[HN Gopher] Rent going up? One company's algorithm could be why
___________________________________________________________________
Rent going up? One company's algorithm could be why
Author : ingve
Score : 144 points
Date : 2022-10-16 15:46 UTC (7 hours ago)
(HTM) web link (www.propublica.org)
(TXT) w3m dump (www.propublica.org)
| [deleted]
| anm89 wrote:
| Definitely not a decade and a half of virtually free money and
| endless liquidity that encouraged people to chases returns
| outside of stocks and bonds.
|
| No, it's those blasted algorithms.
| scotty79 wrote:
| That's basically price fixing by a third party.
| hammock wrote:
| I lived in one or two of these Greystar, etc buildings that used
| this software. They are expensive buildings. You can negotiate if
| you find the right people though (99% won't be able to do this),
| it is rare and difficult.
| setgree wrote:
| This reminds me of management consulting.
|
| The consultants come in, recommend you fire 10% of your
| workforce, and when you pull the trigger you say, sorry McKinsey
| made me do it! Likewise, the recommendations made by the software
| are non-binding, but if pushed you say "well the algorithm said
| so..."
|
| In either case, it's the c-suite/property manager making the
| call. But it seems that we like a measure of distance between
| ourselves and unpleasant decisions. The algorithm/well-groomed
| 20-somethings provide a kind of plausible deniability.
|
| The answer is, of course, a ton more housing.
| PinesOfRome wrote:
| In, fire 30% of the workforce, new logo, boom! Out. You are now
| a fully trained management consultant.
| HideousKojima wrote:
| richbell wrote:
| While I don't know your intentions behind this comment, I'll
| add that high immigration is a core policy in places like
| Canada explicitly so they don't have to solve any problems
| around labour or financial policy. Skilled immigrants tend to
| have lots of money to spend and no debt; unskilled immigrants
| are exploited in schemes where they work below minimum wage
| at menial jobs (e.g., https://financialpost.com/news/retail-
| marketing/foreign-work... or
| https://jacobin.com/2021/12/coffee-chain-fast-food-labor-
| pay...).
|
| I used to work for a government employment centre. It was
| depressing how many highly educated people emigrated to
| Canada for promises of a better life and ended up driving
| Ubers because they were mislead about earning potential or
| education equivalency.
| [deleted]
| dang wrote:
| " _Eschew flamebait. Avoid generic tangents._ "
|
| https://news.ycombinator.com/newsguidelines.html
| Vt71fcAqt7 wrote:
| Is it flaimbait to discuss demand in a discussion about
| supply?
| whywhywhydude wrote:
| Wow, this is a brazen price collusion. No doubt about it. Using
| private data to fix prices and asking landlords to keep units
| vacant rather than decrease rents.
| boole1854 wrote:
| I'm not sure it's so clear. "Using private data" to set prices
| is hardly nefarious on its own, even if the result is higher
| prices. After all, "price stickiness" is a well known phenomena
| in the economics literature (and it can lead to sub-optimal
| allocation of resources). Maybe this is just a way to make
| prices less sticky.
|
| On the other hand, if the system recommends keeping units
| vacant, that does start to suggest that it is enabling
| landowners to take advantage of monopolistic pricing power. Yet
| higher vacancy rates could actually be socially optimal as
| well. A similar phenomena occurs in the movie theater business.
| Theater owners often price tickets such that the "vacancy"
| rates (empty seats) are quite high. However, a law that
| required pricing tickets low enough to fill all seats would
| reduce the return on equity in the industry so much that
| investment in the theater industry would plummet, vastly
| reducing the number of theater seats available available to
| fill consumer demand in the medium to long term.
| jeffbee wrote:
| If the software allows them to take advantage of their supply
| monopoly, the software is not the problem. It's the lack of
| competition. Every housing discussion boils down to this: the
| black/grey stone/star/rock REITs are in this space because
| local governments have rigged the game to favor them. If the
| governments start rubber-stamping developer permits, the
| REITs will get their faces ripped off.
| wjnc wrote:
| Different companies using the same AI for pricing support
| purposes could easily tip into illegal practices if there is
| a feedback loop from company to model. That's just plain old
| collusion via a middleman.
|
| Lo and behold:
|
| "To arrive at a recommended rent, the software deploys an
| algorithm -- a set of mathematical rules -- to analyze a
| trove of data RealPage gathers from clients, including
| private information on what nearby competitors charge."
|
| Dark times if the FTC isn't picking this up.
| boole1854 wrote:
| > Different companies using the same AI for pricing support
| purposes could easily tip into illegal practices if there
| is a feedback loop from company to model.
|
| While there are anti-competitive concerns with this kind of
| system, one of the points I was trying to make is that a
| problem requires more than there be simply a 'feedback
| loop'.
|
| Even in a market with 'perfect' competition, there can be
| feedback loops: e.g., an individual farmer might price
| their grain by checking the current market price which is
| tracked by a third party, and that third party determines
| the 'current market price' by querying the prices set by
| all farmers. The reason this isn't necessarily anti-
| competitive and can be compatible with 'perfect'
| competition is due to the other characteristics of the
| market (all participants are price takers, etc), not due to
| a lack of coordination between producing firms and market
| analytics firms.
| acdha wrote:
| I'd also add that this is going to fuel the importance of
| explainability in these systems. Even if your motives are
| completely fair, not being able to say why the system
| produced a particular output can look really bad in court.
| There isn't an easy way to distinguish "they have no idea
| how this AI system works" from "they built it to avoid
| leaving a paper trail".
| ranman wrote:
| You can't reasonably compare a housing vacancy tax with a
| hyperbolic straw man argument of a theater. It's not a
| similar phenomena at all, because it doesn't happen.
| boole1854 wrote:
| I didn't bring up housing vacancy taxes, let alone compare
| them with anything else. I was making a point about the
| known limitations of the theory of perfect competition.
| PaywallBuster wrote:
| It's just information
|
| It's up to the landlord to negotiate based on his individual
| situation (condition of the unit, demographics, furniture, etc)
|
| Not different from a company asking for "market data" regarding
| salaries and use that to _guide_ their salary offers to new
| candidates
|
| In the end the company will adjust their recommendation based
| on results/feedback from candidates (some companies could be
| popular/well liked and get away with lower compensation, and
| vice versa)
| tchaffee wrote:
| All collusion is "just information".
| siliconc0w wrote:
| It's illegal for competitors to get together and agree to a price
| floor but it's apparently not illegal to do so through a
| middleman. I guess housing is so inelastic that you can turn the
| screws and even let units stand empty to keep artificially high
| prices.
| deviantbit wrote:
| "The beauty of YieldStar is that it pushes you to go places that
| you wouldn't have gone if you weren't using it," said Kortney
| Balas, director of revenue management at JVM Realty"
|
| What she really means, is she would have never imagined sucking
| every penny out of you, until she got a hold of their software.
| They get filthy rich, while you need a place to live, and they
| generate excess profits on false supply and demand models.
|
| Where I live, we have 60% occupancy, but the area is priced
| beyond anything reasonable. $2500 a month for a studio is nuts.
| Now we're getting a renters tax from the city. Joy.
| codekansas wrote:
| For the past few months I've been in a somewhat unusual housing
| situation. My wife is a medical resident in NYC, and the hospital
| system she works for is quite large and owns a lot of NYC
| property. They offer their employees subsidized housing at
| greatly reduced rates (meaning, an 1100 sq. ft. Manhattan
| apartment for $2300 a month). It has a "company town" feel, but
| it has been great for us, and the incentives seem like they're
| aligned in this case - employers have an incentive against being
| extractive because it reduces their employees' effective
| compensation. The residency program is 7 years which means we're
| stuck here anyway, and we don't have to worry too much about
| about her being fired or wanting to find a new job. In a
| competitive labor market like tech / finance / medicine it seems
| like employer-subsidized housing isn't a terrible idea, and is an
| alternative to just relocating corporate offices to a lower CoL
| area.
| cced wrote:
| > it seems like employer-subsidized housing isn't a terrible
| idea, and is an alternative to just relocating corporate
| offices to a lower CoL area.
|
| Would this be in a way similar to how we've tied health care to
| employer-based insurance? If so, I'm not sure I'd want to be in
| a position where my employer subsidizing my housing makes it
| difficult to leave said employer for better opportunities or,
| god forbid, you lose your job and then home subsidy.
| toast0 wrote:
| I think it makes sense in some cases and hospital residency
| is one. It's a temporary position (even if temporary is 7
| years), often where the employee has limited influence on the
| location. They're likely to have lived somewhere else before
| taking the position, and will live somewhere else after the
| position. There are existing strong incentives to not move
| jobs during residency, so an additional one won't hurt too
| much.
