[HN Gopher] DOJ sues realpage for algorithmic pricing scheme tha...
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DOJ sues realpage for algorithmic pricing scheme that harms renters
Author : pseudolus
Score : 553 points
Date : 2024-08-23 15:51 UTC (3 days ago)
(HTM) web link (www.justice.gov)
(TXT) w3m dump (www.justice.gov)
| ChrisArchitect wrote:
| Some Related recent discussions:
|
| _San Francisco to ban software that "enables price collusion" by
| landlords_
|
| https://news.ycombinator.com/item?id=41133143
|
| _San Francisco to Ban Rent-Setting Software Amid Gouging Worry_
|
| https://news.ycombinator.com/item?id=41163936
|
| _Algorithmic price-fixing of rents is here_
|
| https://news.ycombinator.com/item?id=41212616
| currymj wrote:
| Algorithmic pricing that learns to tacitly collude is a hot area
| of study in computer science and economics. For example, if you
| train simple online learning algorithms to adjust prices,
| sometimes they can learn to keep prices high or to take turns
| winning customers, rather than just competing. People have found
| some empirical evidence of this on platforms like Amazon where a
| lot of small sellers use pricing bots.
|
| However, it seems this is a more of a hybrid situation. A big
| part of the complaint is just all these incriminating emails and
| documents where RealPage appears to be coaching landlords to
| avoid lowering rents or giving concessions, independent of the
| software.
|
| At the same time, there was an algorithmic component, which the
| customers appreciated: "I always liked this product because your
| algorithm uses proprietary data from other subscribers to suggest
| rents and term. That's classic price fixing..."
| tyingq wrote:
| Interesting as airlines have been doing this for a really long
| time.
| bluGill wrote:
| Airlines do this internally all the time. However they do not
| share this information with each other.
| currymj wrote:
| there is concern about tacit collusion if all the airlines
| start using the same pricing algorithms based on the same
| historical data. it doesn't even take a very smart pricing
| strategy for them to naturally learn to collude with each
| other.
|
| However I would guess you will never have an email from an
| airline CEO that says "I really like this product...That's
| classic price fixing"
| tyingq wrote:
| They don't share how many seats are left publicly, but fare
| changes are shared real time in a platform that distributes
| them. And there's quite a lot of website scraping that goes
| on that mostly skirts around "how many seats are left".
| dylan604 wrote:
| not everyone is affected by airlines' pricing though as not
| everyone travels. everyone needs a place to live though
| legitster wrote:
| This gets into prisoner's dilemma though. If everyone but me is
| using the price fixing app, I have a strong incentive to
| undercut them, even by just a few dollars. So without a cartel-
| like enforcement mechanism, there is no reason it wouldn't just
| fall apart naturally in the long run.
|
| In the complaint there was a mention of "compliance" which
| could get into that piece though.
| RhodesianHunter wrote:
| >I have a strong incentive to undercut them
|
| Not in a supply constrained market where your rental will be
| occupied either way.
| legitster wrote:
| If your rental is $2400, and it sits on the market for 2
| months, you lost potentially lost $4800. It would take a
| huge rent increase to justify that.
|
| It's one thing if the software is helping landlords jack up
| prices to the market rate. It's quite another to convince
| them to collude against their best interests.
| bluGill wrote:
| It is a different unit every month though as renters are
| moving out all the time. This isn't about 1 unit that is
| empty or not. It is about 100+ units where it can be
| 89,90, or 91 empty - if the other units that are not
| rented pay enough higher rent because the empty is not on
| the market you are better off.
| diebeforei485 wrote:
| Sounds like removing the supply constraints would be a
| better strategy.
| animal_spirits wrote:
| And supply constraints come from regulations on housing,
| zoning, and federal subsidies for "homeowners"
| HDThoreaun wrote:
| If all units are being rented there is no collusion as the
| market clearing price is being charged. Collusion requires
| taking supply off the market in order to raise prices.
| RhodesianHunter wrote:
| > Collusion requires taking supply off the market in
| order to raise prices.
|
| This is factually incorrect.
| everforward wrote:
| I think you're presuming elastic supply, where you can make
| up the lost profit from undercutting by selling more units.
|
| Real estate supply isn't very elastic, and demand already
| outpaces supply. Your units will likely get rented, as long
| as you aren't in the top 0.1% of prices.
|
| Therefore your incentive is to maximize profit per unit since
| you can't move more units. Your incentive is to also join in
| on price fixing, because it's the only way to make more
| money.
|
| Supply outpacing demand would cause this to dissolve, as
| landlords actually have to compete for tenants and the
| highest priced landlords have empty apartments.
| bluGill wrote:
| For the landlord units is elastic. If you have many units
| you can always not rent out a few, in fact you should
| always have a few units that you are remodeling and thus
| cannot rent out.
|
| In general as a large landlord should have around 10% of
| units not rented, if you have more than that rented you
| should raise your rates until people go elsewhere thus
| bringing you down to 10%, while if you have less than 10%
| lower your rates until people start renting from you.
| Different landlords have different numbers, but 10% is a
| good starting place. 100 units at $900/month = 90,000, 90
| units at $1000/month = $90,000, but you have a few units
| free in case someone desperate is willing to pay
| $1100/month (and of course you can remodel one of those
| empty units thus making it more desirable)
| everforward wrote:
| Supply was probably a poor term because it's overloaded;
| I probably should have said stock. They cannot easily
| scale their stock of housing, so they can't make up for
| lower profit with volume the way a grocery store or
| something might.
| mjcl wrote:
| Just a note on vacancy targets, I worked for a MF REIT
| (~33k units) and pre-YieldStar their average target
| occupancy was around 97% for properties. After YieldStar
| was implemented the average dropped to more like 95%. As
| far as I'm aware, the other large managers also targeted
| the mid-to-high 90s.
| diebeforei485 wrote:
| 90% is actually quite healthy. If all housing was always
| full, there is no slack in the system. We should always
| have some overcapacity in the housing market, just like
| we do for hospital beds, food, water, etc. If you're
| always buying the last loaf of bread at the grocery
| store, that means others don't get bread when they want
| to buy it.
| ericd wrote:
| Right, assuming there's more supply than demand. In markets
| with low vacancy rates like Manhattan, landlords get away
| with murder (terrible maintenance, making renters pay for
| gatekeeping rental agents, high rent despite being shitholes,
| etc). In markets with higher vacancy rates, prices tend to be
| a lot more reasonable, and units tend to be somewhat better
| maintained, because they don't have the same pricing power,
| and if they're too bad, they won't be rented unless they're
| extremely cheap.
| ajhurliman wrote:
| This blows my mind that they're actually pursuing this, the two
| complaints are that they schemed to decrease competition among
| landlords and that they monopolized commercial revenue management
| software. Both are completely bogus.
|
| You could say the entire profession of appraising real estate
| prices "decreases competition" if the first complaint is valid.
|
| And they certainly haven't monopolized the software space, I'd
| never even heard of RealPage until the lawsuit, I used
| Rentometer. There are dozens more, predicting rent prices is
| hardly a novel idea.
|
| I think that was like one of the toy problems in Andrew Ng's
| online ML course.
| infecto wrote:
| It's amazing your confidence when it sounds like you don't even
| participate in the top N landlord space for a given market.
|
| IIRC it has already been demonstrated that RealPage had the
| lion shares of the total units in certain markets.
|
| The question is not about rent predictions but having
| asymmetric information that allows users of the site to
| effectively participate as a cartel. I am a big proponent of
| free markets but I think this is a worthy question to answer.
| When your algorithm controls more than 50% of pricing in a
| market does that count as collusion and how do you handle it.
| It seems like it might effectively eliminate the market price
| as you the dominant player are setting it.
|
| It might get thrown out but I believe it's naive and brash to
| just dismiss it so easily.
| mistrial9 wrote:
| dismissive and slightly insulting replies to concerns about
| price are daily business
| trinsic2 wrote:
| I'm glad these questions are being raised and bringing more
| awareness. I always suspected there was something that was
| going on to artificially raise rent prices. It sounds like
| collusion to me.
| game_the0ry wrote:
| I wouldn't be happy either if I was a landlord.
|
| But the landlord-ing business is a tough business, and business
| is about to get tougher.
| kerkeslager wrote:
| If you think being in the landlord is tough, try getting a
| job.
|
| I mean seriously, being a landlord is just owning something.
| At best, you do the work of a handyman, and get paid orders
| of magnitude more for that work. And if you're the average
| landlord, a handyman does a lot more work and does a better
| job because they actually have to compete. Being a landlord
| isn't hard, it's absurdly easy compared to the income it
| yields.
| pessimizer wrote:
| If you're the average landlord, you hire people to maintain
| the building and deal with the tenants. Rich people
| constantly try to convince everyone that owning things is a
| job. If buying a business forces you to work operating it,
| it's because you couldn't afford the business outright, so
| instead you're paying it off with sweat equity.
|
| Certainly nothing wrong with buying a job, it's positively
| Jeffersonian, but the reason you're working there is
| because you couldn't afford anyone else.
|
| Being a landlord is just feudalism. Most of the terminology
| is still the same.
| consteval wrote:
| I think being a landlord is pretty much the easiest business
| ever. As compared to real businesses, who really produce
| products and really participate in competitive markets.
| bluGill wrote:
| Landlord is about luck of the tenants. A bad tenant will
| destroy your property costing you a lot of money. A bad
| tenant will not pay thus forcing you to have your property
| earning nothing for months until you can legally evict
| them. If you don't have enough tenants you lose money
| because you still have to pay your costs (the bank for your
| loan, maintenance...).
|
| You can make a lot of money but it isn't easy money.
| (particularly in the early years, once you have the
| property paid for it is much easier)
| consteval wrote:
| Easy, you outsource your tenant management to a company
| that does that sort of thing. There's many highly
| reliable methods to get good tenants. Outsourcing to a
| company that specializes in that works because you're
| already making free money by being a landlord, so now you
| just make less free money.
| bluGill wrote:
| None of them are taking on the risk of what the tenant
| isn't paying or you don't have one. Landlord also isn't
| free money. You have a lot of bills to pay.
| consteval wrote:
| You have negative bills to pay, because you get money
| purely by virtue of having those bills.
|
| Landlord is not a job, it's a state of ownership. Owning
| a company is not a job either. Being a CEO is! And you
| can be both. But simply owning something is not a job.
|
| You can say property management is hard, and maybe it is.
| That's a separate thing and the VAST majority of
| landlords actually don't manage their property. So being
| a landlord is very, very easy.
| HDThoreaun wrote:
| Then you wont make any money
| SmartJerry wrote:
| How long have you been a landlord? If it's so easy,
| everyone would do it.
| p_j_w wrote:
| People don't refrain from being landlords because it's
| hard. I've seen people being landlords up close, it's
| not. No, people refrain from being landlords because it's
| so incredibly expensive to get started. Especially at a
| time where people are struggling to pay their own damned
| rent or mortgage, the cost of a second property is
| completely out of the question.
| toomuchtodo wrote:
| "Price fixing by algorithm is still price fixing," regardless
| of fanciness or cleverness.
|
| https://www.ftc.gov/business-guidance/blog/2024/03/price-fix...
|
| https://www.ftc.gov/system/files/ftc_gov/pdf/YardiSOI-filed%...
| bearjaws wrote:
| I am very curious how this will play out.
|
| On one hand, I have seen it first hand here in Orlando that EVERY
| apartment complex uses the same software, all of them. At the
| same time, rent has gone up 300% in 10 years, or around 10% per
| year.
|
| FTA it states that it was the fact that they all shared all their
| pricing and inventory data with RealPage, which then determined
| the price using algorithms and therefore rental properties
| weren't competing against one another. When to me, there are
| simply no spare apartments, I've seen some complexes down to 1-2
| units by the end of July.
|
| Lots of systems using competitors data and algorithms to price
| items, so was it simply the fact that too many people used
| RealPage, what if nearby properties didn't use RealPage and the
| rents went up anyway?
|
| I am not sure if this is price fixing, I don't know any landlords
| that use it, every home I've rented was with someone who owned
| 1-2 extra properties and just used Zillow or Craigslist.
|
| That being said, I price my rental properties against what
| similar square footage gets at nearby apartments... Sooo if they
| are going up my rent is going up as well, and I bet most
| landlords do this.
|
| So we've ended up accidentally price fixing the market I guess? I
| think it really depends on the internal communication and what
| they sold to landlords.
| tootie wrote:
| Yeah, there's nothing inherently wrong with algorithmic
| pricing. Issues would start to occur if the pricing was
| actively manipulated and RealPage was used by so many landlords
| in some geographic areas that competition broke down. That may
| be hard to prove.
| skipkey wrote:
| So I worked for RealPage for a few years in the late 90s and
| again in the mid 2000s, and at the time they didn't hold a
| majority of the market. But it would not surprise me now if
| they held a majority of the market in large complexes today.
| At the time they were growing mostly by acquisition of
| competitors.
| ejstronge wrote:
| A relevant excerpt from the complaint:
|
| > RealPage-defined submarkets identified in Appendix A are
| relevant markets in which the agreements between RealPage and
| AIRM and YieldStar users to align pricing has harmed, or is
| likely to harm, competition and thus renters. In each of
| these markets, the penetration rate for at least (i) AIRM and
| YieldStar, or (ii) AIRM, YieldStar, and OneSite ranges from
| at or around 29% to more than 60%.10
| radicality wrote:
| The pricing is manipulated though. If you're part of
| RealPage, it will "recommend" the prices to set for your
| apartments, except you as the landlord are only allowed to
| disagree a small % of the time, or else you can get kicked
| out from the apartment mafia.
