employees and downsizing apt leasing offices and managers so that they have to do more with less..so many working class people working multiple shitty benefit-less jobs trapped in shitty apartments with rent increases they don't deserve. America is such a scammy country.
The sad thing is that Private Equity is the trend now for financing and running other type of industries Greed is Good mindset.. I guess this isn't new
> Since 2016, rents have climbed 76 percent in Phoenix, 63 percent in Las Vegas, 80 percent in Atlanta, 66 percent in Wilmington, North Carolina, and more than 50 percent in Portland, Seattle, Charlotte, Nashville, and Dallas. One multifamily executive quoted in an antitrust lawsuit recalls,
While I have no general reason to doubt the fixing allegations, but in the same time span national average fuel prices increased 72% and CPI increased 32%. So it sounds like inflation is arguably a majority of those change and with it backed out the numbers sound less obviously suspicious.
Driving up rental prices across entire markets is what drove up mortgages. Appraisals were more of a side effect of that than reflections of actual value, although most home owners will be loath to admit their golden geese are a shame.
Rental prices are used as an indicator for housing demand, and median home values feed back into the calculation for rental prices. It was a setup by deep pocketed financial interests with heavy investment into hard assets to game the math.
Before the pandemic, the rhetoric against WFH was largely a tactic by mid- and high-rise owners to sustain property values and income. I don't think a lot of people had access to the people having those conversations, but it was a fairly open topic around me going back to at least 2016.
What is the actual solution here? The lawsuit seems to hinge on "everyone used the same algorithm thus it's collusion", which would mean that _you can't sell a single algorithm to multiple property management firms_, at least not without personalizing it or possibly re-creating new ones from scratch for every management company.
It's already illegal to collude to fix rental prices. Laundering that through software across markets at a national level fools no one, or at least not prosecutors and judges.
The solution is for the state to bring charges against the most egregious participants, then write laws to prevent price-fixing PE cartels with the budgets of nation-states from doing this ever again.
Well I asked what the solution was, which was more technical or a question of "what exactly will those laws say". What is the implementation of something that prevents this but still allows people to buy and sell a common algorithm?
It isn't just an "algorithm" in the computer science sense. It is property managers reporting a bunch of information that is then fed into an algorithm.
Selling the algorithm should be fine. The information sharing is the part that gets into cartel territory.
This would not change anything. If they moved to scraping each others' websites instead of all contributing data to a DB at the end of the day, the outcome wouldn't change; it'd just take a lot more cpu cycles to run.
This is about monopolized rent fixing.