| mattkrause wrote:
| '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."'
|
| Yikes!
| IAmGraydon wrote:
| Yeah many of the quotes in this article are straight out of the
| psychopath textbook. These are the worst kind of people, and
| unfortunately capitalism breeds them. It's a system where
| ethics is a weakness.
| nickpp wrote:
| You should see the kind of people communism breeds then. An
| army of them is busy right now raping and pillaging a
| peaceful country while their leader is keeping the world
| hostage with nuclear threats.
| dang wrote:
| Please don't post ideological flamewar comments to HN. It
| leads to flamewar hell, an information-free entropic state
| that we're trying to avoid here.
|
| https://news.ycombinator.com/newsguidelines.html
| dang wrote:
| Please don't post ideological flamewar comments to HN. It
| leads to flamewar hell, an information-free entropic state
| that we're trying to avoid here.
|
| https://news.ycombinator.com/newsguidelines.html
| armatav wrote:
| It's a system where relentless money printing cripples it by
| forcing that perspective. You need to gamble in order to keep
| your shirt, or you need to raise prices.
|
| Simple solution is not to print money. Capitalism is not the
| problem.
| JoBrad wrote:
| Re-wording so it doesn't sound like I'm trolling.
|
| Commodity and housing prices have had steep price increases
| well before central banks printed money excessively.
| svnpenn wrote:
| I totally agree. Apple makes $300 billion in revenue a
| year, they are barely keeping their shirt!
| armatav wrote:
| Apple's not a single dude working for $40 an hour into
| his broken savings account last time I checked.
|
| Downvote it all you want, money printing is the issue -
| not "capitalism". Sound money eliminates this problem.
| svnpenn wrote:
| You are totally right. Companies would never do stuff
| like using handouts on stock buybacks instead of workers
| right? Right?
| carlivar wrote:
| I agree. As an exercise, consider who has more impact over
| your life: Joseph Biden or Jay Powell?
| Gibbon1 wrote:
| Rentier Capitalism rewards sociopathy.
| ghufran_syed wrote:
| This whole discussion seems to miss the point that sellers
| _always_ want to sell for as much as they can, and buyers
| _always_ want to pay as little as they can. If the price goes too
| high, buyer 's won't buy. You could get the same effect by having
| an auction every month for all the units that would be available
| in the next month - the price would still rise, but then you
| could blame the other buyers for "overbidding"
|
| The optimal price for a seller is always "whatever the market
| will bear" - which we don't like the sound of it's a big "evil"
| corporation. But if any of us as individuals were selling a car
| for example, and some software would help us maximize the sale
| price, we would gladly use it - I don't see how the seller has a
| moral duty to take _less_ money, same as the buyer has no moral
| duty to pay _more_
| SantalBlush wrote:
| And you seem to be missing the point that this article is
| discussing a cartel created via a middleman; they are
| restricting the quantity supplied, not just setting their
| prices individually.
| routerl wrote:
| That's... not how markets work...
|
| Discounts are often given to build relationships: Gillette
| razor handles are sold at a loss, so you'll keep buying
| Gillette razors; my loyal mechanic is willing to sell me a used
| car at a smaller than maximum profit, since he knows I'll come
| to him for service; I'm willing to sell my labor for less than
| the maximum, in order to work on an exciting project that will
| greatly advance my career.
|
| Short-term profit is often the enemy of long-term
| profitability.
| nottorp wrote:
| That only works if the buyer has the option to not buy ;)
| creato wrote:
| Which is the case because there is not enough housing being
| built. That's the real issue.
| nottorp wrote:
| The buyer in this case is the renter. The seller is the
| landlord.
|
| Looking for a lower price implies relocating which tends to
| have a huge cost. So it's not a free market.
| mtgx wrote:
| malikNF wrote:
| Thing is, we are talking about housing here. A basic necessity
| for everyone. I can live without a car, I can live without that
| expensive new_shiny_toy_of_the_month but housing is something
| that's vital, it has the ability to impact so many aspects of
| my life.
|
| So the whole debate here, as far as I understand is, how
| ethical is all this. Is it ethical to squeeze every last cent
| out of a person looking to house themselves and their family?
| colinmhayes wrote:
| What's unethical is not building enough housing to affordable
| house everyone.
| jfghi wrote:
| I'd claim it's more complicated as large groups could
| purchase said housing, and by intentionally introducing a
| certain amount of vacancy create enough of a shortage such
| that the rest of the portfolio becomes more expensive and
| "profitable"
| ok_dad wrote:
| Anyone involved with this type of business should be ashamed of
| themselves. This is a absolutely disgusting collusion of literal
| rent seekers.
|
| I can't wait until "you'll own nothing and like it" happens, so
| we can see a real revolution. People won't stand for this, right?
| p4coder wrote:
| Rent increase has been one of the biggest contributor to core
| inflation [0]. That has caused fed to raised interest rate at a
| rapid clip and cause the market crash. So is an algorithm
| responsible for the blood on wall st?
|
| [0] https://www.corelogic.com/intelligence/the-role-of-rent-
| in-i...
| thunky wrote:
| toiletfuneral wrote:
| richbell wrote:
| > Bottom line is that this service is not responsible for
| higher rents, the market is.
|
| This service is directly and indirectly responsible for
| landlord's increasing rent for their tenants. Blaming "the
| market" is a convenient way to cast blame away from people
| responsible onto a nebulous concept.
|
| Companies like Zillow use software based on "the market" to
| determine housing prices. But for all intents and purposes
| they are responsible for driving up housing prices based on
| actions informed by their software, because _their actions
| directly influence "the market"_.
| defterGoose wrote:
| This is what so many "free market" hawks tend to
| misunderstand. The market is not an acyclic network, but is
| still strongly ordered in its power imbalance.
|
| 'The world is in greater peril from those who tolerate or
| encourage evil than from those who actually commit it.'
| -Albert Einstein
| thunky wrote:
| If the "free market" isn't good enough for you here, what
| are you suggesting is the solution? Banning software that
| analyzes market data if the output may result in pricing
| adjustments?
| acdha wrote:
| There isn't a single "free market" and this one isn't
| particularly free since there's hefty information
| asymmetry and buyers typically have much lower
| negotiating power (you must have somewhere to live this
| month; a landlord can often leave a place idle for months
| holding out for a higher offer, especially if AirBnB is
| an option).
|
| Mainstream economic consensus for ages has been that
| markets need some regulation to work most effectively and
| that's especially true for a basic human need like
| housing which controls how healthy the overall community
| is.
|
| Some obvious things to regulate here could be mandatory
| disclosure of sources used to justify increases, annual
| rate caps, requiring amounts over a certain threshold to
| be itemized and temporary (i.e. if the building includes
| heat & oil costs spiked require the owner to show that
| the price they actually paid went up & don't raise the
| rent permanently since it'll come back down).
| baggy_trough wrote:
| Mainstream economic consensus would be that your
| proposals are very bad ideas.
| richbell wrote:
| Why?
| baggy_trough wrote:
| Because they add deadweight loss to the economy by
| interfering with price signals and raising transaction
| costs.
| thunky wrote:
| > a landlord can often leave a place idle for months
| holding out for a higher offer, especially if AirBnB is
| an option
|
| I guess they can, but they are running a business and
| their goal is to make money, so they'll eventually take
| what they can get.
|
| And remember it works both ways. It doesn't seem like it
| now, but sometimes, in some markets, it's hard for
| landlords to attract tenants. I have serious doubts that
| regulation or any other form of intervention on pricing
| would have anything but unintended consequences, in some
| cases leading to the exact problem you're trying to
| prevent:
|
| https://www.americanexperiment.org/new-york-landlords-
| are-ke...
| acdha wrote:
| > I guess they can, but they are running a business and
| their goal is to make money, so they'll eventually take
| what they can get.
|
| Oh, sure but the point is just that the market dynamics
| favor sellers pretty strongly. For example, how much does
| the hassle of moving or leaving a neighborhood deter the
| kind of negotiation which would normally be key to
| keeping a market stable?
|
| Note also that regulation doesn't need to directly
| control pricing to make a difference. Since information
| asymmetry is a lot of the problem here, increased
| transparency could help improve the situation and give
| people better negotiating positions (e.g. if a building
| owner is profitable at 30% less than asking for all of
| the current leases, you can probably negotiate better
| with that information than if you don't have it)
| thunky wrote:
| > actions informed by their software
|
| Yes, _informed_. The output of this software, and Zillow 's
| algorithms, is only _information_ that still needs to be
| applied to the real world ( "the market"). The algorithms
| just provide information that wasn't as easy to access
| before.
|
| It's like saying that Google is responsible for higher
| rents/prices because it allows landlords/homeowners to
| easily access and analyze market data. I don't think so.