|
| So to keep their customers happy, RealPage will configure it
| to keep increasing prices, and it's not really in any
| landlords' interest to disagree.
|
| I live in a building managed by a group that uses RealPage.
| They keep increasing prices and say "Computer says this is
| $X, can't do anything, sorry".
| cjbgkagh wrote:
| I think the major difference is price is set at the margin, so
| only the marginal renter has to use the software in order to
| move the market. Since rental owners, like wealth, exist on a
| power law curve large numbers of properties are owned by very
| few people. I.e. it is possible for both the average landlord
| to not be using the software but the average property is owned
| by a landlord who is.
|
| The other thing is that normally there is an advantage to
| breaking the collusion which is what generally prevents them.
| AFAIK the software is capable of punishing people who break
| from the suggested price so this pushes the cost of maintaining
| the collusion onto the participants who have to put up with
| vacancies for longer than they would otherwise.
|
| So in my view you can have an implicit collusion, or a
| collusion in effect even without an explicit collusion and with
| most of the participants not participating in it.
|
| I also think this is one of the most important points of
| contention of our time. Our ponzi economy requires extracting
| monopolistic rents which is absolutely crushing the middle
| class and younger people. When I last visited SF downtown was a
| ghost town with many of the businesses that survived Covid
| being driven out by high rents - it appears that rental
| collusion has already been more damaging than a global
| pandemic.
| bick_nyers wrote:
| Housing is pretty inelastic. I think people are just willing to
| suffer financially to avoid the fate of homelessness. Just
| because there aren't vacancies anywhere doesn't mean that the
| price is fully justified, because housing will take priority
| over groceries for a lot of people.
| RhodesianHunter wrote:
| Housing supply is inelastic due to the time it takes to
| permit and built.
|
| Housing demand is more elastic than you suspect. People have
| income on a curve, and at a certain point of price/quality
| will move further out and commute or move to a lower cost of
| living city entirely.
| WarOnPrivacy wrote:
| > People have income on a curve, and at a certain point of
| price/quality will move further out and commute or move to
| a lower cost of living city entirely.
|
| This doesn't describe the major renter class who has few
| workable options to choose from. They take whatever they
| can get.
|
| Once they manage a place to live, they're likely trapped
| there because they don't have a wad of cash on hand
| (required to move).
|
| That's average renter difficulty. It can get far worse.
|
| In 2021, the few rentals available here got 400
| applications/day. We beat out 50 applicants for one that
| was advertised for 2 hours (offered 6mos up front).
|
| We beat long odds and _barely_ avoided homelessness (even
| tho we had good employment history + money in the bank).
|
| Many, many others were less lucky. Every rent-by-the-week
| hotel filled up, typically with people exhausting their
| savings.
| bluGill wrote:
| People also start to take on roommates or become
| roommates. People in general want a place of their own.
| However as rent goes up they will start to be willing to
| rent the upper bunk in a bedroom, and people who do have
| a place to live start to become willing to rent out part
| of their bedroom just to afford the rent. For most this
| is the last option they will take (homeless might be
| better if they can find a place to sleep the night
| outside)
| gen220 wrote:
| Meanwhile, I know many people in NYC who spend ~60% of
| their post-tax income on rented housing.
|
| Nobody is happy about it or thinks it's a good idea, but
| living further out is not perceived as a legitimate option
| because of the fear of being severed either socially or
| career-wise.
|
| Whether that's a rational fear or not, it's a reality that
| allows housing prices to outpace wage gains every year. As
| somebody who used to think housing demand is fairly
| elastic: housing demand is much less elastic than you'd
| suspect.
| RhodesianHunter wrote:
| Yes, living in one of the, if not the, most desirable
| cities on the planet comes with additional costs.
| bobthepanda wrote:
| The NYT recently did a piece on how the tendrils of the
| housing crisis have made it out to places like Kalamazoo,
| MI that are not really traditionally high COL cities with
| booming economies. https://www.nytimes.com/2024/08/22/busin
| ess/economy/housing-...
|
| We are running out of cheap places to live in. Remote work
| has mostly pushed the crisis to other places without a
| corresponding pressure release in the high COL areas.
| legitster wrote:
| Housing can be very elastic. Humans can be very adaptive to
| compromises in living space requirements to fulfill the basic
| needs.
|
| Part of the problem is that the lower end of potential
| inventory (pod apartments/SRO/etc) are essentially illegal in
| this country. So the barriers to entry make it seem much more
| inelastic.
| weknowbetter wrote:
| I mean what can you do? The market is _forcing you_ to raise
| rent. Your hands are tied.
| Manuel_D wrote:
| Lots of people want to blame rising prices on price fixing,
| when there really is growing demand without commensurate
| increases of supply. They want a silver bullet to bring down
| prices, without tackling the underlying problems.
|
| > That being said, I price my rental properties against what
| similar square footage gets at nearby apartments... Sooo if
| they are going up my rent is going up as well, and I bet most
| landlords do this.
|
| This is essentially what RealPage does. It just automates
| calculating "what similar square footage gets at nearby
| apartments". It probably does other stuff like puts a premium
| on corner units or those with south facing windows.
| Sohcahtoa82 wrote:
| > Lots of people want to blame rising prices on price fixing,
| when there really is growing demand without commensurate
| increases of supply. They want a silver bullet to bring down
| prices, without tackling the underlying problems.
|
| Yup. The underlying problem is a single word: supply.
|
| Build more supply, the prices come down. But of course,
| developers know that. They don't want the prices to come
| down, so they don't build supply.
| bick_nyers wrote:
| I agree that the underlying issue is a lack of supply.
| However, if a landlord is commanding a 30% profit margin on a
| non-luxury apartment then I think they are contributing to
| the problem (to be clear, I'm not insinuating anyone in this
| thread is doing this). I think the only objective way to tell
| if it's priced too high is by the profit margin, but of
| course even that can be inflated if e.g. a developer took a
| huge margin on it before selling it to a new owner.
|
| As to what an "ethical and not terrible for society" profit
| margin would be is above my pay grade, but I would estimate
| 15%. It also probably depends on how easily you can make
| money on the stock market as well.
| matwood wrote:
| You know what gets developers excited about building?
| Someone getting consistent 30% profit margins.
|
| Now, government just has to get out of the way and let
| housing be built.
| HDThoreaun wrote:
| Business arent charities. Almost every one is trying to
| maximize profits.
| bugglebeetle wrote:
| Landlords also aren't businesses. They're a class of
| parasitic rentiers who siphon off wealth from economic
| activity around them and use corrupt means to prevent
| competition (mostly bribing politicians to constrain
| supply).
| biggoodwolf wrote:
| No, many of these building are way under 80% utilization.
| Manuel_D wrote:
| Can you reference where that figure is from? Because what I
| can find, SF has a single-digit vacancy rate:
| https://nainorcal.com/san-francisco-market-report-
| march-2023...
| akira2501 wrote:
| > I've seen some complexes down to 1-2 units by the end of
| July.
|
| And you're sure the building is actually occupied and the units
| haven't been strategically taken off the market?
|
| > I am not sure if this is price fixing,
|
| It is on RealPage's part. It's their stated _intention_.
| Whether cases should open against landlords who used it, I
| agree, I'm not sure, but it _is_ clear that RealPage broke the
| law here.
|
| > I think it really depends on the internal communication and
| what they sold to landlords.
|
| The real question is "does realpage charge landlords for it's
| service?"
| pfisherman wrote:
| What you are doing is just good business. You are not
| implicitly or explicitly colluding with other property owners
| to set you prices. You are simply doing market research based
| on publicly available data and making an independent decision.
|
| Contrast this with a cartel that includes a significant number
| of landlords in your city (i.e. way more than just a couple of
| your buddies) that (1) shares non public info such as current
| occupancy rates, current lease terms and durations, etc., (2)
| sets prices as a bloc, and (3) enforces compliance on pricing
| targets.
|
| It's qualitatively different from how you described your
| situation.
| iambateman wrote:
| This is probably the best thing the justice dept can do to help
| promote a competitive market for renters.
|
| Also...we need the government to encourage housing policy which
| produces a lot more housing stock.
|
| The long-term reason housing is expensive is because there aren't
| enough good houses and zoning has a lot to do with that.
| acdha wrote:
| > we need the government to encourage housing policy which
| produces a lot more housing stock.
|
| It's really not "the government" but existing homeowners and
| especially old ones. Many politicians would love to add housing
| and especially density because that boosts businesses, tax
| revenue, use of local services, etc. but the idea that your
| house is going to pay for your retirement has a lot of people
| afraid of changes which could lower their valuation, and that
| makes it extremely hard to get things like zoning laws changed.
| adolph wrote:
| I think RealPage foot-gunned their corporate structure and
| marketing by being so blatant about it. If they had set up a
| separate structure that offered "benchmarking" like what is used
| in healthcare[0] and other industries, they could have performed
| the same service but avoided legal trouble.
|
| 0. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5379508/
| lukev wrote:
| Some quotes from the filing:
|
| > Discussing a different RealPage product, another landlord said:
| "I always liked this product because your algorithm uses
| proprietary data from other subscribers to suggest rents and
| term. That's classic price fixing . . . ."
|
| > In fact, as RealPage's Vice President of Revenue Management
| Advisory Services described, "there is greater good in everybody
| succeeding versus essentially trying to compete against one
| another in a way that actually keeps the entire industry down"
|
| > Its executives are blunt: They want landlords to "avoid the
| race to the bottom in down markets." Sometimes RealPage is even
| more direct, acknowledging that its software is aimed at "driving
| every possible opportunity to increase price"
| Carrok wrote:
| > industry
|
| The fact that providing people with housing is even seen as an
| "industry" is a big sign of what is wrong with the world right
| now.
|
| It is essential to living a decent life.
|
| It should not be a driver of lining the pockets of people who
| are already rich.
| Manuel_D wrote:
| Do you want to invest tens of millions of dollars into
| building an apartment with zero expectations of making a
| return? If there's no profit to be made in building housing,
| why would anyone want to build housing? This line of thinking
| is what leads to situations like San Francisco, where price
| controls on housing lead to few developers willing to build
| there.
|
| If it's proven that landlords colluded to fix prices, that
| should be addressed. But the reality is, prices are only
| going up in a select few metros. And it's because lots of
| people want to live in those areas, which leads to rising
| demand which has not been satisfied by new housing
| construction. People desperately want to believe that there's
| a silver bullet that will bring prices down without actually
| addressing the mismatch between supply and demand.
| toomuchtodo wrote:
| Profits are fine, excessive profits at the cost of people
| who need housing are not. There is no silver bullet, but
| increasing supply along with strong regulation to protect
| renters is welcome vs them being cattle to be squeezed by
| for profit entities. Human rights are a thing, there is no
| right to profit.
|
| > The six largest publicly traded apartment companies in
| the U.S. -- all of which are linked to an alleged rental
| price-fixing scandal -- experienced profit increases during
| the first three months of the year, according to an
| analysis from left-leaning watchdog group Accountable US
| exclusively shared with The Hill.
|
| > In the analysis, the companies earned a combined $300
| million in profit during the first quarter of the year, in
| part, due to rent increases.
|
| Lots of profit to squeeze out with regulation, based on the
| evidence. The Vienna model is a proven model if for profit
| enterprises walk away from housing.
|
| https://thehill.com/business/housing/4718252-large-
| apartment...
|
| https://accountable.us/report-top-corporate-landlords-see-
| pr...
| itake wrote:
| strong regulation increases costs (see all the permits
| and surveys required in SF).
|
| What are "excessive profits"? 10%? 15%? 25%?
|
| > experienced profit increases during the first three
| months of the year
|
| Does this even mean anything? This could mean their
| vacancy rate decreased and thus their business is more
| profitable. I don't see the issue with companies reducing
| vacancies and providing more housing to more people.
| toomuchtodo wrote:
| I cannot say, but experts can, and suggest to legislators
| and regulators implementation details. To operate a
| business in a jurisdiction is a privilege, not an
| entitlement.
| itake wrote:
| I'd love to see the data on this. Usually when you
| increase construction costs, via additional regulation,
| you're going to increase the price of rent/sale.
|
| What expert thinks increasing costs will lower prices?
| toomuchtodo wrote:
| It's the other way around. Regulation around pricing
| forces housing providers to provide housing within a
| constrained cost model (land + materials + labor + cost
| of capital + permitting/AHJ requirements [regulation]).
| If they cannot meet the market (or choose not to, for
| whatever reason), public housing is an option, with muni
| bonds issued to finance construction. This removes the
| profit component, which a for profit enterprise needs,
| but public housing does not.
| itake wrote:
| where does the public housing come from? WA and CA can't
| seem to figure out how to build public housing. In WA,
| the best I've seen is the gov buying hotels and having
| the hotel sit empty for years [0].
|
| If regulations make it impossible to build housing and
| public housing has the same regulations, who is paying
| that bill? The existing residents via sales and property
| taxes?
|
| you can google construction costs in sf. how does
| regulations reduce any of those numbers?
|
| [0] - https://www.kiro7.com/news/local/king-county-
| taxpayers-payin...
| Manuel_D wrote:
| Washington has at least done a better job than San
| Francisco. Seattle has built over twice (IIRC three)
| times as many homes per-capita than SF over the last
| decade, despite lower population. The fact that rent
| control is banned statewide has a big role to play there.