| richbell wrote:
| > Yes, informed. The output of this software, and
| Zillow's algorithms, is only information that still needs
| to be applied to the real world ("the market"). The
| algorithms just provide information that wasn't as easy
| to access before.
|
| Who verifies that the algorithm is correct? Who is
| culpable if the algorithm is flawed or applied
| incorrectly? If GreyStar or Zillow realized their
| algorithms were significantly inflating values, would
| there be any incentive to correct it without regulation?
|
| > It's like saying that Google is responsible for higher
| rents/prices because it allows landlords/homeowners to
| easily access and analyze market data. I don't think so.
|
| Except that information isn't readily available and
| easily accessible on Google (in many jurisdictios). It's
| locked away behind pricey subscriptions to vendor
| products. In the case of YieldStar it means that tenants
| cannot fairly negotiate because they don't know what a
| reasonable price is.
| thunky wrote:
| > Who verifies that the algorithm is correct?
|
| You're not going to like this answer, but...the market
| does.
|
| The point is that no software has to power to force
| tenants to pay higher than market rents.
|
| edit to add:
|
| > In the case of YieldStar it means that tenants cannot
| fairly negotiate because they don't know what a
| reasonable price is.
|
| If that's the case, then the landlords could save the
| money they're spending on YieldStar and just set the high
| prices already. They could use their own proprietary "I
| want more money" algorithm, and the tenant would have no
| choice but to pay whatever number the landlord popped out
| of their head.
| richbell wrote:
| > You're not going to like this answer, but...the market
| does.
|
| In other words, nobody is culpable and the people with
| money and resources are able to exploit those below them
| with impunity.
|
| > The point is that no software has to power to force
| tenants to pay higher than market rents.
|
| Sure it does.
|
| Having a roof over your head is a fundamental need and
| people are willing to do a lot to avoid homelessness. If
| your landlord says to you "rent is going up $500 a month"
| and you're already struggling financially, uprooting your
| family is a serious personal and financial hardship many
| people try to avoid, even if that means giving up basic
| luxuries.
|
| Not to mention that corporate landlords can absolutely
| abuse their power to drive prices across an area. We
| aren't just talking about individual landlords -- though
| even individuals can still own dozens of properties.
| thunky wrote:
| If I have a friend that owns a rental property, and I
| tell her: "you're only charging $1k for rent? you could
| get $2k easily". Am I helping her exploit her tenant? Now
| what if she owns 10 rentals? 1,000? 10,000?
|
| I think we probably just need to agree to disagree that
| this is a form of exploitation.
|
| Now if there is actual price fixing or collusion going
| on, that's another matter.
| richbell wrote:
| > If I have a friend that owns a rental property, and I
| tell her: "you're only charging $1k for rent? you could
| get $2k easily". Am I helping her exploit her tenant? Now
| what if she owns 10 rentals? 1,000? 10,000?
|
| > ...
|
| > Now if there is actual price fixing or collusion going
| on, that's another matter.
|
| If your friend owns 10,000 rentals and sets prices
| unilaterally, thats blatantly anti-consumer if not
| monopolistic. Shelter is a basic need and people will pay
| as much as they can to keep a roof over their heads,
| until they reach the breaking point.
|
| If you have several friends that control a sizable amount
| of the housing supply in an area and they agree to charge
| a certain amount and artificially limit the availabile
| supply, that seems like price fixing to me. Doesn't
| matter if you have three friends or three hundred
| friends.
|
| ) When competitors collude, prices are inflated and the
| customer is cheated.
|
| https://www.justice.gov/atr/file/810261/download#:~:text=
| Whe....
|
| In either case, the prices are inflated and people are
| being cheated.
| thunky wrote:
| > If your friend owns 10,000 rentals and sets prices
| unilaterally, thats blatantly anti-consumer if not
| monopolistic.
|
| In my example, the friend is only "fixing" the rent in
| the sense that it was broken (artificially low) before. I
| didn't say she controlled the entire supply of housing in
| the area, and I didn't say she was setting rents
| artificially high. I don't see a crime.
|
| For some reason you're assuming that anytime rent is
| raised it's a violation of the tenant's rights.
| richbell wrote:
| > In my example, the friend is only "fixing" the rent in
| the sense that it was broken (artificially low) before
| ... For some reason you're assuming that anytime rent is
| raised it's a violation of the tenant's rights.
|
| Artificially low according to what metric -- that people
| are only paying 30-50% of their income towards housing?
| People are willing to pay a lot for housing because they
| often _have to_. I consider it highly unethical to frame
| squeezing as much money out of people for shelter as
| "[taking] away the tenant's ability to exploit an
| inefficiency in market pricing." Inequality, reliance on
| food shelters, and homelessness were already bad enough
| before 2020 and have only gotten significantly worse.
|
| Not to mention that many people who would have been able
| to purchase homes are unable to do so because of large
| capital groups or investors purchasing large swathes of
| homes, significantly driving up the costs, and then
| renting out that supply at inflated rates or converting
| them to short-term rentals. It benefits no one except
| those who are already wealthy.
|
| > I didn't say she controlled the entire supply of
| housing in the area, and I didn't say she was setting
| rents artificially high.
|
| In fairness you provided 1,000 and 10,000 as examples of
| the number of rentals she might own.
|
| Regardless, 1k to 2k is a significant jump in rent and
| there's likely important context beyond the numbers. A
| real world example I'm familiar with is people moving
| from a big city to a small town. Is it unethical or
| criminal for the rent to jump from 1k to 2k if people are
| willing to pay for it? Not necessarily. But doing so
| tends to price out people who actually grew up in that
| town, especially people with lower or fixed incomes,
| leading to a strain on social systems and homelessness.
| thunky wrote:
| > I consider it highly unethical to frame squeezing as
| much money out of people for shelter as "[taking] away
| the tenant's ability to exploit an inefficiency in market
| pricing"
|
| Maybe I shouldn't have used the word _exploit_. I didn 't
| mean that the tenant is cheating the landlord, I just
| meant that there is an inefficiency in the market and the
| tenant is able to use it to their advantage.
|
| Rents, like house prices, do have a fair market value.
| Buyers and sellers are constantly engaging in
| negotiations every day in order to set prices on the
| whole. If software helps the buyer or seller negotiate
| more effectively, that's fine by me.
|
| I don't disagree with you that it's become much more
| difficult for people to afford housing and other
| necessities. It's a huge problem. And I think you're on
| the right track when you mention large investors buying
| investment property. I wouldn't be opposed to limiting
| foreign investment. Crossing my fingers that with rates
| finally rising, housing/rental investment becomes less
| attractive and the market comes back down to earth and
| rents come down with it.
| richbell wrote:
| > Maybe I shouldn't have used the word exploit. I didn't
| mean that the tenant is cheating the landlord, I just
| meant that there is an inefficiency in the market and the
| tenant is able to use it to their advantage.
|
| And that's a fair point -- I just think that "the market"
| tends to be a harmful concept for basic needs like
| housing, especially when there are controlling interests
| whose sole motivation is to maximize profit. I have an
| inherent distrust of software (https://xkcd.com/2030/),
| and the fact that programs like YieldStar rely on
| proprietary formulations and non-public data (or at least
| data that isn't possible for the average person to
| reasonably acquire on their own) means you are trusting
| them to provide a fair valuation when there's a bit of a
| conflict of interest for them not to. "The market" has
| been a pretty poor regulatory of corporate malfeasance.
|
| Short-term profit is usually at the cost of longevity. In
| the case of housing, there is a difficult to quantify
| 'human cost'. People are generally healthier, more
| productive, and contribute more to their local economy
| when they aren't stressed and experiencing financial
| hardship.
|
| But I digress. I think we both understand each other,
| agree on a few things, and disagree on others.
|
| > And I think you're on the right track when you mention
| large investors buying investment property.
|
| Rates rising has definitely cooled the market in my city,
| albeit prices are still at least 100k over where they
| were even a year ago. I worry though that the recession
| we may or may not already be in will simply be an
| opportunity for big players to swoop in and buy even more
| supply.
|
| I don't really see things improving without significant
| changes to things like zoning laws, short-term rentals,
| and limiting mass-ownership of property (so new supply
| actually goes to buyers and not speculators).
| WalterBright wrote:
| So, why don't landlords just double the rent? Heck, why not
| triple it?
| richbell wrote:
| > So, why don't landlords just double the rent? Heck, why
| not triple it?
|
| I'm not sure where you're from but the rent in my area
| HAS more than doubled in the past few years.
| WalterBright wrote:
| Since the market is inelastic, and landlords can charge
| whatever they want, make it 10x.
| richbell wrote:
| > Since the market is inelastic, and landlords can charge
| whatever they want, make it 10x.
|
| They'll get there, slowly and steadily.
|
| You obviously cannot snap your finger and raise the rent
| 10x in an instant. You have to boil the frog slowly, by
| continuously buying up properties and raise rents
| considerably every year, especially for new tenants. In
| my city the overwhelming majority of residential
| apartments are owned by a single private company.
|
| This is an especially profitable venture with trailer
| parks, which don't have as many pesky tenant rights or
| protections. E.g.,
| https://www.newyorker.com/magazine/2021/03/15/what-
| happens-w...
| WalterBright wrote:
| > You obviously cannot snap your finger and raise the
| rent 10x in an instant.
|
| Why not? Demand is inelastic, and people will be forced
| to pay it. Right?
| richbell wrote:
| > Why not? Demand is inelastic, and people will be forced
| to pay it. Right?
|
| You're clearly not engaging in good faith so continuing
| this discussion would be pointless.
| WalterBright wrote:
| Is your point that Supply & Demand set prices or not?
| richbell wrote:
| > Is your point that Supply & Demand are actually in
| play?
|
| I never claimed they weren't. However, there are a
| significant number of external factors that you refuse to
| acknowledge, like government regulations specifically
| enacted to protect tenants from this type of
| exploitation.
|
| You initially said "why not just raise the price 2x or
| 3x!", when I pointed out that this was happening you
| moved the goal posts to "why not raise the price 10x!" I
| am not interested in engaging with snide 'gotcha!' games.
| WalterBright wrote:
| richbell> Blaming "the market" is a convenient way to
| cast blame away from people responsible onto a nebulous
| concept.
|
| That sounds like a rejection of Supply & Demand forces.
|
| > However, there are a significant number of external
| factors that you refuse to acknowledge, like government
| regulations specifically enacted to protect tenants from
| this type of exploitation.
|
| All that does is make for higher rents and lower supply.
| KerrAvon wrote:
| I think you're missing the point. Let me try this:
| there's a tipping point where you have 50% occupancy and
| charge $x0,000 for 500 sq ft and make just as much money
| as you would at 100% occupancy with a charge of $x000.
| The difference between these two is in the latter
| scenario, some people have no place to live because they
| can't afford the $x0,000. The owner corporation doesn't
| care, they make just as much money either way.
| WalterBright wrote:
| Airlines discount tickets at the last minute. That's
| because flying an empty seat around doesn't make any
| money.
|
| Magazines sell ad space at a steep discount the day
| before it goes to press. Same reason.
|
| Stores have clearance sales. Again, same reason.
|
| And so on. No landlord in his right mind would leave half
| a building vacant if he can get a paying tenant in.
| richbell wrote:
| > Airlines discount tickets at the last minute. That's
| because flying an empty seat around doesn't make any
| money.
|
| > Magazines sell ad space at a steep discount the day
| before it goes to press. Same reason.
|
| > Stores have clearance sales. Again, same reason.
|
| You did not acknowledge or address KerrAvon's point at
| all.
|
| > And so on. No landlord in his right mind would leave
| half a building vacant if he can get a paying tenant in.
|
| Of course they would, and both KerrAvon and TFA explain
| why:
|
| ) The company had been seeking occupancy levels of 97% or
| 98% in markets where it was a leader, Winn said. But when
| it began using YieldStar, managers saw that raising rents
| and leaving some apartments vacant made more money.
|
| ) "Initially, it was very hard for executives to accept
| that they could operate at 94% or 96% and achieve a
| higher NOI by increasing rents," Winn said on the call,
| referring to net operating income. The company "began
| utilizing RealPage to operate at 95%, while seeing
| revenue increases of 3% to 4%."
|
| Plenty of companies avoid large sales or clearances as a
| policy because it damages their ability to sell at
| inflated rates.
| WalterBright wrote:
| > You did not acknowledge or address KerrAvon's point at
| all.
|
| Sure I did. Leaving 50% vacant is leaving a lot of money
| on the table.
| pa7ch wrote:
| So the ever nebulous market is the problem. What regulation
| do we advocate to stop these bottom feeders from hurting the
| entire US economy? Rent control doesn't seem adequate and
| causes other problems. I honestly don't know the answer but
| people making massive profits on rent seems like a major
| inefficiency and inequality problem.
| WalterBright wrote:
| If the profits are above the usual profits, you can usually
| point to government interference causing supply shortages.
| pa7ch wrote:
| Sure thats part of the problem, but its convenient to lay
| this as generic government interference when we know its
| usually the real estate owners who collude or make up
| parts of local government to achieve this interference.
| Stopping this regulatory capture seems to be a
| prerequisite for most good social change.
| WalterBright wrote:
| Regulatory capture is still the government doing it, not
| the market.
|
| Government will always abuse its power, the idea is to
| give it as little as practical.
| mistrial9 wrote:
| which part of the multi-hundred laws, regulations, taxes
| and discretionary decision making is "interference" and
| which part is.. you know, having government with laws? I
| suggest that the implication here is that a local feudal
| lord is the correct form of governance.. it was for a
| thousand years.. that's what you imply, really
| WalterBright wrote:
| Interference is things like preventing new construction.
| Other things are unreasonable burdens local government
| tends to put on landlords, which always result in higher
| rents.
|
| For example, in Seattle, the landlord cannot charge a
| tenant for damage to the unit if the damage is the result
| of domestic violence.
| axiolite wrote:
| > A landlord can only get the amount of rent that a tenant is
| willing to pay.
|
| A place to live is a rather inelastic commodity. If the price
| goes up across the board, people will pay, until they can't
| possibly afford the going rent and are driven into
| homelessness.
|
| > this service is not responsible for higher rents, the
| market is. This service has effectively _cornered_ the
| market, and is manipulating the market through shortages,
| driving rents higher.
| WalterBright wrote:
| > A place to live is a rather inelastic commodity.
|
| People always say this when prices are going up. Then
| prices go down, like in 2008.
|
| The thing is, it is elastic. For example, people get
| roommates to split the rent. They get larger or smaller
| places based on their willingness to pay. More convenient
| or less convenient. More or less amenities.
| acdha wrote:
| Here's what that looks like on the history: 2008 caused a
| brief flattening but it's clear why people are talking
| about rent going up because that's what it has
| overwhelmingly done.
|
| https://fred.stlouisfed.org/series/CUSR0000SEHA
| WalterBright wrote:
| Rents also went down in San Francisco during the
| pandemic. Something that the people on HN wrote could
| never happen :-)
| acdha wrote:
| Oh, no argument - but for how long relative to the time
| they have been going up? I wouldn't say they never go
| down but there's been a pronounced trend for ages. I
| bought a house relatively early (thanks dotcom bubble!)
| and was constantly reminded of how much extra income I
| had relative to my friends who were renting, and that
| really adds up over the decades where people in decent
| jobs were struggling to amass down payments.
| WalterBright wrote:
| Housing tends to go up over time due to inflation,
| government regulation, and increasing population
| competing for the same housing stock.
|
| Housing in many rural areas has stagnated, because people
| don't want to live there.
| masterjack wrote:
| It's true, but it's not like other markets where someone can
| choose not to buy and additional sellers can come in, to make
| sure that prices are in some ways tied to costs. Here,
| everybody has to live somewhere, so by default you have a
| "naked short" position on housing. Efficient price discovery
| here is performing a short squeeze and finding the point of
| "maximum you can afford to pay without going broke", which is
| only possible to reach with price collusion.
| thunky wrote:
| I think you're ignoring something important: competition.
|
| Your statement would only be true if all rental properties
| were owned by a single entity or small number of colluding
| entities.
|
| But in reality there is no such thing, and competition for
| tenants puts a downward pressure on market rents.
| masterjack wrote:
| True, but that's the interesting thing about these kinds
| of algorithms, they align the pricing approaches so the
| entities act more like one than they did before,
| effectively decreasing competition.
| thunky wrote:
| I would say that pricing approaches are already aligned,
| and this software is just another approach that may or
| may not replace existing approaches in some areas. I
| don't see how this decreases competition, tough. A
| competitor can still undercut their competition to
| attract tenants.
| WalterBright wrote:
| The cause of inflation is excess money created by the Fed (i.e.
| things like the $2 trillion "stimulus" package).
|
| The rest is the Law of Supply & Demand.
| JumpCrisscross wrote:
| > _cause of inflation is excess money created by the Fed
| (i.e. things like the $2 trillion "stimulus" package)_
|
| You're mixing up fiscal and monetary policy. Congress and the
| Fed.
| WalterBright wrote:
| The Fed creates the money that Congress wants to spend.