| robertlagrant wrote:
| It's not "despite" lower population. The thing that
| drives the costs up isn't evil landlords or the dreaded
| "profit motive". It's just demand massively outstripping
| supply, and high wages.
| tossandthrow wrote:
| The natural interest rate plus a bit.
|
| If you can earn 25% percent in profits in the current
| environment then it is a clear indication of an
| inefficient market - a market that needs to be regulated
| in order to create efficiency (like in this case as with
| many other cases: remove monopolistic behavior).
|
| While it is problematic if you can't derive profits from
| productive activities it is also problematic when
| entities derive unsustainable profits - also for the
| party deriving the profits.
|
| If there is not a bit middle class to consume products,
| then there will not be be a market to supply products to.
| schrectacular wrote:
| Targeting profit rarely helps. The big players can afford
| the financial engineers to make the profits negligible
| from an accounting perspective. Likely funneled into
| growth. The small players cannot, so you put them in a
| situation where selling to a big player is rational. And
| the oligopoly grows.
| tossandthrow wrote:
| The current economic environment definitely over indexes
| on very abstract metrics to steer, which is problematic.
|
| I am also not proposing any _formal_ system.
|
| I am saying that it is quite easy to spot profits that
| are too high.
|
| I am also saying that the governments role is to ensure
| _efficient_ markets.
|
| In this case it is suing RealPage.
|
| It could also be making it easier to make housing in a
| specific area to counter under supply.
|
| it is all regulation.
| Manuel_D wrote:
| The phrase "protect renters" is often used as a
| dogwhistle for price controls. For example, rent control
| and affordable housing mandates that require a certain %
| of units to be rented at below market rates. Can you
| elaborate on what exactly you're referring to here?
| toomuchtodo wrote:
| This would be an unproductive use of time. It is very
| clear you are pro "no regulation" around housing (based
| on your thread comments, "just build more"), so a heated
| argument with the potential for the subthread to be
| detached by dang does none of us any good. I'm not here
| to change your belief system, and to attempt to do so
| would provide no meaningful impact to macro outcomes.
| Manuel_D wrote:
| All I'm asking you to do is list the specific laws or
| regulation you're referring to here when you write about
| the need to "protect renters". I don't know if we agree
| or disagree, because you haven't actually stated what
| your beliefs are.
|
| I definitely support regulations around housing: housind
| needs to be safe (fire exits, sprinklers, etc.).
| Landlords can't engage in deceptive practices, like
| putting up ads for one unit and giving the tenant a
| different one. Units should be promptly repaired.
| Landlords shouldn't discriminate on the basis of
| protected class. I could go on.
| toomuchtodo wrote:
| Dynamic price control of rents to prevent them from
| accelerating beyond what wages can support (existing
| tenants win vs potential new market entrants, them the
| breaks when supply is catching up to demand or cannot
| meet demand), tenant rights with strong local regulatory
| oversight, government incentives to encourage a diverse
| ecosystem of suppliers bringing new supply onto the
| market based on forecasted market demand (cost of
| capital, regulatory streamlining support, construction
| labor pipeline, etc), upzoning whenever possible to
| encourage density as much as reasonable.
|
| Supplier diversity is needed to prevent use of market
| power to restrict new supply coming online to hold rents
| higher than they otherwise would be (strong evidence
| homebuilders are doing this current state, restricting
| supply to juice profitability). The rest should be self
| explanatory. As you said, there is no silver bullet; it
| is various policy measures working in concert to attempt
| to arrive at a desired outcome. I am not anti profits, I
| am anti "gouge the human for basic needs for profits."
|
| TLDR Some profits? Okay. Too much profit? Not okay.
| People living in constant fear of not having a home? Not
| okay. Build, build, build.
|
| (am a landlord myself, do not raise rents unless actual
| costs go up, reduce rents when needed by tenants, keep my
| profits reasonable [~%6-%10], usually no more than
| $100/month/door)
| Manuel_D wrote:
| Okay, so I was right: "protect renters" was indeed
| referring to price controls. Price controls coupled with
| what sounds like blatantly nativist policy:
|
| > Dynamic price control of rents to prevent them from
| accelerating beyond what wages can support (existing
| tenants win vs potential new market entrants...
|
| Can you elaborate on what you mean by "existing tenants
| win vs potential new market entrants"? Does this mean
| that landlords must rent at lower rates to someone who
| has lived in SF for some time, versus an immigrant that
| is willing to pay higher rents?
| medvezhenok wrote:
| I think GP is pretty clearly implying more akin to Prop
| 13 but for renters (i.e. Prop 13 locks in increase in
| property taxes to 2% a year), this policy would do
| something similar for rent.
|
| It benefits existing renters because new entrants (new
| renters) would have to pay market price, but existing
| renters might be behind market rent if market rents are
| increasing too quickly. Same way that Prop 13 works.
|
| Dynamic in the sense that it's not fixed at 2% but tied
| to some sort of variable index (San Diego for example
| does CPI + 5% with a hard cap of 10% YoY increase I
| believe)
| Manuel_D wrote:
| > I think GP is pretty clearly implying more akin to Prop
| 13 but for renters (i.e. Prop 13 locks in increase in
| property taxes to 2% a year), this policy would do
| something similar for rent.
|
| It's called rent control. That's literally describing the
| existing rent control policies in SF: rent is fixes save
| for an extremely minor increase around 2%. Allowing a
| fixed price increase is still a form of price controls.
|
| I really want the previous comment to elaborate on this:
|
| > existing tenants win vs potential new market entrants
| RhodesianHunter wrote:
| >Dynamic price control of rents
|
| How many economics studies, from all schools of economic
| thought, across 100 years of research need to prove that
| price controls don't work before people start accepting
| that fact?
| orwin wrote:
| I mean dynamic price control works in most French cities.
| The exception is Paris, but they tried a static price
| control for no reason (also, non-market housing supply is
| diminishing, which is a bad thing. Capitals with 30 to
| 40% non-market housing are doing extremely well usually)
| cloverich wrote:
| > prevent them from accelerating beyond what wages can
| support
|
| In practice what does this mean? If landlords raise rents
| beyond what people can pay... doesn't that mean they lose
| tenants? If they do not lose tenants, then by definition
| doesn't it mean they have not raised rents beyond what
| people can pay?
| 0x457 wrote:
| > For example, rent control and affordable housing
| mandates that require a certain % of units to be rented
| at below market rates.
|
| The issue that we have here - market rates controlled by
| RealPage. Since everyone uses RealPage, in terms of price
| for renters it's essentially the same as if every
| building was owned by the same company.
|
| I'm appalled how long it took for this lawsuit to be
| filed. We knew about this price fixing for quite some
| time.
| Manuel_D wrote:
| Apparently, RealPage only serves 10% of the rental market
| in San Francisco: https://jacobin.com/2024/08/realpage-
| software-housing-landlo...
|
| > The company has reported that it provides these
| services to 10 percent of the rental market in San
| Francisco.
|
| RealPage doesn't have nearly enough market share to
| engage in price-fixing. If it tried, its units would stay
| vacant as other renters flock to the 90% of units that
| aren't using RealPage.
| medvezhenok wrote:
| Sure, but what matters is what percentage of the
| apartments with vacancies RealPage controls. Many
| apartments don't turn over year-to-year, so that 10
| percent might or might not be misleading.
| ZoomerCretin wrote:
| Do you feel the same way about food production? Should we
| ban food production for profit and make people starve
| until someone decides to work for free to produce enough
| food for everyone to eat once again?
|
| Or how about cars? Let's ban profit on cars. That'll make
| them cheaper, right?
| toomuchtodo wrote:
| I support price regulation when called for. Your
| hyperbole is...not congruent with reality, considering
| the incredible agriculture subsidies provided and
| automobile tariffs.
|
| https://www.theatlantic.com/ideas/archive/2024/08/economi
| sts...
|
| https://www.ncsl.org/financial-services/price-gouging-
| state-...
|
| https://www.whitehouse.gov/briefing-room/statements-
| releases...
|
| From a paid Matt Stoller BIG
| (https://thebignewsletter.com/) piece on monopoly
| pricing:
|
| > Something real is going on. In individual markets, CEOs
| have been bragging publicly that they are restraining
| production to increase prices. Profit margins in the food
| industry jumped during Covid and haven't come back down.
| Or take rent. There's a company called RealPage that
| works with the biggest corporate landlords to hold
| apartments empty so they can increase prices, which
| jumped up 11% in 2022. There's some evidence of
| conspiracy around pricing in virtually every industry.
| Turkey, poultry, and pork. Frozen french fries. PVC pipe.
| Anesthesiology. Oil. Ammunition. Pharmaceuticals. K-Pop.
| Credit bureaus and FICO, Verisign, industrial gasses,
| architectural software, locks, entertainment data.
| Homebuilders. Garden chemicals. Defense and aerospace.
| Ticketing. Estate Sales. Gaming. Drug wholesaling. Work
| ID information. Seeds and chemicals.
|
| Laws to crack down on this behavior has popular support,
| so I won't spend additional time defending the idea in
| this forum, as it is unnecessary.
|
| https://blueprint2024.com/polling/inflation-poll-06-25/
|
| https://blueprint2024.com/wp-
| content/uploads/2024/06/Screens...
|
| > The most popular policies are calling on all states to
| suspend taxes on groceries (68% selected), cracking down
| on overcharging by hospitals (66%), starting a
| congressional committee to hold hearings on and
| investigate price gouging and overcharging by
| corporations (63%), requiring public utilities to cut
| rates for electricity (63%), reducing the deficit by
| cutting spending (62%), and prosecuting price gougers
| (61%).
| ZoomerCretin wrote:
| >I support price regulation when called for. Your
| hyperbole is...not congruent with reality, considering
| the incredible agriculture subsidies provided and
| automobile tariffs.
|
| The outrageous profiteering in food and groceries is not
| with the hyper-subsidized agriculture industry that grows
| food and raises livestock, but up the supply chain in the
| middle-men who buy this to process and package it
| (especially meatpacking). Consumers, farmers, and grocers
| would all be served if the monopolies that absorb massive
| food profits were busted.
|
| > Something real is going on. In individual markets, CEOs
| have been bragging publicly that they are restraining
| production to increase prices. Profit margins in the food
| industry jumped during Covid and haven't come back down.
| Or take rent. There's a company called RealPage that
| works with the biggest corporate landlords to hold
| apartments empty so they can increase prices, which
| jumped up 11% in 2022. There's some evidence of
| conspiracy around pricing in virtually every industry.
| Turkey, poultry, and pork. Frozen french fries. PVC pipe.
| Anesthesiology. Oil. Ammunition. Pharmaceuticals. K-Pop.
| Credit bureaus and FICO, Verisign, industrial gasses,
| architectural software, locks, entertainment data.
| Homebuilders. Garden chemicals. Defense and aerospace.
| Ticketing. Estate Sales. Gaming. Drug wholesaling. Work
| ID information. Seeds and chemicals.
|
| Sounds like the real solution to this problem is the same
| solution to the housing market: Too many laws preventing
| new entrants, which prevents natural competition from
| lowering prices.
|
| The problem is the needless and protectionist laws and
| regulations. If you want to see the effectiveness of
| monopoly regulation, look at California's PG&E vs Texas'
| deregulated electricity provider market. Californians are
| paying outrageous bills, meanwhile Texans have their
| choice of paying different electricity providers, and
| thus have much lower electric rates.
| no_wizard wrote:
| >Sounds like the real solution to this problem is the
| same solution to the housing market: Too many laws
| preventing new entrants, which prevents natural
| competition from lowering prices.
|
| I could buy this for many industries, but real estate has
| no functioning free market dynamics because there is no
| external pressures to facilitate maximal usage of land
| value (and therefore sale or productive usage like
| building more homes), in fact most of zoning laws do just
| the opposite - they encourage low yield development for
| the sake of holding existing land owners value higher.
|
| A land value tax would flip this narrative, applying an
| actual market force to real estate market dynamics. This
| would incentivize maximal productive use of land to pay
| for the land value tax. Not to mention, land value taxes
| are easier to implement and assess value on. It also puts
| an actual value on what makes the land valuable - the
| community aspect, like being located near shopping
| centers - and returns money back into the community.
| Combined with upzoning, you would see more churn in the
| housing market and massive incentivizes to build more
| housing, because you would finally have a pricing
| pressure on the value of the land.
|
| Changing zoning alone isn't going to make the same dent
| either, because it does nothing to incentivize the sale
| of land, same with changing any regulation around
| housing. You need something that facilitates land owners
| to actively make productive maximal use of land value,
| and an LVT will do that.
| text0404 wrote:
| > The problem is the needless and protectionist laws and
| regulations. If you want to see the effectiveness of
| monopoly regulation, look at California's PG&E vs Texas'
| deregulated electricity provider market. Californians are
| paying outrageous bills, meanwhile Texans have their
| choice of paying different electricity providers, and
| thus have much lower electric rates.
|
| They really don't:
|
| - https://www.texastribune.org/2024/05/23/texas-
| electricity-bi...
|
| - https://www.texastribune.org/2021/02/22/texas-pauses-
| electri...
|
| ... and have we already forgot that 250+ people died and
| 3/4 of the state was left without power during a winter
| storm?
| https://en.wikipedia.org/wiki/2021_Texas_power_crisis
|
| Even _if_ Texans were paying less on their monthly bills,
| does that matter if ERCOT's negligence ends up getting
| people killed and causing massive power outages during
| times when its needed most critically?