| derac wrote:
| https://fred.stlouisfed.org/series/CP
|
| Increased profits gaming the public impression of inflation
| play a huge role. See the FRED chart above. Profits increased
| 1 trillion since 2020, thats something like 3300 dollars per
| capita.
| FooBarBizBazz wrote:
| 1. Inflation goes up.
|
| 2. Fed raises rates in response.
|
| 3. Mortgages get more expensive.
|
| 4. Rents, which compete with mortgages, get more expensive.
| They are also part of core inflation.
|
| 5. GOTO 1.
|
| I left out the "break" involving massive unemployment and
| political unrest.
| ghufran_syed wrote:
| Having thought about it a little more, I think we don't like the
| idea of it because "shelter" is a basic human necessity, not an
| optional purchase. But a lot of the problem of unaffordable
| housing has been created by _our own policies_ in the US, this
| article is a good summary of the issue:
|
| '"Zoning is not a good institution gone bad. ... On the contrary,
| zoning is a mechanism of exclusion designed to inflate property
| values, slow the pace of new development, segregate cities by
| race and class, and enshrine the detached single- family house as
| the exclusive urban ideal." So writes M. Nolan Gray in Arbitrary
| Lines: How Zoning Broke the American City and How to Fix It.'
|
| https://www.cato.org/regulation/fall-2022/case-abolishing-zo...
| conductr wrote:
| Even if you exclude zoning from the equation entirely and look
| at the raw material and labor costs associated with building
| it's usually exceeding most definitions of "affordable".
| Density is often lauded as a solution, but building vertically
| is more expensive than horizontally. It only helps spread land
| costs across more square footage. The costs of going vertical
| usually outpaces the savings of diluted land cost. So there's
| really no solution that's sustainable. The result being all
| affordable housing is a shell game of subsidies.
|
| Some of this is our own doing as well as we continue to up the
| requirements of building standards/codes. Some make more sense
| than others, but in general we don't design building codes with
| costs in mind and I feel that's a pretty large recipe for
| disaster.
| dickersnoodle wrote:
| >... in general we don't design building codes with costs in
| mind and I feel that's a pretty large recipe for disaster.
|
| Speaking as a Floridian living in Tampa (who just had a near
| miss with a Cat 4 hurricane) that is an extraordinarily poor
| choice of words. Building codes aren't _supposed_ to be
| designed with costs front and center; they 're supposed to be
| designed to foster a sturdy structure than can withstand most
| likely _actual_ disasters. Go look at the footage of Ft Myers
| Beach and Sanibel Island for some perspective.
| mixmastamyk wrote:
| This is mostly not true, excluding skyscrapers, which yes are
| costly. You've forgotten roads, sewers, utilities, sidewalk
| maintenance etc. Missing-middle housing is _much_ more
| efficient than suburbs.
|
| Washington DC is a good example, for those unable to visit
| Europe.
| pixl97 wrote:
| Eh, infrastructure costs of growing horizontally are
| underestimated in the sense you demand everyone has cars,
| massive interstates, thousands of miles of water and sewer
| piping, pollution problems brought on by car culture, etc.
| leereeves wrote:
| This sounds like price fixing as a service, but I wonder if the
| law is prepared to handle it. The FTC guidance on price fixing[1]
| only discusses "agreement among competitors", and never mentions
| each party outsourcing pricing to the same service.
|
| If the competitors never meet or agree on anything, is it still
| illegal?
|
| 1: https://www.ftc.gov/advice-guidance/competition-
| guidance/gui...
| hammock wrote:
| It could be. There is something called tacit collusion, I am
| not immediately aware of case law involving a third party
| algorithm though.
|
| Here is a paper discussing the exact scenario: https://mdpi-
| res.com/d_attachment/sustainability/sustainabil...
| paulryanrogers wrote:
| Collusion by proxy is still collusion. My guess is their
| marketing will take care never to put in writing that effect,
| yet still communicating it with a wink and a nod.
| dasil003 wrote:
| > _If the competitors never meet or agree on anything, is it
| still illegal?_
|
| No idea how the laws were written, but the vast majority were
| conceived before modern big data systems were possible, and
| even today most regulators are unprepared for arguments like
| this (from the article):
|
| > _Using software like YieldStar is "taking what we used to do
| manually on a yellow pad and calling people on the phone and
| putting it on a codified system where you take the errors out
| of the pricing," he said._
|
| Modern big data and ML capabilities mean that not only is the
| human removed from the details of the process, but even
| understanding the mechanics and relative weight of different
| inputs becomes all but impossible. Large-scale human-based
| processes can still feel opaque and arbitrary from the outside,
| but at least there are entry points for human empathy and (more
| importantly) accountability.
|
| As we saw in the 2008 financial crisis, it's a very dangerous
| state of affairs when the risks and rewards of financial
| innovation are decoupled across different parties by means of
| opaque and unintelligible instruments. Computers are not the
| same as paper.
| treis wrote:
| >Modern big data and ML capabilities
|
| But for the most part this stuff doesn't work. And I think in
| this specific case if there were really some secret sauce
| they'd make a lot more money as property flippers. Buy
| underperforming property for cheap, apply secret magic, and
| sell much better performing property for much more would make
| you way more money than selling a SAAS.
| richbell wrote:
| >>Modern big data and ML capabilities
|
| > But for the most part this stuff doesn't work.
|
| Yeah, not a great example when ML is frought with
| discriminatory biases or bizarre edge cases like Twitter
| banning people for posting innocuous pictures[0].
|
| People get so blindsided by the magic they forget that
| these systems are often designed poorly, trained poorly,
| and cannot be easily explained.
|
| [0] I can't find the link, but it was something like a
| picture of a bear that resulted in your account being
| immediately suspended.
| drdec wrote:
| I would submit that you are making a common mistake in applying
| an engineer's or programmer's mindset to the law.
|
| What I am thinking of is that company that tried to get around
| copyright by having their customer's buy TV antennas located at
| their HQs and then they would stream the feed from the antenna
| to the customer. Every piece was technically legal but because
| the entire scheme resembled a patently illegal activity
| (profiting from distributing copies of copyrighted material)
| the courts shut them down.
|
| Similar reasoning will be applied in this case. If enough of
| the market is using the same service to set prices, that will
| be struck down as collusion.
|
| (All IMHO and IANAL)
| raincom wrote:
| This has been the case for the last 7 years or so. In the bay
| area, apartment managers, who run REI-owned properties, blame the
| software for yearly rental raises, and that they have no say in
| how much they should charge rent. Mom'n'pop apartments or
| individual condos managed by third parties are reasonable in
| terms of negotiation, as they are not bound by any software.
|
| Yes, the software used by these properties is another way to
| engage in cartel-like behavior--price fixing.
| jareklupinski wrote:
| A few days ago, someone posted an article about Work Number and
| how it lets basically any corp pull your current salary.
|
| At the time, I didn't see the harm in allowing it, since I didn't
| see a situation where this could be used against me.
|
| After reading this article, I froze my data. I believe landlords
| should price rentals based on the value of their property, not
| the value of its tenants.
| q7xvh97o2pDhNrh wrote:
| Yeah, I've seen "The Work Number" popping up more and more --
| usually buried deep inside the company's HR documentation.
|
| I've personally opted out entirely, instead of just going for
| the freeze. (In their terminology, a "freeze" lets them keep
| all your data _and_ continue harvesting new data, whereas an
| "opt out" instructs them to delete all your data entirely.)
|
| Another important detail: At my company (and presumably many
| others), it's not just your base salary that's sent over to The
| Work Number. It's _also_ full details about your equity comp.
|
| I've grudgingly disclosed my base salary as needed (leasing
| applications, etc), and it's easy enough to do without
| involving The Work Number because most employers are fine with
| generating an employment-verification letter. But I don't see
| any reason why the average landlord would need to know about my
| equity package, so I found that bit especially unsettling.
| dorchadas wrote:
| Can you give a link to how to freeze it?
| jareklupinski wrote:
| https://news.ycombinator.com/item?id=33210775 this thread has
| a bunch of details, I went the email route
|
| https://employees.theworknumber.com/employee-data-freeze/
| UweSchmidt wrote:
| As usual, systems allow for the few people who really care to
| opt-out, preventing backlash but not impeding the system's
| function.
| maximilianroos wrote:
| This is mostly a distraction from the underlying issue. The
| algorithm helps sellers to maximize prices given the supply &
| demand so, yes, this probably is responsible for a few percentage
| points of increase in price, in the same way that price
| comparison websites are responsible for a small decrease in the
| price of car rentals.
|
| But the underlying problem here is the supply & demand! Rentals
| are competitive, an algorithm can't force people to pay more than
| an comparable rental property is charging.
|
| It's the lack of housing supply in areas like SF is responsible
| for rents being a multiple of what they could be.
|
| Developers want to build apartments, but are prevented from doing
| so by local regulations. So we need to change those regulations
| or, as is increasingly happening in the last couple of
| California's legislative sessions, take control away from local
| authorities (e.g. SF Board of Supervisors).
| P5fRxh5kUvp2th wrote:
| If a large % of rentals in an area are using this algorithm,
| then it becomes a feedback loop fully controlled by this
| algorithm.
|
| I get so tired of watching people declare things with an air of
| authority that are absolutely not true if you apply a modicum
| of thought to it.
| rdtwo wrote:
| Umm the algorithm allows you to bypass collusion laws by having
| everyone run the same algorithm. It's the newest in legal
| innovation using algorithms to do illegal shit then blame it on
| the algorithm
| midislack wrote:
| We could also just not live in San Francisco. That's a better
| option for many.
| tjr225 wrote:
| And yet people love it and want to call it home, and are
| willing to make sacrifices to do so. I know I have here in
| the Seattle area. Mind ya own business!
| nkrisc wrote:
| I think what they're really saying is that maybe not every
| person who wants to live in SF, for example, can. There's
| some upper limit on how many people can live there and if
| more people want to live there than can prices will go up.
|
| So maybe not everyone who wants to live there gets to.
| bombcar wrote:
| In the past this would cause other places to become "more
| San Francisco-like" (arguably Seattle itself has changed
| since the 80s and perhaps in this direction). Why that
| doesn't occur could be interesting for discussion.
| geofft wrote:
| I very much agree with you that the lack of supply is a major
| problem, but the article is making a case here that what the
| algorithm is doing is tantamount to price-fixing / collusion.
| Even in markets where supply is much easier to come by than
| housing and does not have the entrenched political dysfunction
| restricting supply - such as RAM chips and canned tuna - price-
| fixing is a problem.
|
| There's an analogy in the article to airplane seat pricing. The
| solution there was to tell the airlines they couldn't collude
| with each other, not to say "The real problem is the lack of
| flight supply."
| maximilianroos wrote:
| Yes, I think that's a fair point.
|
| But I don't see any actual evidence that collusion is
| happening. Collusion is difficult to pull off! It requires
| each owner to restrict their supply so that all owners
| benefit through higher prices. The incentive for an
| individual owner is to "defect" by renting out their whole
| supply. Collusion generally requires participants to be able
| to monitor and enforce each other's behavior.
|
| To the extent that owners are increasing prices slightly to
| benefit themselves, that's not collusion, that's just the
| market clearing.
| shahbaby wrote:
| You say that the underlying problem is a limited supply but why
| stop there? Why is there a limited supply?
|
| How long will looser regulations help until we're back to the
| same problem?
|
| Perhaps we should dig deeper.
|
| Why have we organized our society in a way that encourages and
| almost enforces high population density?
|
| The fact is that our current way of living is unsustainable.
| The housing situation is just one symptom of that.
| mixmastamyk wrote:
| Density is better for the environment as others mentioned. It
| is the opposite of enforced, currently mostly prevented.
|
| Answering your question with another question. Why stop
| there? What you are ultimately arguing for is population-
| growth control. Turns out very few people are interested in
| the government deciding how many children they can have.
| pixl97 wrote:
| The US population that has lived here 3 generations or more
| is shrinking, and thus trend also applies to Europe and
| Japan. Even China is looking at a future population
| decrease. Turns out these forced population decreases are
| not necessary.
| xboxnolifes wrote:
| > The US population that has lived here 3 generations or
| more is shrinking
|
| What do you mean here, and how does it relate to total
| population levels?
| CorrectHorseBat wrote:
| Population growth control is also utterly pointless, it
| turns out that having babies is a lot of work and if given
| the opportunity most people don't have 6 of them. Rich
| countries that don't have a shrinking population do only so
| because of immigration.
| NegativeLatency wrote:
| Carbon emissions from a city resident are much lower than
| those from a suburb or rural resident.
|
| Unless your proposed plan is like living off grid or
| something, making it easy for people to move to cities seems
| logical.
| Silverback_VII wrote:
| This is something I do not get. In my opinion renting a
| flat should be a more efficient form of living than owning
| a house and yet economically(&long-term) renting is often
| the worse option.
| bombcar wrote:
| If you fully account for everything, renting doesn't
| always lose - it's just we've had absurd appreciation for
| so long.
|
| Once you account for maintenance items owning becomes
| decently more expensive than a simple "mortgage +
| utilities + insurance + taxes" calculation shows. A $10k
| furnace every 25 years adds something like $40 a month
| and that's only one of the many wear items there are.
|
| There are other non-tangible benefits to ownership, of
| course.
| ghaff wrote:
| There's (mostly) a distinction between single family
| homes and condos (though high-end condos can have
| significant costs even if shared as well in addition to
| condo fees). But, yes, something on the order of hundreds
| of dollars per month should probably be budgeted to keep
| a single family house in steady state over a significant
| period of time.
| maxerickson wrote:
| Most cities with severe housing shortages are pretty much
| plainly anti-density.
| wizofaus wrote:
| There's plenty of supply - I don't doubt even the state of CA
| has more actual housing available than strictly necessary for
| all those currently living there, but it's natural for people
| to want to live in areas that are a) close to family and
| friends b) provide access to employment and c) have necessary
| infrastructure/ services/retail options readily available.
| All those factors contribute to making densely populated
| areas desirable - unless you can provide transportation
| infrastructure that enables millions of people to efficiently
| transit long distances - and just about the only countries
| that have achieved that are those with very high population
| densities anyway! But there are definitely other factors that
| exacerbate cost-of-housing issues - income disparities that
| are further magnified by the degree to which banks are
| prepared to lend money being one that's rarely discussed. If
| someone earning $200k a year is able to afford to spend up to
| 5 times more on a house - and by extension the land it's on -
| than someone earning half that (and quite possibly 10 times
| more than someone earning 50k), then how can that not have a
| serious impact on housing affordability, which trickles down
| to rental affordability, as enough rent needs to be charged
| to help offset mortgage costs for landlords.
| joshfraser wrote:
| I mostly agree, but they're actively pushing rental property
| owners to let units sit empty for extended periods of time
| while they wait for higher prices. There are a shocking number
| of high end apartments in cities like SF and NYC that are
| sitting empty while everyone else is struggling to find an
| affordable place to live.
| pandaman wrote:
| Being shocked by empty apartments on the rental market is
| like being shocked by stocked shelves in a grocery store in
| my view. Do you think a market without inventory is better
| somehow?
| idontpost wrote:
| Spooky23 wrote:
| This is where I think inflation and higher rates will be good
| for the US.
|
| The ridiculously low cost of holding assets are making it too
| cheap to hold and do nothing. Tax policy is a big part of
| this, but won't change for many years.
| lupire wrote:
| Inflation doesn't help. Higher rates lower inflation,
| making housing more affordable for wage earners.
| bombcar wrote:
| This has been common in the commercial sector for decades -
| and in the commercially managed residential sector (think
| large apartment complexes).
|
| All this is doing is bringing it to smaller apartments and
| single family rentals.
|
| I still feel that if you correctly account for costs and back
| out appreciation, being a single family home landlord ain't
| worth it.
| londons_explore wrote:
| They sit empty because an empty apartment is still going up
| in value.
|
| If you rent it out, there will be wear and tear (ie. after 5
| years it'll need a full refurb), and you run the risk of
| having tenants stuck in your property if laws change and
| suddenly you aren't allowed to evict them.
|
| Often the capital appreciation is so much greater in value
| than the rental income (after management, maintenance, etc)
| that it isn't worth risking the capital income for a tiny bit
| of rental income.
| lupire wrote:
| They are going up in value because there isn't enough
| housing and there are too many rich people and because the
| property / land value tax is too low.
| SantalBlush wrote:
| Right. In other words, the notion that developing more
| residential properties will bring prices down is nonsense.
| xboxnolifes wrote:
| A lot of the increase in value is because there _isn 't_
| more residential property.
| PragmaticPulp wrote:
| > But the underlying problem here is the supply & demand!
|
| This is the answer to most pop-Econ articles. It's amazing how
| hard people want to believe that something else is to blame or
| that traditional economics doesn't apply for some reason.
| Algorithms are a popular outrage-bait right now, so I'm not too
| surprised to see "the algorithm" blamed for high rents now,
| too.
| klyrs wrote:
| The problem isn't "the algorithm," the article is exceedingly
| clear that the problem is "the company" and "the captured
| market" but mostly collusion by proxy.