| eadmund wrote:
| > I support price regulation when called for.
|
| When is price regulation ever called for? The only times
| I can think of are when there is a monopoly, oligopoly,
| monopsony, oligopsony or significant externalities.
|
| > Laws to crack down on this behavior has popular
| support, so I won't spend additional time defending the
| idea in this forum
|
| The popularity of a proposal has very little to do with
| its appropriateness.
| SmartJerry wrote:
| Excessive profits are actually the catalyst for
| competition. THe cycle of capitalism and free markets
| looks like this: earn excess profits -> people build more
| supply -> prices come down and excess profits dry up ->
| people stop building -> earn excess profits. When you fix
| the 'prices come down and excess profits dry up' all you
| get is people stop building.
| medvezhenok wrote:
| That works in a well functioning, liquid market. If there
| are barriers to entry for new competitors (like
| regulatory hurdles, or zoning), this free-market theory
| falls flat on its face.
| deepsun wrote:
| > If there's no profit to be made in building housing, why
| would anyone want to build housing?
|
| To live in it.
| from-nibly wrote:
| You want to live in an apartment complex by yourself?
| failuser wrote:
| You'll need a construction cooperative. IDK if those can
| compete with large construction companies due to the
| economy of scale. The construction cooperatives were a
| staple of late Soviet and post-Soviet Russia, but were
| essentially outlawed later to make way for large
| construction business and mortgages-backed construction.
| bluGill wrote:
| I'm not against them, but they are not the right answer
| for everyone. They are great if you want to live in the
| same apartment for a few decades, but if you move they
| become tricky.
| deepsun wrote:
| It's called cooperative. If I'd like to live in apartment
| complex, I'd post an ad like "Buy an apartment in a
| future complex for a low price of X! Move in in only 2
| years!". (Cost to build Y, number of apartments Z, X =
| Y/Z).
|
| And it's not something new. When price is lower than
| market, people do buy it.
| bluGill wrote:
| What if I only want to live someplace for a couple years?
| Building a house that I want to live in for the next 40
| years makes sense, but if you have no reason to think
| life will keep you in the one place for 40 years renting
| may be a better deal - let someone else take the risk of
| building a house and hoping someone comes to live in to.
| jmole wrote:
| There is a lot more to San Francisco's housing crisis than
| price controls: lengthy permitting processes, environmental
| reviews, NIMBY community outreach, etc.
| mistrial9 wrote:
| San Francisco has always been a crooked city.. fleecing
| newbies is sport.. they have jokes and murals and parties
| around it and always have.. in the American era.. source:
| personal testimony by someone born and raised there
| around 1900
| Carrok wrote:
| If price controls on housing exist in SF but not elsewhere,
| and this causes developers to not build there, then the
| issue is not that price controls exist in SF. The issue is
| that price controls do not exist elsewhere.
|
| Set the same price controls across the entire nation,
| suddenly there is no disincentive to not build in any one
| area.
| Quinner wrote:
| Suddenly there's no incentive to build in all areas.
| margalabargala wrote:
| You appear to be making an incorrect assumption that
| there is some consistent amount of housing which will be
| built each year, and the question is only how to
| distribute it among different localities.
|
| That's not the case. If you add the same price controls
| everywhere, then the same near-zero housing gets built
| everywhere.
|
| Construction companies will shut down, they will not
| continue paying people to build housing at a loss.
| Carrok wrote:
| You appear to be making an incorrect assumption that
| price controls must be so onerous that they will result
| in zero new housing being built.
| RhodesianHunter wrote:
| I'm not trying to be snarky, I'm genuinely curious. Have
| you ever read the economics literature on price controls?
| Alupis wrote:
| They have not... and unfortunately this viewpoint is
| shared by too many these days.
|
| Removing the profit-motive from the equation does not
| magically net increased benefits for everyone. It's
| usually the opposite in reality... landlords end up doing
| the absolute bare minimum because sinking a bunch of
| money into renovating the bathrooms or kitchen will not
| yield increased rent under these proposed policies. Or
| people looking to invest in housing/apartments for rental
| income decide it's ROI is far too low to be worth the
| hassle and risks... so less housing is built.
|
| This line of thinking looks at some minority of people
| living in slums, and assumes every rental owner is
| actually a slumlord. So, the solution is obviously to
| degrade the situation for everyone because some small
| minority of people have it rough...
| orwin wrote:
| I mean, did you read Diamond, McQuade, and Qian? Or newer
| studies? It should be the minimum to read before talking
| about rent control effect (with Autor, Palmer, and
| Pathak) because people tend to cite 'Friedman', who
| _never_ empirically worked on this subject. I mean, I
| understand liberals/Libertarians seems to love pure
| reason, but I hope people on this website are more
| scientifically minded. Experience is always better than
| models, no?
|
| [edit] anyway, rent-control on market housing do not
| work, but limited non-market housing do apply downward
| market pressure, even when done poorly and unplanned (as
| shown by AP&P study)
| margalabargala wrote:
| You appear to be making an incorrect assumption that I
| said "zero new housing". I did not. I said near-zero.
|
| In your comment you explicitly specified that the whole
| country should adopt the _same_ price controls as SF.
|
| SF's price controls are sufficiently onerous that nearly
| no new housing is built there.
| Carrok wrote:
| > In your comment you explicitly specified that the whole
| country should adopt the same price controls as SF.
|
| I absolutely did not say this.
|
| I said "Set the same price controls across the entire
| nation", which means one set of consistent price controls
| for the country, not the existing set of price controls
| that SF currently has.
|
| Perhaps I should have worded it as "Set a consistent set
| of price controls across the entire nation".
| margalabargala wrote:
| That's fair. The wording of your comment (heavily,
| honestly) implies setting SF's policies nationwide, but
| rereading I can see how it can be read the other way.
|
| You're correct, "Set a consistent set of price controls
| across the entire nation" is a much better wording.
| Manuel_D wrote:
| Set the price controls across the nation, and developers
| will redirect their money towards something other than
| residential real estate. It's frankly disappointing to
| see this faulty thinking on HN. Price controls
| fundamentally disrupt the feedback loop between supply
| and demand. If you limit the profit to be made on
| building housing, you're disincentivizing it from being
| built.
|
| Imagine a county is in the middle of a famine, and the
| government in a few provinces set price controls on food.
| The famine worsens in those provinces. Is the problem
| helped by setting price controls _nationwide_?
| BobbyJo wrote:
| I agree with most of what you said, and do think supply is
| ultimately the fix, however, we also have to acknowledge
| the extreme inelasticity of demand for housing, and the
| massive shoe leather cost, both of which leave consumers at
| a massive disadvantage in price discovery.
| Manuel_D wrote:
| How are consumers at a disadvantage in price discovery?
| Hop on Zillow, craiglist, FB marketplace, etc. set your
| filters and sort by price.
| BobbyJo wrote:
| Price discovery as in the market converging on a price,
| not as in an individual seeing how much something would
| cost at present.
|
| https://en.m.wikipedia.org/wiki/Price_discovery
|
| Since the good has very inelastic demand, suppliers have
| an easier time influencing the market. Small changes in
| supply _should_ cause big changes in price, in both
| directions. However, prices go higher much faster during
| high demand than they go lower during low demand.
| raincom wrote:
| Realpage is involved in a vicious loop, not a virtuous
| loop. Even in the Bay Area, corporate landlords jack up
| rent like 10% every year, whereas small landlords are happy
| to raise rent by 3%. That's the difference due to
| algorithmic collusion set and controlled by RealPage.
| Manuel_D wrote:
| How are the corporate landlords able to rent their units
| if the small landlords are selling equal quality units
| for substantially less? Wouldn't everyone just rent from
| the small landlords while the corporate apartments stay
| vacant? This is the hole in the price-fixing argument:
| price-fixing only works when everyone is onboard,
| otherwise the parties not involved in price fixing will
| gobble up the market share.
|
| I wouldn't be surprised if corporate-run apartments are
| more expensive. They're are usually renting much nicer
| buildings with amenities like air conditioning, parcel
| delivery rooms, gated parking, etc.
| Carrok wrote:
| > Wouldn't everyone just rent from the small landlords
| while the corporate apartments stay vacant?
|
| If there was enough supply, they absolutely would.
|
| > They're are usually renting much nicer buildings with
| amenities like air conditioning, parcel delivery rooms,
| gated parking, etc.
|
| It sure sounds like you've never rented. This is, in the
| vast majority of cases, not reality.
| Manuel_D wrote:
| Exactly: prices are rising because there isn't enough
| supply to satisfy demand.
|
| I have, in fact, rented in San Francisco. I rented from a
| small landlord in a building that had no A/C, no package
| room, no parking. I had to fix my refrigerator and shower
| mixer myself because she barely spoke English. But it was
| a cheap apartment! I also rented from a corporate
| landlord. It had a lot of amenities like a gym, a package
| room, and parking. But I paid a lot more for that
| apartment.
| kelnos wrote:
| Because there's a shortage of units overall. All units
| get rented; the corporate landlords just make more
| profit, and a lot of people are priced out of the market,
| including many existing residents.
| washadjeffmad wrote:
| Small landlords who didn't use RealPage didn't struggle
| with occupancy. Large ones "fired" renters and warehoused
| apartments, meeting debt obligations at occupancy rates
| even below 80%.
|
| And most amenities are bullshit. They've taken ordinary,
| expected services and privatized them, externalizing the
| costs to residents for kickbacks, and made elective
| services like cable and internet mandatory through
| exclusive provider agreements to inflate revenue.
|
| In aggregate, squeezing older properties subsidizes newer
| properties by equalizing returns. They're making just as
| much or more off of cheaper properties as newer "premium"
| ones.
| kelnos wrote:
| > _This line of thinking is what leads to situations like
| San Francisco, where price controls on housing lead to few
| developers willing to build there._
|
| Not sure what "price controls" you're talking about, but
| the reason it's expensive to build in SF (which reduces the
| appeal for builders) is zoning, the byzantine planning
| process, the ability of local residents to effectively
| block or delay projects, and weaponized environmental
| review.
|
| > _Do you want to invest tens of millions of dollars into
| building an apartment with zero expectations of making a
| return?_
|
| Building housing doesn't need to be an investment
| opportunity. In a better world, I'm sure there would be
| plenty of people who would be happy to build housing with
| only enough profit to pay employees a comfortable wage.
| These sorts of people don't have the ability to break into
| the industry, though.
| Manuel_D wrote:
| Policy restricting housing is indeed another factor
| impeding housing. The price controls I'm referring to are
| rent controls (which applies to ~70% of apartments in SF,
| and the threat of reintroducing rent controls looms) and
| affordable housing mandates. The affordable housing
| mandates require that a certain percentage of units are
| rented at set prices.
|
| Again, if housing isn't an investment opportunity, then
| why would anyone build new housing? Sometimes people get
| together and build co-ops. But those are rare, and it's
| only available to people with a lot of capital on-hand.
| Plus, it runs the risk of the project going over-budget.
| asadotzler wrote:
| Lots of businesses make less than stock market index
| returns. You can be a builder that doesn't want to beat
| the S&P and still support your family doing it. Not
| everything has to be about massive accumulation of wealth
| or "growth at all costs". Plenty of people are OK doing a
| day's work for a day's creature comforts and leaving it
| at that.
| Manuel_D wrote:
| Sure you _can_ deliberately invest in a way that doesn 't
| generate the best returns. You _can_ be a philanthropist
| and build housing for free! But the vast majority of
| people are indeed looking to maximize returns.
| leafmeal wrote:
| In San Francisco, rent control doesn't apply to new
| construction as I understand.
| simoncion wrote:
| Correct. With one major exception (that is, a dozen or
| two of the couple-hundred units in Trinity Place on
| Market Street) SF's rent stabilization ordinance does not
| apply to buildings constructed after ~1979.
|
| So, it would be good for GP (PP? family trees are hard)
| to consider the implications of the fact that ~70% of the
| rental apartments in SF were built BEFORE 1979.
| Alupis wrote:
| Why is this viewed as a problem?
|
| The people living in SF and it's surrounding areas
| clearly _want_ things the way they are. Who are we to
| force them to build "affordable" housing just because we
| think it might be good?
|
| "We", mostly being people who don't even live in SF...
|
| Do the tax payers of SF not get a say in how their
| community is managed? Are we now advocating people have a
| "right" to live in SF despite it's cost or something? How
| does that work in reality, and most importantly, why?
| EVa5I7bHFq9mnYK wrote:
| True, just as people from Mexico don't have a right to
| live in the rich and nice USA, people from the sticks
| don't have a right to live in the rich and nice SF.
| Alupis wrote:
| > A right is a power or privilege held by the general
| public, usually as the result of a constitution, statute,
| regulation, or judicial precedent[1]
|
| Nobody has a "right" to live in SF. If you can afford SF,
| then nothing is stopping you.
|
| You _do_ have a right to live, but you _do not_ have a
| right to live in a particular area.
|
| [1] https://www.law.cornell.edu/wex/right#:~:text=A%20rig
| ht%20is....
| pessimizer wrote:
| People from Mexico don't have a right to live in the USA,
| any more than people from the USA have a right to live in
| Mexico; and the people moving into SF and complaining
| have top 3% incomes.
| ZoomerCretin wrote:
| Zoning restrictions in just three cities (San Francisco,
| San Jose, and New York) are responsible for all of the
| United States' GDP being lower by double-digit
| percentage.
|
| It is in the interest of the entire country that these
| regions be forced to allow maximum housing development,
| because it will raise incomes across the entire country.
|
| >Do the tax payers of SF not get a say in how their
| community is managed?
|
| We know why zoning density restrictions exist, because
| their birth place was across the bay in Berkeley, whose
| proponents loudly extolled its benefits in pushing out
| anyone who was not White. This was the original intent of
| getting a say in development: to prevent undesirable
| racial minorities from moving in next door.
|
| San Francisco weaponized housing density restrictions to
| push black people out of Haight-Ashbury, and to this day,
| continues to fight any and all housing development that
| might reverse this grave injustice.
| ZoomerCretin wrote:
| Found it: https://eml.berkeley.edu/~moretti/growth.pdf
|
| If New York and the Bay Area alone relaxed their zoning,
| their GDP would be 33% higher, and US GDP would be 3.7%
| higher (as of 2009), and national average income would be
| $3,685 higher.
| tacticalturtle wrote:
| It's a problem when every town/municipality thinks like
| this, and then larger state- wide governments are faced
| with the dilemma of an angry voting population tired of
| high housing costs.
|
| You can either get ahead of a state-wide solution and
| implement something where you have some control that
| works for your community, or you can do nothing and wait
| for the state government to begin to remove zoning from
| local control.
| Alupis wrote:
| High rent costs are not something a town/municipality can
| solve. In a most ways, it's also something a state
| government cannot solve.
|
| "High" rent is relative to the area, and rent is high
| across the entire country currently.
|
| Lack of rental housing drives up rental prices. The lack
| of rental housing is largely due to unnaturally low
| interest rates. People qualified for oversized loans, and
| bought up the rental supply, converting them into homes
| instead.
|
| Since cash was easy to acquire via loans, this resulted
| in an unprecedented period of time where housing prices
| were driven upwards with near-zero limiting factor. That
| was the market where people were overbidding asking-price
| by $50K+ without even seeing the house... that was/is a
| very unnatural market. This bidding process resulted in
| significantly overvalued homes, which made them
| inaccessible to lower-income people. So the rental market
| shrunk significantly, and housing prices went through the
| roof... then runaway inflation came knocking, making
| everything that much worse.
|
| Which is to say, all of this is the creation of poor
| federal policy, and there isn't much your state or city
| can do about it.
| Manuel_D wrote:
| No, rent is not high across the entire country. It's high
| in a select few metros, and fairly low everywhere else.
| Municipalities can't unilaterally reduce rents, but the
| can exacerbate the problem by disincentivizing housing
| through regulation and price controls.
| amy-petrik-214 wrote:
| price controls is rent control. SF. see also: NYC "you
| can raise rent by X% per year AT MOST, no more than that"
| if inflation / supply/demand is >X%, the landlord eats
| it. Thus landlording might be for some, more appealing
| elsewhere.
|
| Cali also has prop 13 i.e. rent control on real estate
| taxes. So if I bought my house in 1955, I might pay
| $100/year in property tax, the guy who just bought a
| completely identical house next door this year might pay
| $15,000 a year in property tax. On basically the same
| house. How is that fair? kinda a boomer "I got mine" type
| mentality. Also part of the bay area real estate problem,
| in addition to zoning/byzantine planning, borken process
| - why would anyone want to move out?!? Moving out would
| mean +$15,000/year tax, every year. Just stay put.
|
| Of note in Singapore there's not really the concept of
| "apartment building" business and it works fine (very
| dense NYC tier housing there). The reason why is the more
| "units" you own, taxes become progressively more brutal,
| an apartment building would be tax armageddon. So most
| rentals are a person who owns a few condo type units and
| rents them, few enough that taxes aren't bad. Most people
| aim for owning, and for owning there is a private sector
| but a public government sector that provides home at more
| reasonable prices with various perks and incentives.
| That's how to handle housing when you've got tons and
| tons of people and almost no land.
| jjav wrote:
| > So if I bought my house in 1955, I might pay $100/year
| in property tax
|
| Ok it's fine to point out drawbacks of Prop 13, but
| making up stuff doesn't help.
|
| Prop 13 baseline assessment used 1976 values, so buying
| in 1955 doesn't make any difference, it still started on
| 1976 valuation.
|
| It goes up 2% every year, so for this scenario we're
| talking about a house that was worth well under 10K in
| 1976. The median house price in the US in 1976 was 48K
| (so surely higher than that in California).
| simoncion wrote:
| > ...but making up stuff doesn't help.
|
| Eh, the order of magnitude difference is pretty spot-on.
|
| Housing prices are absurd, and their rate of increase
| massively outpaces the rate of increase for pretty much
| every other thing a person would purchase.
| biggoodwolf wrote:
| Like Manhattan? They've built a lot, and it's getting
| cheaper every year
| Manuel_D wrote:
| Manhattan rents tanked during the pandemic, but rebounded
| pretty quickly after covid subsided. Supply and demand is
| such that prices may rise even if you build a lot of
| housing if there's even more people that want to live
| there. Big supply coupled with _even bigger_ demand will
| still see prices rise.
| dwallin wrote:
| This is not a binary situation. There are plenty of
| reasonable approaches that help limit abusive landlord
| behavior without damaging the prospect of profitable real
| estate development.
| Manuel_D wrote:
| I wholeheartedly agree that landlords should not engage
| in abusive behavior: Landlords should not discriminate on
| the basis of protected class. They should keep units safe
| and up-to-code. They should not engage in deceptive
| practices like advertising one unit and selling a
| different one, or falsifying facts about the unit.
|
| But where I'm not going to agree is the notion that
| setting rent above a certain threshold is "abusive
| landlord behavior". If a landlord is setting the rent too
| high, the consequence should be that the unit stays
| vacant. If someone is willing to pay that rent, then
| evidently the rent wasn't too high.
| dwallin wrote:
| Except that there are significant switching costs. A
| person moving has to pay moving costs, might have to
| replace furniture that doesn't work for the new place,
| can affect your children's schools etc. This means the
| value of a unit to someone living there can often be
| significantly higher than the market rate.
|
| This can led to situations where the most profitable move
| for landlords is to take advantage of the discrepancy to
| regularly raise the rent for existing renters by more
| than the market, in attempt to maximize profit. Sure they
| might have to deal with the hassle of finding a new
| tenant every couple of years when someone gets priced
| out, but if it leads overall to slightly higher profits
| it's the winning capitalist move.
|
| The rentiers are ostensibly following the law, but the
| overall cost to the population and quality of life loss
| to renters can be significantly outsized compared to a
| sliver of additional profit for the rentiers. This is a
| great example of externalized costs in a free market and
| exactly where government should generally be attempting
| sensible regulation.
| bdcravens wrote:
| > Do you want to invest tens of millions of dollars into
| building an apartment with zero expectations of making a
| return?
|
| No, but this doesn't change the fact that housing is a
| basic good like gasoline and insurance. Controls in those
| industries don't prevent companies from investing. Profit
| regulation doesn't mean no profit.
|
| > price controls on housing lead to few developers willing
| to build there
|
| Because there are alternate places without those controls.
| If housing were treated like the essential good that it is,
| there wouldn't be any ROI havens, and developers would
| adapt (or die if they can't accept reducing the typical
| ROI, which averages around 15%)
|
| > rising demand which has not been satisfied by new housing
| construction
|
| There's plenty of demand, just not for the houses that are
| being built. (That's not to say there aren't specific
| cities where there is no supply). Based on most
| affordability standards, many can't afford the typical rent
| or mortgage. If those prices can't come down, or income
| can't go up, then new types of much cheaper housing must be
| built.
| Manuel_D wrote:
| Gasoline isn't subject to price controls, though! They
| were in the past, and the results were disastrous. This
| is what price-controls on gasoline look like: https://www
| .federalreservehistory.org/-/media/images/essays/...
|
| The way that the government influences gas prices is that
| they stockpile or release oil from the US strategic
| reserves. They don't regulate prices. They influence
| supply in order to influence prices. The analogy would be
| building public housing.
|
| I'm not sure what you mean by treating housing like an
| "essential good". Most essential goods aren't subject to
| price controls. There aren't price controls on food, for
| example. Most countries that set price controls on food
| experience famines (or the price controls are widely
| ignored and the black market becomes the normal market).
| bdcravens wrote:
| You can be prosecuted for price gouging of essential
| goods.
| Manuel_D wrote:
| "price gouging" is not the same as price-fixing. Price
| gouging refers to raising prices in response to natural
| disasters: https://www.cato.org/blog/anti-price-gouging-
| laws-entrench-s...
|
| > Texas's APGL kicks in when a disaster is declared by
| the governor or the country's president. Under the law,
| merchants are not allowed to sell or lease fuel, food,
| medicine, lodging, building materials, construction
| tools, or other necessities at "exorbitant" or
| "excessive" prices, with those caught facing civil
| penalties of up to $10,000 per violation, rising to
| $250,000 if elderly consumers are affected.
|
| There's very specific, and very short-term windows in
| which prices cannot be raise excessively. It's not even
| remotely comparable to price controls on rents.
| orwin wrote:
| It's called 'dynamic price control' and is present in
| most cities in my country. My landlord cannot rise the
| rent at weird levels, which is based on the selling cost
| of the unit. Basically if her unit appreciate 5% yoy, she
| won't be able to rise the rent higher than 5% yoy.
| Manuel_D wrote:
| So it's exactly the same thing as SF rent control, albeit
| with a higher allowable year-over-year increase. There's
| nothing "dynamic" about it, it's just textbook rent
| control.
| skeeter2020 wrote:
| >> leads to rising demand which has not been satisfied by
| new housing construction
|
| we seem to accept this at face value, but there's lots of
| evidence that supply is not the only issue, or even the
| biggest. Example: in Toronto this year there's been over
| 220 large real estate projects go insolvent. There's
| clearly a limit on the demand side.
| trilobyte wrote:
| So you would be ok with contractors who are building the
| houses (often as subcontractors) coordinating their prices
| for the work to maximize the cost to the developer?
| chgs wrote:
| Sounds like a union
| washadjeffmad wrote:
| You're missing that they didn't use this to build or expand
| housing, but to limit it. Just look at the occupancy rates.
|
| They colluded with property management companies to capture
| 80% of existing multi-family dwellings and raised rents to
| inflate hard asset values of PE owned properties
| nationwide. Just because this is the closest that
| homeowners have had to a bailout in their lifetimes doesn't
| mean they didn't profit even more.
|
| It was a scam.
| bequanna wrote:
| Well, housing needs to mostly be handled by the private
| sector if we want high quality.
|
| Government housing should absolutely exist, but only as a
| safety net as their management is incredibly inefficient.
|
| Private housing isn't the issue here: collusion is. Collusion
| should generally not be tolerated in a well regulated
| capitalist system.
| mistrial9 wrote:
| there are massive and documented scandals at the US Federal
| level with the departments assigned to regulate and serve
| those markets (HUD etc).. an easy and relevant start is the
| Savings and Loan collapse of the 80s, directly on top of
| mortgage monies
| bequanna wrote:
| I don't disagree but not sure what point you're trying to
| make here.
|
| Problems with regulation are the expected consequence of
| living in the real world and not a model. They should be
| fixed and we can do better.
|
| I just don't see how any of this leads us to more
| regulation. More government control means less efficiency
| and likely MORE corruption.
| JackYoustra wrote:
| I don't see why this is an important point: food is an
| industry and it's never been cheaper in human history than in
| developed capitalist countries with vibrant agribusiness.
| RhodesianHunter wrote:
| True but, look up the price fixing that's been going on in
| big AG via AgriStats. Similar story as OP.
| legitster wrote:
| Modern housing is a direct development of the industrial
| revolution. In that sense it is an industry.
|
| You could provide housing like undeveloped nations do, where
| large families live in cramped hovels without electricity or
| running water.
|
| In the sense that someone should want an apartment with 2
| bathrooms, a fireplace, and a pool - it's easier to treat
| housing overall as a consumer good.
| Carrok wrote:
| This is quite the straw man you've constructed.
|
| You seem to be suggesting that either housing must be
| exploitatively expensive, or people must live in squalor.
| legitster wrote:
| You are strawmanning me. Nothing in my statement suggests
| that treating housing as a product means it has to be
| exploitatively expensive or given away for free. If
| anything, most industrial products are supposed to get
| cheaper over time.
| kelnos wrote:
| > _If anything, most industrial products are supposed to
| get cheaper over time._
|
| And yet the cost of housing more or less always
| increases. Isn't that enough to suggest that there's
| something about this "industry" that doesn't quite make
| sense the way it's handled?
| sangnoir wrote:
| ...vs "providing" housing like developed nations in cramped
| shelters, in cars and on the street? FYI: multigenerational
| households are a cultural artifact, not an economic one. As
| one might assume, hovels without water or electricity don't
| break the bank, they aren't "provided" by anyone either.
| Yours is a false dichotomy, and is easily disproved by
| examples in other developed countries where shelter is
| considered a right.
| legitster wrote:
| I grew up in tenements in Romania. So I can tell you from
| experience that building the bare minimum shelter for the
| most amount of people is possible (if less enticing than
| you may think). But the idea that they were anything
| other than "industrial" housing as OP states is
| ridiculous.
|
| Regardless of who pays for it, housing modern peoples is
| an industry.