|
| But in this case, it's also the algorithm -- the article has
| multiple quotes where "empathy" is seen as a problem and that
| getting humans out of the loop is a boon to profit. The
| algorithm itself isn't the problem, it's the bloody-minded
| profit-seeking where capitalists leverage _trust in the
| algorithm_ to extract maximum rents by leaving properties
| vacant in the midst of a housing crunch.
| BlargMcLarg wrote:
| Because supply and demand itself is ridiculously broad. I
| don't even see people claim it isn't S&D given so many say
| anything from "build more housing" to "slackers go earn more
| money / save more", but saying supply & demand is the
| underlying problem is about as useful as saying the needle is
| in the haystack.
| alcover wrote:
| > Algorithms are a popular outrage-bait right now
|
| Oh yes. Media often lament people radicalizing online
| supposedly because of them. But nobody is forced to follow
| recommendations, which are moreover _labelled_ as such.
| People stay logged-in and indulge on them, and that 's it.
| hotpotamus wrote:
| That same reasoning would seem to apply to heroin, wouldn't
| it?
| yellowapple wrote:
| And likewise, it seems silly to blame heroin for people
| being driven to use it. Heroin ain't exactly a
| recreational drug; people turn to it because they're in
| extreme suffering, be it physical (due to health issues)
| or mental/emotional (due to socioeconomic hardship), and
| need an escape. Addressing those concerns would address
| heroin use (and swaths of other issues, like violent
| crime).
| r12343a_19 wrote:
| Silverback_VII wrote:
| >given the supply & demand
|
| Not if the company keeps apartments empty as mentioned in the
| article. With such an arrangement between landlords you can
| increase rent not matter the supply&demand.
| jpollock wrote:
| There are high costs to an empty apartment. The bank doesn't
| stop demanding payment if the apartment is empty. Same with
| property taxes, heating, insurance, groundskeeping, etc. You
| can even find that the maintenance costs increase as problems
| that would have been seen and fixed (particularly leaks) are
| missed.
| halfjoking wrote:
| I don't think that's incentive enough.
|
| There could be an Elysium scenario where the super-rich
| will pay anything to live in a high-demand area, so the
| prices go so high almost all properties end up empty. That
| doesn't seem beneficial to society, the environment or
| anyone.
|
| If there were strong vacancy taxes the situation would
| change. Vancouver has a 3% empty homes tax. Let's keep
| raising a tax like that until managing empty properties
| becomes untenable. If we want people to have more
| affordable homes to buy we should incentivize people living
| in them over managing them for optimal profit.
| mleonhard wrote:
| 2011-2015 SF jobs increased 23% and housing increased 3% [0].
| During this time, my own rent increased about 10% per year.
|
| California legislature is passing some housing good laws, but
| the state's attorney is not enforcing them. The non-profit
| CaRLA is doing the enforcement and having success [1]. Their
| wins in court have set precedent and unblocked a lot of
| building permits.
|
| [0] https://news.ycombinator.com/item?id=19679440
|
| [1] https://carlaef.org
| YellowZeeZee wrote:
| The supply&demand issue does not turn what this company is
| doing into a "distraction", quite the opposite. Their
| "algorithm" has an outsize influence on the prices precisely
| because of the underlying housing crisis.
|
| I put algorithm in quotes, because it's clearly just a facade
| in front of good ol' fashioned price collusion.
|
| As the example in the article points out, replace the word
| "algorithm" with "a guy named Bob" and suddenly it doesn't
| sound so innocent to say: The companies controlling 90% of
| apartments in a neighborhood give all their data to Bob, and
| then Bob tells each one what to price their apartments. It's
| price collusion by proxy, pure and simple.
|
| We shouldn't just ignore it because it's not the biggest cause
| of the price increases. Yes, we absolutely need to tackle the
| housing supply problem, but at the same time we need to stop
| companies like this from exploiting the crisis and driving
| prices up even further.
| lupire wrote:
| Ending the crisis by creating housing supply is the way to
| stop exploiting the crisis.
|
| If you stop "this one company" you'll just have someone else
| making profits and still have people homeless.
| P5fRxh5kUvp2th wrote:
| If the new supply uses the same algorithm, it does not
| solve the problem.
| noasaservice wrote:
| Not if the RICO act was used against them, and all rental
| properties are transferred to the renter in payment for
| fraud, conspiracy, interstate fraud, etc
|
| Do you honestly think any other property owner would touch
| companies like this if this one popped like that?
| Vvector wrote:
| I understand your frustrations. But nothing here is
| anywhere close to a RICO violation.
|
| https://en.wikipedia.org/wiki/Racketeer_Influenced_and_Co
| rru...
| sobkas wrote:
| > Ending the crisis by creating housing supply is the way
| to stop exploiting the crisis.
|
| > If you stop "this one company" you'll just have someone
| else making profits and still have people homeless.
|
| And this new homes will be bought by ordinary people who
| for years paid inflated rents and have no real liquidity or
| corporations/landlords who have profited by renting and
| have more than enough cash to absorb any new properties
| that would become available on the market? Because grabbing
| them allows for a virtual monopoly on home ownership so
| people are forced to rent. And we have another cycle of
| capitalism.
| noasaservice wrote:
| > As the example in the article points out, replace the word
| "algorithm" with "a guy named Bob" and suddenly it doesn't
| sound so innocent....
|
| And there's your gig-workforce and companies like Uber that
| figured out that replacing blatantly illegal stuff with
| "AlgOriThMS" somehow takes governments long times to untwine
| and figure out that they're illegal shills.
|
| But the in-person businesses can't do such tactics. But some
| venture capital financed outlet can dump hundreds of scooters
| on public areas, and socialize their costs and privatize
| their gains.
|
| And yes, the article shows that this is collusion through a
| third party. I don't give a shit if it's an 'algorithm', Bob,
| or a tarot reading. It's collusion, and anyone involved needs
| to suffer.. up to and including being awarded the
| apartment/house.
|
| But, we know the worst that'll happen is some lawyers will
| get millions, and the plebes will get a check for $100 off
| their rent at participating renters.
| Bukhmanizer wrote:
| The "it's all just supply and demand" argument is overly
| simplistic and strikes me as coming from people who have taken
| first-year Econ, if that, and literally nothing else.
|
| Does supply and demand affect housing prices? Yes, and the fact
| that supply has been constrained is affecting prices.
|
| Is it the only factor? Probably not.
|
| Even basic economics classes will teach that there are several
| ways that supply and demand breaks down.
|
| For one, if there are imbalanced implications for both the
| supply and demand parties. For a landlord, rent is a purely
| economic transaction. Not taking a tenant means losing money.
| For a renter, not having a place to live is far more damaging.
| You lose shelter, safety, social standing, etc. The article
| touches on leaving an apartment empty for a couple months to
| find a tenant that will pay what you're asking. But would
| anyone really go homeless for a couple months to save on rent?
| Not only that, but peoples lives revolves around where they
| live, and it's not easy for a lot of people just to pick up and
| move to a different market.
|
| Another way supply and demand might break down is if there is
| price collusion between parties on the supply side. This is
| relevant especially in this case because if there is a single
| party setting prices (eg the algorithm) and there is a
| constrained enough market, then you can in fact force people
| more than what typical supply and demand would imply.
| nickpp wrote:
| Have you ever looked at how long it takes to get a building
| permit in one of those high-rent areas? Years, if you get it.
| And millions of dollars in plans, approvals and preparations.
| God forbid if you must involve some union people.
|
| We've outlawed construction. Any other factor besides this is
| far far behind.
| P5fRxh5kUvp2th wrote:
| Since you obviously have, would you care to provide sources
| for those of us who haven't?
| Bukhmanizer wrote:
| > Any other factor besides this is far far behind.
|
| Ok based on what? Like I think there are supply problems,
| but there are plenty of examples where the demand isn't
| increasing much or is even decreasing but housing is still
| getting more expensive.
| threatofrain wrote:
| I believe SF would need _way more_ central planning and not
| less if we want more housing supply. The transportation issue
| in SF is crazy at the moment and parking is expensive in both
| time and money.
|
| A city needs to upgrade multiple infrastructural elements
| simultaneously if it wants to make a successful leap into
| higher densities. In a democratic culture this means getting
| enough parties on board to accept a big jump in taxes for huge
| civic works projects like subways. To make all of this coherent
| this will take a massive and sustained political momentum which
| can exercise eminent domain in a very big way.
| AlchemistCamp wrote:
| SF tax revenues increased greatly (double, IIRC) over the
| past decade.
|
| How much more revenue do you believe the city needs?
| opportune wrote:
| We don't need more parking. It's a waste of space and very
| expensive compared to more public transportation.
|
| By all means allow people to build parking if they want to,
| but there's no need for parking minimums.
|
| I don't see how more central planning could help. Our central
| planners love to block housing unless it meets 100 different
| conflicting requirements they make up on the spot. Just let
| people build!