| sangnoir wrote:
| "Hovel" is the opposite of industrial housing,
| etymologically, and evokes the images of ad-hoc slums
| rather than soviet-style brutalist blocks. Industrial
| housing is a step up from what OP described (no running
| water or electricity).
|
| I will also note that the currently in-vogue 5-over-1s
| lean heavily towards "Industrial housing". Funny how
| diffent economic systems both with a captive market
| converged towards no-frills housing.
| lawlessone wrote:
| > it's easier to treat housing overall as a consumer good.
|
| But it doesn't function like that.
|
| Building the house isn't even the part that is the problem.
| It's land/space and how some people maintain monopolies on
| those.
|
| A free market might make the materials and construction of
| a house cheaper. It address that space is limited and that
| most expensive space is often where there are more jobs.
| Alupis wrote:
| > The fact that providing people with housing is even seen as
| an "industry"
|
| > It is essential to living a decent life.
|
| What troublesome phrasing. "Provide" implies people should
| get housing for free, and "decent" implies getting "decent"
| housing for free...
|
| Well, so who is actually paying for it then? Magical handwavy
| "government" money? Everyone knows where government money
| comes from, right? Right?
|
| Do we want more printed money and uncontrollable inflation?
| No? Oh so we should just steal this money from people who
| worked hard, because some others didn't?
|
| > It should not be a driver of lining the pockets of people
| who are already rich.
|
| Ah yes, the ol' "rich people bad" whipping horse. Despite the
| tens of millions of jobs created by "rich people" and the
| millions and millions of people who live in actually decent
| housing in exchange for market rates.
|
| The fact that some people actually truly believe "free
| government housing" is going to be "decent" is absolutely
| tragic. Yes, let's doom millions to the "projects" because it
| makes us feel better knowing those darn rich people aren't
| making money!
|
| If anyone wants a porthole view into what government housing
| looks like - take a look at the plethora of stories and
| pictures from our military barracks, across all branches.
| Mold, bugs, broken appliances, holes in walls, locks that
| don't work... and nobody cares despite the very vocal, highly
| visible complaints. There's a reason our service men and
| women scramble to off-base housing the moment they are
| allowed.
| switch007 wrote:
| I'll totally accept you're speaking just in the context of
| the USA but...
|
| > The fact that some people actually truly believe "free
| government housing" is going to be "decent" is absolutely
| tragic
|
| Council houses are fairly highly regarded in the UK (i.e.
| the property, in terms of space, light, build quality. The
| estates/tenants, not so much...). They also have a track
| record of maintaining them far better than private/social
| landlords - I can personally attest to that.
|
| It is the large homebuilder companies that build truly
| awful, "tragic" homes, cutting every single possible corner
| imaginable for an extra penny of profit.
| Alupis wrote:
| Wikipedia indicates most of these Council Homes were
| built in the early 1900's - and are not modern
| construction. An additional average of a around 100 homes
| total were built per year from the 40's through 1980. So
| these don't appear to be helping a significant portion of
| the population.
|
| Wikipedia also indicates in the 1970's the UK government
| dramatically and suddenly cut back on funding for these
| homes (among other things), which led to some very poor
| living conditions.
|
| Your quality of life being dependent on the whims of
| politicians and budgets outside-your-control seems
| awful...
| switch007 wrote:
| I note you don't link to your sources. You need better
| sources and/or better research skills. 100 per year is
| way off. Have you confused 100 with 100,000? I think even
| that is low
|
| Yes the Conservatives stopped building council homes,
| mostly through neoliberal ideology that the government
| shouldn't provide housing. The private market houses are
| far worse quality
| chgs wrote:
| The number of new council house starts dropped in the
| 70s, before thatcher.
|
| The trend continued into the 80s but blaming thatcher and
| neoliberalism is simplistic at best.
|
| https://www.ons.gov.uk/peoplepopulationandcommunity/housi
| ng/...
|
| Table 2A, housing starts by FY.
|
| 1970 185k. 110k in 1978/79 before thatcher's landslide.
| By 1980 (so before the 1980 housing act came in) down to
| 58k.
|
| The starts are what's important as those are the ones
| impacted by new legislation and policy.
| switch007 wrote:
| From your source, this is the number dwellings "Completed
| - Local Authorities" from 1979 to 1997:
|
| 89,630 (1979)
|
| 88,540
|
| 68,330
|
| 40,080
|
| 39,170
|
| 37,580
|
| 30,410
|
| 25,380
|
| 21,820
|
| 21,450
|
| 19,350
|
| 17,870
|
| 11,230
|
| 5,700
|
| 3,360
|
| 2,880
|
| 3,440
|
| 1,740
|
| 1,550 (1997)
|
| You're going to claim the Conservatives of that era
| didn't stop building council houses?
|
| Compare with the 18 year period before Thatcher:
|
| 119,350 (1961)
|
| 132,070
|
| 126,240
|
| 156,830
|
| 167,300
|
| 179,170
|
| 202,860
|
| 190,670
|
| 182,380
|
| 179,280
|
| 157,380
|
| 122,360
|
| 104,570
|
| 124,140
|
| 152,470
|
| 153,750
|
| 145,070
|
| 113,660 (1978)
|
| > By 1980 (so before the 1980 housing act came in) down
| to 58k.
|
| I don't recognise this 58k. What is the exact cell of
| that number?
| chgs wrote:
| Starts are important, not completions, when looking at
| policy impact. I added local authority and housing
| associations together as they are basically the same
| concept.
| switch007 wrote:
| Oh you moved the goalposts. Got it.
|
| Council houses and housing associations are completely
| different. Have you ever lived in either? I have
| chgs wrote:
| Fine, just have local authority numbers then which halved
| from 175k in the decade before thatcher was elected, let
| alone had any chance to implement policy.
|
| She didn't reverse the trend, but she didn't start it.
| diogocp wrote:
| It being an industry is what allows people to live a decent
| life.
|
| Just like farming being an industry allows you to sit at a
| desk all day instead of being out there foraging.
| legitster wrote:
| If this was a market for a less politically charged product
| than housing, would the quotes be as malicious? Like if this
| software was used to help people get the best price for their
| car or their stocks or collectibles?
| alpha_squared wrote:
| I'm not sure I understand what politics have to do with this.
| Housing is essential. It's "politically charged" because of
| the lack of affordability. Part of that is due to lack of
| building and now, evidently, part of that is due to price-
| fixing.
| legitster wrote:
| But as evidence of price fixing, people claiming to get
| sellers the best possible price isn't a smoking gun in any
| other market - essential or not.
| everforward wrote:
| Most markets have many people making that claim, though.
| Those people have to compete against each other. Their
| pricing is also optional, where RealPage was basically
| forcing landlords to use their prices.
|
| RealPage's big issue is market penetration, though. They
| control pricing for enough of the housing stock to
| artificially manipulate the cost of housing.
|
| It's one thing to promise to get clients a sale price on
| the far end of the bell curve. It's another thing
| entirely to move the entire bell curve.
| kerkeslager wrote:
| This isn't relevant. I'm don't want smoking guns, I want
| an economy where harming people isn't profitable.
|
| If I invest in a stock and the stock goes down, nobody
| looks at my intentions and decides whether I should make
| money off it. It's my responsibility to understand what
| I'm investing in.
|
| If I invest in harming consumers, nobody should look at
| my intentions and decide whether I should make money off
| it. It's my responsibility to understand what I'm
| investing in.
|
| Even if RealPage didn't know what they were doing was
| harming renters, _they should have known that_. Knowing
| how your actions affect people is a prerequisite to
| running a business in any market, but _especially_ in a
| market where people 's basic needs are at stake.
| lawlessone wrote:
| Well yeah? for most people housing isn't abstract.
| kerkeslager wrote:
| > If this was a market for a less politically charged product
| than housing, would the quotes be as malicious? Like if this
| software was used to help people get the best price for their
| car or their stocks or collectibles?
|
| The answer to this question does not matter.
| sophacles wrote:
| Yes they would be, or at least should be taken that way.
| Capitalism is supposedly best for everyone because
| competition between suppliers of a good or service drives
| prices down allowing the most people to afford those goods or
| services. The jerk talking about "avoiding a race to the
| bottom" is really saying "lets circumvent market forces to
| screw people out of money since we're too incompetent to
| provide actual value in the face of competition".
| lukev wrote:
| Yes. Price fixing can happen in any market where participants
| on one side of the market collude to set prices. It is mostly
| illegal in the US:
| https://en.wikipedia.org/wiki/Price_fixing#United_States
| legitster wrote:
| But again, these quotes aren't specific admissions of price
| collusion as they are just "getting the best price".
| ahoy wrote:
| I don't think Funko Pops and housing are comparable.
| trilobyte wrote:
| My concern with this is that it fundamentally undermines
| competition, which is a promise of the markets. Being more
| efficient means delivering products more cheaply than your
| competitors, which is good for the market. This sort of
| collusion completely undermines that and holds back innovation
| in the market.
|
| How would real estate developers feel if construction companies
| / subcontractors had a similar product for pricing their labor?
| Or how would any company feel if employees worked together to
| set the price of their labor? That sounds kind of familiar, and
| doesn't sound like something most companies would be happy
| about.
| jasode wrote:
| _> Armed with competing landlords' data, RealPage also encourages
| loyalty to the algorithm's recommendations through, among other
| measures, "auto accept" functionality and pricing advisors who
| monitor landlords' compliance._
|
| I think the _" private prices" + "autoaccept" + "compliance"_ is
| the key misbehavior that gets RealPage into legal trouble.
|
| If competitors want to _converge on prices in a legal manner_ ,
| they have to do out in the open via "price signaling" via public
| posting of prices. That's how it's legally possible for
| competitors in other industries to do it:
|
| - gas stations looking at each others signs of prices and quickly
| adjusting to match;
|
| - e-auctions like Ebay/Reverb showing a seller what the previous
| range of sold prices were;
|
| - Kelly "Blue Book" showing current used car market prices
|
| - Zillow publicly showing rental rates, etc.
|
| Neither the platform nor the sellers in those examples get in
| trouble for "price fixing".
|
| In contrast, the privately shared pricing with compliance
| monitoring by the platform is too coordinated to avoid legal
| scrutiny.
| legitster wrote:
| The Blue Book is a great example because the number is so often
| discarded in almost all sales.
|
| Another example would be stock trading apps, especially ones
| that give you forecasts and estimates as to when to buy and
| sell.
| kpw94 wrote:
| Many listings for apartments are on on-site.com (which is "a
| RealPage company") and are publicly available...
|
| So it could be argued it's not
|
| "private prices" + "autoaccept" + "compliance"
|
| But rather
|
| "public prices" + "autoaccept" + "compliance"
|
| Still problematic behavior (and probably add "private knowledge
| of inventory forecast" on top of that), but I'd argue price
| signaling of the available inventory isn't the main issue.
| jasode wrote:
| _> So it could be argued it's not "private prices"_
|
| I added "private prices" as one of the factors because the
| official DOJ wording in the complaint mentions _"
| nonpublic/confidential/sensitive"_ prices in 3 different
| places:
|
| > _The complaint alleges that RealPage contracts with
| competing landlords who agree to share with RealPage
| nonpublic, competitively sensitive information about their
| apartment rental rates
|
| >"We allege that RealPage's pricing algorithm enables
| landlords to share confidential, competitively sensitive
| information and align their rents.
|
| >Landlords agree to share their competitively sensitive data
| with RealPage in return for pricing recommendations and
| decisions that are the result of combining and analyzing
| competitors' sensitive data. *_
| everforward wrote:
| I don't think they're talking about the price they're
| renting the apartment for; I can't imagine that number is
| secret in any meaningful sense of the word. Who rents an
| apartment without knowing the price?
|
| I think they're talking about more sensitive internal
| numbers. What are the costs and margins on the unit? How
| quickly are units moving at a certain price? What's the
| turnover at particular prices?
|
| I think the core mechanics bear some similarities to
| insider trading, with a third party "washing" the non-
| public information.
| stackskipton wrote:
| Another big one is when do the leases end for inventory
| control. RealPage is why Apartment dwellers report
| getting options to renew at cheapest price for odd number
| of months like 17. Realpage is trying to prevent a bunch
| of leases ending and flooding the market.
| kpw94 wrote:
| > I think they're talking about more sensitive internal
| numbers. What are the costs and margins on the unit? How
| quickly are units moving at a certain price? What's the
| turnover at particular prices?
|
| Yeah that's my understanding of it too "competing
| landlords who agree to share with RealPage nonpublic,
| competitively sensitive information about their apartment
| rental rates and other lease terms".
|
| I.e. realPage has an oracle view of all the lease ending
| times etc, so it knows for instance, this next July
| there's going to be very few availability, so boost all
| the rents by X%
|
| I guess there's a "private price" if the apartment
| complex share what, after all negotiations, the renter
| ended up signing for. It can be more than what was on the
| public website, if they ended up signing for a shorter
| lease, or less if the apartment ended up needing to throw
| in "first month free" etc.
|
| There's also private price of lease renewals done before
| the unit is put for rent on the website.
| bluGill wrote:
| There is more than just pricing at question here. If you go
| to your typical local gas station with a 5000 gallon tank and
| fill up the station will raise their prices above the other
| stations in the area because they will only have a small
| amount of gas in their tanks and so they want everyone to go
| elsewhere until the next delivery fills the tanks up again.
| (depending on when you fill up the station may not even have
| 5000 gallons in their tanks.) How much tank is left at any
| station is NOT public information shared with other stations
| in the area.
|
| RealPage though has information on how many apartments are
| empty and uses that in algorithms even though it isn't public
| information.
| hnburnsy wrote:
| >are publicly available
|
| The list price is different than the final accepted monthly
| rate\term for the renter. Realpage is getting the actual
| rental information.
|
| In addition, the occupancy of the building is also not public
| data.
| tmoertel wrote:
| The classic way that businesses openly coordinate their pricing
| is via price matching. Businesses advertise their preferred
| prices but also promise that they'll match lower prices from
| competitors. Competitors see these advertisements and set their
| own prices to approximately match.
|
| The FTC does not consider this type of open signaling to be
| price fixing:
|
| > Q: Our company monitors competitors' ads, and we sometimes
| offer to match special discounts or sales incentives for
| consumers. Is this a problem?
|
| > A: No. Matching competitors' pricing may be good business,
| and occurs often in highly competitive markets. Each company is
| free to set its own prices, and it may charge the same price as
| its competitors as long as the decision was not based on any
| agreement or coordination with a competitor.
|
| Source: https://www.ftc.gov/advice-guidance/competition-
| guidance/gui...
| pixl97 wrote:
| Price matching was something that really worked in the past,
| again in the days before mass digitization and cheap
| storage/printing. Add in there are only a few major retailers
| left, it becomes easy to make a product for each of them.
|
| CostCow will have product 0ICU812a
|
| WalWart will have product 0ICU812b
|
| Then they don't have to actually price match because they are
| "different products"
| codedokode wrote:
| Online stores seem to match prices; when I google for some
| electronic equipment (like headphones or MIDI controllers),
| many stores have almost equal prices for the same item. Of
| course there is a chance that all they are owned by the
| same entity, but it is not very plausible.
| willcipriano wrote:
| That's probably the MSRP for the item.
| (https://www.investopedia.com/terms/m/manufacturers-
| suggested...)
| bobthepanda wrote:
| that's not really price fixing in so much that price matching
| in this manner is known to lead to a race to the bottom.
|
| this is very different from, "leasing agent, set this high
| price or get fired by your employer."
| bogwog wrote:
| I think you're over analyzing and confusing things. Price
| fixing is when competitors work together to raise prices above
| what they would normally be in a competitive market.
|
| Using your gas station example, a gas station isn't going to
| look at a competitor selling gas at $4.15 and decide to raise
| their price to $4.45. They would _lower_ their price to match
| the competition, otherwise they 'd lose sales and make less
| money. Price fixing would be if both gas stations decided to
| raise their price to $4.45 at the same time so that customers
| don't have a choice.
| andrew_eu wrote:
| The analogy also works in the opposite direction. If a gas
| station is selling at $4.10 a gallon and another down the
| street is selling at $4.15, the first gas station could
| happily up their price to $4.14. 1% more revenue and they're
| still the cheapest on the block.
| oooyay wrote:
| Competitive markets keep things within a tolerance, imo. If
| the average is $4.10 then you can expect the price to vary
| up and down by some amount depending on location and other
| things provided.
|
| What RealPage does is distinct because it assures prices
| are always above and by orders of magnitude what they
| should be. It also achieves that through private
| communication which I think is generally accepted as a
| problem.
| dwaltrip wrote:
| And if there is a third also selling at $4.10? Unless they
| privately coordinate and collude, its hard for this to work
| for artificial price increases.
| coding123 wrote:
| I think one thing that's weird to me is that Shell and
| Exxon or 76 or whatever all somehow got their gas to be
| somewhere in the same ballpark. You'd expect to see that
| some gas companies can't get their shit together and
| can't figure out how to extract, purify, and distribute
| gas at anything less than $500 per gallon. Now, naturally
| you'd expect those companies to just go out of business.
| And you'd also expect to see at least one that figures
| out how to do all of that for $1 per gallon. Yet, here
| they all are, selling it around the same price. It's too
| strange in my opinion. There is collusion happening in
| many markets. I suspect they are all producing it for way
| less which is why one of them doesn't suddenly go out of
| business, but the fact that they're not selling it so low
| that the competitors simply go out of business - again a
| collusion signal.
| bogwog wrote:
| Relevant: https://www.reuters.com/business/energy/us-
| senate-committee-...
| bluGill wrote:
| They are all selling the same gas from the same refinery.
| They might have slightly different additives but
| otherwise it all comes from the same place. you can't
| afford shipping costs to get gass from a different
| refinery (unless you are on a territory border)
|
| the only question is how much profit to put on top and
| even then they have to be careful as if they go too low
| their competetors won't follow and then they have to pay
| extra for an unscheuled delivery just to fill their tank.
|
| i'm reasonable certian that small stations are illegally
| colluding in some cases.
| curiouscavalier wrote:
| Many do go out of business, and many substantially
| undercut others. This is particularly true for the diesel
| market, where OTR truck operators are more price
| sensitive. Most stations are buying gas around similar
| prices at the terminal, but their overhead to provide the
| station can vary wildly between large chains and small,
| family owned stations.
|
| "Skimmers" (drastically lower-priced diesel stations) are
| a real threat to larger chain stations. They don't put
| them out of business entirely for a number of reasons,
| but one is because gas stations ultimately sell more than
| gas/diesel (e.g. a clean bathroom is often worth a few
| extra cents per gallon for me, but there's a lot more
| than that too). Also any given station can't sell an
| infinite amount of fuel. Beyond tank capacity, wait times
| are a real impact on sales volume, and so if a station
| offers a price too low (even if still profitable), it is
| just leaving money on the table.
|
| So not to say collusion doesn't happen, but one can also
| arrive at similar pricing with a commodity like gas
| without it. Especially since fuel margins are typically
| low.
| AceyMan wrote:
| The theory is correct, but the example is not the best:
| petrol prices are not as elastic as you'd think.
|
| If I need to make a left turn across traffic or go around
| the block I'm not topping off at a station just for 5
| cents/gal. (Tho, I might make a mental note & use that
| station when I'm coming down the other way, when it's easy
| to in & out.)
|
| Los Angeles in particular is crazy. We have the equivalent
| to micro-climates with fuel prices. Stations a half mile
| apart can be 30C/ different. Stations a town apart can be
| 70-80C/ different.
|
| And there are a couple of stations in Beverly Hills
| adjacent that are ~$2.50 more than the going rate (no
| surprise there, tho).
| jasode wrote:
| _> , a gas station isn't going to look at a competitor
| selling gas at $4.15 and decide to raise their price to
| $4.45. They would lower their price to match the competition,
| otherwise they'd lose sales and make less money._
|
| But the airlines are also doing the opposite of your
| scenario: they also _raise prices_ instead of lower them via
| legal "price signaling" via publicized fares[1] in the
| global reservations system.
|
| Competitors can _converge on a higher price_ instead of a
| lower price. It 's not just one direction. They just need to
| do it via public price signaling to stay out of legal
| trouble.
|
| In 2022, Apple Music raised their subscription from $9.99 to
| $10.99. Spotify then followed them and also _raised their
| price_ to $10.99. By 2023, they both converged on $10.99. I
| think right now in 2024, Spotify is $1 higher at $11.99.
| Nobody should be surprised if Apple Music also raises its to
| $11.99.
|
| [1] https://www.google.com/search?q=It+is+now+common+for+an+a
| irl....
| bogwog wrote:
| > Competitors can converge on a higher price instead of a
| lower price. It's not just one direction. They just need to
| do it via public price signaling to stay out of legal
| trouble.
|
| I don't understand what you're saying. Are you saying that
| companies _are_ colluding, but not really because the
| prices are public? Most prices are public, just walk into
| any supermarket or open Amazon.com and you 'll see public
| prices. If a company bases their price on a competitor's
| price, that's not collusion, that's just a pricing
| strategy. If a company is able to price a product above
| their competitors and still succeed (e.g. by investing more
| in marketing), that's legal too.
|
| > In 2022, Apple Music raised their subscription from $9.99
| to $10.99. Spotify then followed them and also raised their
| price to $10.99. By 2023, they both converged on $10.99. I
| think right now in 2024, Spotify is $1 higher at $11.99.
| Nobody should be surprised if Apple Music also raises its
| to $11.99.
|
| Streaming is not an example of a healthy market IMO. I
| don't know the economics of it all, but I know all the
| streaming services need to pay the same record labels.
| Whatever is going on there, it's weird that they all cost
| the same. I currently pay $10.99/month for Tidal, which is
| the same exact price as most other services. I wouldn't be
| surprised if there was collusion going on there, maybe even
| something like RealPage behind the scenes. There's also the
| factor of Apple and Google's monopolies over apps, and I
| wonder if undercutting Apple/Youtube is bad for business.
|
| > But the airlines are also doing the opposite of your
| scenario: they also raise prices instead of lower them via
| legal "price signaling" via publicized fares[1] in the
| global reservations system.
|
| The link you posted seems to be a google search page? Not
| sure what you meant by that.
| ang_cire wrote:
| > If a company is able to price a product above their
| competitors and still succeed (e.g. by investing more in
| marketing), that's legal too.
|
| Yes, but it also runs counter to the idea that free
| markets tend to drive prices down through competition. In
| reality, 1 of 2 things happens:
|
| a) companies try to differentiate their products enough
| to not be direct competitors (e.g. exclusive content on
| streaming platforms, or platform lock-in), and both/all
| charge more
|
| b) one company buys the other to kill their competition
|
| No one actually lowers their prices to compete anymore,
| because we abandoned enforcing anti-trust and anti-
| monopoly laws decades ago.
| bogwog wrote:
| Sorry, but that is nonsense and I have no idea what point
| you're trying to make. You're saying that competition
| doesn't drive down prices by giving two examples of how
| companies _avoid_ competition.
| ToucanLoucan wrote:
| > You're saying that competition doesn't drive down
| prices by giving two examples of how companies avoid
| competition.
|
| The point is that the intuitive wisdom that free market
| competition lowers prices of goods is not now, nor has it
| ever been the truism that it's postured as, _because_ the
| businesses within that market have a huge selection of
| tools and strategies at their disposal to avoid direct
| competition.
|
| And this makes sense. Why in the world would you subject
| your business to the unmediated competition of a free
| market? Yeah, it's totally _possible_ for you to create a
| product so innately better that you own the market by
| virtue of that, but that 's like... hard. It's way easier
| to create brand-lock-in to incentivize your existing
| customers to stay in your "ecosystem," or to create an
| innovative unique feature and patent it so your
| competition can't use it, or use snobby/elitist marketing
| to make your product more enticing to people who seek
| status, or shit, go the other way, make it humble and
| down to earth, and appeal to a sense of "genuineness," or
| tie yourself to patriotism and put flags all over your
| product, whatever it might be. There's tons of ways you
| can make people want your thing that have fuck-all to do
| with the thing.
|
| I think this is a serious fault in how pro-free-market
| people tend to think, which is this constant positioning
| of people as rational actors who will choose the best
| product for their needs, and it's utter nonsense. People
| buy stuff for stupid reasons constantly.
| colonCapitalDee wrote:
| No, your time horizon is too short. Prices go up in the
| short term, which increases profits, which incentivizes
| competition, which brings prices down in the long term. A
| few years of increased prices is worth increased
| efficiency over decades. Prices are going in most
| industries, US markets are generally quite competitive.
| Miraste wrote:
| Increasing profits often doesn't incentivize competition,
| especially when barriers to entry are high. Instead, it
| decreases competition by giving existing corporations
| even more money and power to use against newcomers. Look
| at what happened to Bandcamp: bought up by a music
| licensing company and gutted.
| ClumsyPilot wrote:
| > which increases profits, which incentivizes competition
|
| This is a fantasy. Give two examples of major markets
| where competition has increased recently.
|
| The US economy has grown what, 4 times since 1990's but
| the number of registered companies has fallen by half.
| Animats wrote:
| This is oligopoly. If there are less than four major
| players, price competition seems to stop. There's a EU
| study on this, which I've referenced before. More than
| four, and someone will drop their price to $8.99, grow
| their market share, and make more money. When the number of
| competitors is very small, and you already have major
| market share, it's very hard to grow market share by
| lowering prices. So price competition stops.
|
| It doesn't take collusion. It's a result of size alone.
| insane_dreamer wrote:
| > They would lower their price to match the competition,
| otherwise they'd lose sales and make less money.
|
| - they could also see their competitor raise their price to
| from $4.00 to $4.15 (for whatever reason) and decide that
| they can raise their price as well without losing customers.
| ssl-3 wrote:
| They can do both things, and both things are described by
| Edgeworth Price Cycles[0].
|
| In gas prices, there's undercutting to draw business --
| which seems natural in a free market. That's often smaller,
| local players who drive this stage, pricing things just
| below the nearby competition, but players of all sizes are
| involved.
|
| But sometimes, the price jumps up -- often by a significant
| margin, and across the board. This is often at the behest
| of a big player; when company like Exxon Mobil seemingly-
| arbitrarily raises gas prices in an area, it tends to set a
| trend. The smaller players tend to raise prices in
| accordance with this higher baseline and are happy to see
| the financial relief.
|
| This may seem counterintuitive in a competitive market, but
| it does happen anyway. And it's all temporary and cyclical,
| as we've all seen over and over again. Free markets aren't
| necessarily stable systems that are free of resonance.
|
| [0]: https://en.wikipedia.org/wiki/Edgeworth_price_cycle
| jonas21 wrote:
| If instead the 2 gas stations were both selling at $4.45 and
| looked around and decided _not_ to lower their prices to
| $4.15 even though they could, it 's equivalent.