| rdtwo wrote:
| We can't have public transit because we gave up on public
| safety during covid. Lots of public transit is now unsafe
| or much less safe than before
| matt3210 wrote:
| Before I switched to better living arrangement, the property
| manager at my apartment complex had the goal of sending my
| account to collection with a 100% fee for collections paperwork.
| These people don't have empathy or compassion.
| danielfoster wrote:
| People really need to be asking themselves, "Why isn't new
| housing being built?" and focus on removing the barriers to
| building new housing.
|
| Pricing algorithms wouldn't be such an issue if it were easy to
| add new supply.
| Plasmoid wrote:
| Largely it's because the existing residents don't want people
| moving in. They liked how the neighborhood was before and they
| want it to remain static.
|
| To this end, you get zoning rules, ever tightening building
| codes, impact fees, taxes, public hearings, and just straight
| up prohibitions on building.
| anm89 wrote:
| Because we have an overabundance of housing for one. Massive
| portions of our housing supply are sucked up as STRs and and
| second and third houses due to a decade of free money.
|
| On top of that we have all time record numbers of houses set
| to be completed over the next few months which are still
| being snapped up by investors.
|
| We have a shortage of available housing. Not a shortage of
| housing (there are individual markets where this isn't true
| and there are actually shortages of physical units).
| Fortunately, this is to some degree in the process of
| correcting itself but I doubt the place we get to is going to
| be a solution that very many people are happy with either.
| Plasmoid wrote:
| > Because we have an overabundance of housing for one.
|
| I've seen this canard so many times it physically hurts me.
|
| I don't know where you found this so it's hard to provide
| specific debunking so I'll just go over all of them.
|
| 1) The houses aren't where people actually want to live.
| There is a lot of vacant housing in dying rural towns,
| mining sites, or the middle of nowhere. So unless you have
| a plan to get people to move to Buffalo-Butte then
| available housing there may as well not exist.
|
| 2) The most of the "vacant" homes aren't actually vacant.
| Depending on how badly the stats are gathered they will
| include a lot of garbage. Let's look at the list of things
| that considered vacant: - Houses on the
| market for rent/sale - Houses that have been
| rented/sold but not yet moved into - Houses that
| unfit for human habitation - Houses undergoing
| significant renovations - Houses that are used
| seasonally
|
| That's right, if your house burns down the still-
| smouldering rubble is considered vacant.
|
| There is just not enough housing where people want to live.
| Objections like this only get brought up when someone is
| about a half-step away from proposition house rationing.
| Not for them though, other people should have their housing
| rationed.
| anm89 wrote:
| Yeah well, if you sit around in the couple of places that
| have no housing and hate building housing, surprise,
| there's not going to be available housing and quality of
| life is going to be awful.
|
| If that's the battle you want to fight in life more power
| to you.
|
| If you want to battle your way through needles and shit
| and piss and the mentally ill and drug addicted to go sit
| in an fancier office and to live in a city with some cool
| restaurants so you can pay 6k a month for a 400sqft
| apartment or have roommates at 30 feel free to do it. But
| I really have minimal sympathy for people who sign up for
| this and then complain loudly about how much it sucks.
| zdragnar wrote:
| Local metro put in a light rail line years ago through an area
| with the expectation that it would re-invigorate those
| neighborhoods and cause more housing to be built. For years,
| there was very little movement; existing rents and land values
| along the line were too low for anyone to bother building
| additional dense housing. This failure, among others, became a
| talking point among those who have tried to stall building
| additional lines.
|
| Now, with the metro in an acute housing crunch, rents have gone
| up enough that investors are finally building more housing along
| the light rail line. What are they building? Small, chic
| apartments geared towards young people. It's not really the sort
| of thing that fosters strong communities, as anyone who wants to
| start a family is unlikely to stay there long term.
|
| There's really only two outcomes I see: housing prices stabilize
| at marginally affordable at best, or the "character" they are
| trying to go for disappears not long after the housing bubble
| pops, and the area becomes blighted.
|
| All of this is to say that there are market-driven price floors
| on housing that aren't easy to shift. The "just build housing"
| mantra might be over-estimating the extent to which people are
| willing to accept prices going down. There's better ways to make
| money elsewhere for the people you expect to do the building and
| management after a certain point.
| Jasper_ wrote:
| It seems absurd to me that they'd judge the success of public
| transit as when the property values go up, rather than whether
| people are riding it and using it. We should build public
| transit because it's an improvement on quality of life for the
| community, not because people who don't live there will see a
| return on investment.
|
| Housing prices will always be a bubble, as long as they're so
| detached and distant from the communities they're trying to
| build.
| zdragnar wrote:
| The people who ride the lines were already getting from point
| A to point B using other means (cars, busses, taxis), so
| ridership isn't really a useful metric. Pretty much all of
| the lines that are being built are being sold as ways to
| improve the economy along the line, as people are pulled out
| of cars and off the freeway (i.e. greater visibility of local
| stores and housing options to commuters).
| bobthepanda wrote:
| There is a way to look at it and that is time saved.
|
| Seattle traffic is so horrendous it does legitimately save
| time (or, if not saving time, take a consistent amount of
| time.)
| zdragnar wrote:
| OP here. In this particular case, for this particular
| line, traveling by car is roughly between a third and
| half the time it takes by light rail.
|
| Most of the other lines that I know of are similar or
| slightly better, but there's a bit of a spread. I don't
| know of any that are actually faster.
|
| This is a metro that wishes it was a coastal style metro,
| but is not on the west or northeast coasts.
| red_trumpet wrote:
| If you want to pull people out of cars, comparing metro
| ridership to previous non-car riderships seems a pretty
| good metric?
| opportune wrote:
| Young people need places to live too. What's wrong with some
| developers building housing that appeal to that group? As long
| as they're building more than there was previously, it means
| less competition for the other housing for those who don't like
| that style of building.
| klyrs wrote:
| The problem isn't that developers are building units that
| appeal only to young people, the problem is when they're
| _exclusively_ building those units.
| cplusplusfellow wrote:
| If developers aren't building housing for families higher
| on the SES ladder, that's generally a result of regulatory
| issues.
| klyrs wrote:
| I'm not sure what you mean by "higher on the SES ladder"
| because the "young renters" in this case are Amazon
| employees with ridiculous disposable income. They _are_
| high on the SES ladder, it 's the lower rungs that are
| getting priced out of the market.
| mantas wrote:
| It's complex. Usually the max price people are willing to
| pay is mortgage they may get from a bank. So developers
| who want to push margin can build smaller apartments and
| still sell for the same price. With fancy marketing how
| tiny apartments and DINK is cool.
|
| We have same issue in my city. New apartments are
| 40-50sqm 2 rooms (1 bedroom + kitchen-living room) or
| 60-70sqm 3 rooms (2 bedrooms + kitchen-living room ) at
| best. If you want family-sized housing, house in suburbia
| is pretty much the only option.
| bombcar wrote:
| Detached homes are better for families in many ways,
| second would be townhomes then row homes and finally
| apartments.
|
| Sadly many apartments are not built to withstand a
| screaming child in a neighboring unit.
|
| When the children are older those things don't matter
| quite as much, but by that time people often can afford
| to move to more space.
| opportune wrote:
| Well the solution certainly isn't to build nothing.
|
| I lived in one of those at one point in the Seattle area
| and there were families (mostly with small children) in
| them.
| Schweigi wrote:
| Could also just be driven because of the zoning. For
| example a 2-bed unit usually requires two parking spots. So
| its better to build two 1-bed units. Same amount of parking
| but more rental income because usually 2-bed units aren't
| double the rent of a 1-bed units. Its actually not even a
| choice because whoever sold the land to the developer will
| have done this calculation already and priced the land
| accordingly to the maximum financial payout based on the
| zoning rules.
|
| We are building a smaller apartment building in Dallas and
| everything from unit numbers, to sizes and shape of
| building is driven by the zoning rules. And because the
| land is sold based on those rules you can't really make it
| different otherwise the project isn't viable anymore. Thats
| why everyone is currently building townhomes and not small
| apartments buildings in places like Old East Dallas or
| Bishop Arts District.
| ineedasername wrote:
| Seems like it's real easy for them to assert something very like
| monopoly or cartel-like price manipulations on behalf of
| landlords without even doing so deliberately. Once enough people
| use your product it's easy to make a claim like "raises average
| rent by X%" and have it be a self-fulfilling prophecy simply by
| virtue of tweaking the algorithm to favor increases regardless of
| market fundamentals and competition.
| ok123456 wrote:
| [deleted]
___________________________________________________________________
(page generated 2022-10-16 23:01 UTC)