| lukev wrote:
| Or one of them could lower to 4.35 and take all the
| business. Which is normally what would happen without
| collusion.
| BurningFrog wrote:
| I don't have a source for this, so take it as you wish,
| but as I remember what I read, duopolies can be quite
| stable. Three party cartels can go either way.
|
| But with 4 or more participants, someone will inevitably
| betray the others out of greed.
| jimbob45 wrote:
| _Price fixing would be if both gas stations decided to raise
| their price to $4.45 at the same time so that customers don
| 't have a choice._
|
| Which was the case in this instance. RealPage required
| subscribers to use their price suggestion some percentage of
| the time or they'd risk losing their subscription.
| PeterisP wrote:
| "compliance" alone is a sufficient misbehavior. No matter how
| people get to a price number, you can't have a contract or any
| other mechanism for the competitors to try and enforce the
| coordinated price, that's straight out wrong by itself.
| tqi wrote:
| What I'm having a hard time understanding is why RealPage cared
| about "compliance" in the first place - do they charge as a %
| of rent? That seems nuts, I would imagine landlords hate that.
|
| If not % of rent then I can't understand why the company would
| want rents to be higher across the board.
| ZeoVII wrote:
| IMO, because that way they can claim to landlords they get
| target ocupancy rates with the higher price; if one landlord
| in the area knows the price others get, he could try to get
| higher occupancy rate by lowering his price, aka
| "competition", by requiring "compliance" to RealPage prices,
| they are effectively coordinating and price fixing the
| market, which is the ilegal part. After all, landlords could
| see regular posing on other channels and adjust their prices
| in the "normal" way.
| lobsterthief wrote:
| Because then they can say "hey landlord, on average if you
| list through us you can charge X% higher rents than our
| competitors"
| codedokode wrote:
| Maybe they want to attract landlords to sign up, and making
| rent raise works better than any advertisement.
| andrewmutz wrote:
| I built software for this industry (not at realpage) for 10+
| years and can explain why price compliance is a big deal.
|
| The reason is that there is a fundamental principal vs. agent
| problem in the fee-based property management industry.
|
| Usually an investor buys a building and then hires a separate
| corporation called a fee-based property management company to
| manage the property. The management company gets to keep
| 8-10% of the rents that come in exchange for doing all the
| management work. (there are situations where the owner and
| the manager are the same corporation but they are less common
| and are called owner-operators)
|
| The fee-based management company and the building owner have
| different interests. The building owner wants to maximize net
| operating income, which usually means maximizing revenue. The
| fee based manager wants to maximize their earnings, which is
| the 8-10% of the rents minus paying for all the management
| work to happen.
|
| On first glance you might think these are similar interests,
| but when it comes to choosing the price they are not the
| same. If a rental price is optimal, it takes a bit of work to
| rent it out. The housing unit will sit on the market for a
| little bit and be shown to a lot of people before you find
| someone willing to pay the price. If, on the other hand, the
| price is 10% below the optimal price, it will take very
| little work to rent out and will be taken by the first person
| who comes to look at it. In this case "little work" means the
| management company can save money by paying fewer staff
| members.
|
| So, property owners want optimal prices and property managers
| want prices that are slightly lower than that.
|
| Revenue management algorithm compliance is a solution to this
| principal agent problem. The building _owner_ insists on it
| being used by the management company because he doesnt trust
| the management company to choose prices. He doesnt trust the
| management company to choose the price because they are
| motivated to lower the price in order to reduce their
| workload.
|
| High price algorithm compliance is important to realpage
| because it is how the owner makes sure the manager is
| choosing prices that maximize the owners interests, rather
| than the management company's interest. And the owner is the
| person who chooses to enforce the pricing algorithm, and thus
| the true customer of realpage when it comes to revenue
| management algorithms.
| doctorpangloss wrote:
| Yeah, but listen brother. Do you want housing prices to be
| _lower_ or _higher_? Do you want rents to be _lower_ or
| _higher_? Which is best for you? What is best for the
| country? Your experience is really valuable in the context
| of what this action is meant to address, which is a
| potentially irreconcilable political interest in low rents
| for all, high prices for some, low prices for others, which
| could be achieved many ways.
| tqi wrote:
| > the owner is the person who chooses to enforce the
| pricing algorithm
|
| Very interesting - I can't find anything about this on
| their website, but assuming that is the case I feel like
| this is the only explanation so far in this thread that
| makes sense. Other explanations in this thread (marketing,
| optimizing for all the customers) fall short to me because
| (as far as I can tell) there is no reward / punishment
| mechanism.
|
| This is not to say that the effect isn't the same though,
| driving prices up. And the other quotes from internal
| documents certainly hint that there might have been some
| awareness of this as well.
| jacobgkau wrote:
| RealPage's customers are landlords who want to maximize their
| rent prices. If some landlords look at the data and offer
| lower prices, that takes business away from the rest of
| RealPage's customers-- it makes RealPage less valuable for
| landlords and makes buying into RealPage essentially paying
| to give up valuable data that other landlords will use
| against you.
|
| Forcing compliance ensures all of RealPage's customers get to
| raise their rents while retaining their renters, which means
| landlords are making a safe bet when using RealPage-- and the
| only downside is real people paying higher rent.
| A4ET8a8uTh0 wrote:
| I think the major differentiator here is that in the examples
| provided, everyone has access ( even if it is for a price ).
| When it comes of equifac work number or realpage data, it seems
| to be available to only a subset of population, which is
| problematic. I want to know what a given corporation is paying.
| bhhaskin wrote:
| They need to go after the landlords as well. If they just go
| after RealPage there is nothing stopping landlords from doing it
| again with different software.
| bluGill wrote:
| Only if the software exists. By going after RealPage they
| ensure nobody else is stupid enough to write software this way.
| They might use software, but that software either will not have
| as much information, or it will have different information that
| they will try to claim doesn't violate the rules. The first is
| legal, but makes the cartel much harder for form. The second is
| illegal, but it is harder to figure out how to get information
| and make it seem like you are not violating the rules.
| legitster wrote:
| I am a small-time landlord. There's no "marginal cost" to
| determine how much to charge for rent. The only thing I use to
| determine the price is the current market rate. And all I have to
| do is open up Zillow or Craigslist and do a search on similar
| properties with similar characteristics. It only takes ~5 minutes
| of research to get a competitive market rate.
|
| While RealPage might command 80% of the market for this type of
| software, they only have 12,000 clients. There are over 5.2
| million multi-family dwellings in the US. It's only a monopoly in
| that they offer a very niche product. So I doubt the implication
| the justice department is making here - that RealPage is having a
| significant impact on market price through widespread collusion.
|
| Furthermore, housing is a market - nobody is "competing on
| merits". There's limited inventory, and it goes first-come,
| first-serve. Realpage advertising that it gets the best dollar
| for its clients isn't that much different than your Schwab
| account letting you know you shouldn't sell your MSFT share for
| $50. I suspect the DOJ may have trouble actually proving that
| landlords held to the price recommendations _to their own
| detriment_ to keep them high.
|
| While I appreciate the breaking up of a potential cartel here,
| and this is a software I would never use, I would hold my breath
| if I was expecting a sudden change in the rental market because
| of this. Inventory is still fundamentally limited, and unless the
| DOJ bans all market research, the going rate is still the going
| rate.
| Sohcahtoa82 wrote:
| > While RealPage might command 80% of the market for this type
| of software, they only have 12,000 clients. There are over 5.2
| million multi-family dwellings in the US.
|
| That reveals a startling statistic that 80% of the market is
| controlled by only 12,000 users. That's 433 units per user on
| average.
| legitster wrote:
| I think the better implication is that the vast majority of
| apartment owners don't bother paying for pricing software.
|
| It's worth pointing out that third-party tools like 6Sense
| assess RealPage's customer base as much, much lower (around
| 6000 paying customers).
| lcnPylGDnU4H9OF wrote:
| > I think the better implication is that the vast majority
| of apartment owners don't bother paying for pricing
| software.
|
| I don't think there's anything so far to indicate this or
| that; there's still a reasonable possibility that 80% of
| the market is controlled by large property management
| businesses.
| legitster wrote:
| This is easy to look up. There are approx 300,000
| property managers in the US.
|
| Assuming RealPage isn't lying about their number of
| active customers, they would only account for 16% of the
| industry. Obviously the numbers could be skewed wildly
| but it's still far from a monopoly.
| everforward wrote:
| The allegation would be that they have a monopoly over
| rental pricing, in which case the relevant metric is the
| percentage of rental pricing they control, not what
| percentage of landlords use RealPage.
|
| If Kroger, Walmart, and Safeway decided to collude,
| they're probably less than a percent of grocery store
| brands. They are like 95% of the grocery supply, though.
| bena wrote:
| There's two major companies in the area that rent out
| apartments.
|
| I rented from one a few years back. In my unit, there were 12
| apartments (I think). IIRC, four per floor, with three
| floors. I believe there were 8 to 12 units surrounding a
| common area in our "block". Then this "block" was a part of a
| larger group of complexes and in the area, they had five or
| six of these groups.
|
| That's around 50 - 100 units.
|
| They also had other locations. They probably manage at least
| 1000 units.
|
| The other company manages fewer, but not by much.
|
| If RealPage gets both of them, they've effectively set the
| prices for all apartments in the area.
| gunapologist99 wrote:
| > That reveals a startling statistic that 80% of the market
| is controlled by only 12,000 users. That's 433 units per user
| on average.
|
| This conflates the market _for this type of software_ with
| the larger housing market. Presumably, this software is only
| used by some large (probably mostly hedge-fund or REIT funds)
| apartment complexes. So, yeah, 80% of _that_ market, but that
| 's only a tiny amount of the overall market.
|
| The DOJ chose that number (almost certainly out of a hat,
| because there's no way to actually identify all of them) of
| 80% in order to make it seem like it's a monopoly, but
| proving at trial that RealPage or its clients controls prices
| over more than a tiny fraction of the market will be
| incredibly difficult (actually impossible, because it's
| obviously not true).
|
| However, given the DOJ's limitless funding to pursue this,
| clearly it's not after actually _winning_ at trial; it 's
| after a consent decree.
| bbatsell wrote:
| RealPage works by collating private competition data from all
| of their clients, running models to determine the highest
| possible vacancy rate for an area that will lead to the highest
| possible market rate, then telling their clients to set at that
| price and never offer discounts or reductions.
|
| In a fair market, landlords with vacancies would want to fill
| them -- they have tons of fixed costs and they can't leave
| money on the table like that. If you had trouble filling, you'd
| look at the market and adjust downwards, or offer better
| amenities, or do whatever you wanted to attract customers. The
| tension between demand and supply leads to market equilibrium.
|
| RealPage tells its clients that if they all work together to
| set their prices higher than market equilibrium, hold out for
| far longer than they normally would want or what a free market
| would lead to, then the simple inelasticity of housing demand
| -- everyone needs a home! -- means that customers will
| eventually have to give in to the higher price in order to live
| their lives, and landlords will rake in the profits over time.
|
| They use the data and actions of their clients working in
| concert in order to manipulate a fair market into a deeply
| unfair one which does not properly adjust to market forces.
| kelnos wrote:
| > _running models to determine the highest possible vacancy
| rate for an area that will lead to the highest possible
| market rate_
|
| In my view, holding units vacant intentionally in order to
| increase profit should be illegal. Vacancy taxes don't go far
| enough; landlords who do this should be forced to sell any
| units they've decided to keep vacant, or see their properties
| seized.
|
| Optimizing profit around providing people shelter (or
| avoiding doing so) is evil.
| bluGill wrote:
| That is very easy to cheat though. Two obvious ones: a
| different unit is held open every month; or these units are
| closed for remodeling. Until you get to long term 40%
| vacancy it is really hard to tell - and be careful not to
| kill rural small towns that no longer have demand and so
| apartments that will never be full anymore get torn down
| thus harming the few renters who remain (since it isn't
| worth replacing the building at current rents and many
| cannot afford the rent that a new apartment would need just
| to be worth building)
| legitster wrote:
| Again, I have experience in this market so I have first hand
| experience.
|
| I understand the cartel allegations here, but I think people
| are vastly underselling the competitive forces at play. If
| you are not filling your unit immediately, you are losing
| thousands of dollars a month.
|
| Cartels break down because of the incentive to undercut
| (prisoner's dilemma). But in this case, it would be very,
| very profitable to undercut RealPage's prices and get your
| units filled before them. So their compliance and enforcement
| mechanisms of RealPage would have to be _extremely_ robust to
| get corporations to willingly lose tens or hundreds of
| thousands of dollars a month to collectively collude on
| prices.
| redserk wrote:
| How are the forces being undersold here? A large-scale
| property management company can drastically influence the
| market without needing to fully capture it or even hold a
| majority.
|
| Let's say of a given market, 30% of all units are owned by
| a large-scale property management company using this
| software.
|
| If the prices of the 30% of those properties was
| artificially kept high, it would push renters to look at
| the 70% of other landlords whose prices were kept low as a
| result of not using this software, causing a demand on that
| part of the market.
|
| As demand rises in the 70% of open-market-priced
| apartments, I would expect these property owners to see
| that there's a bump in demand and would understandably see
| this as an opportunity to nudge prices up a bit.
|
| If your property only received 10 potential tenant
| candidates a month a year ago, and you're now seeing 14-15,
| you might be leaving money on the table.
|
| Removing the cartel claim for a moment:
|
| Say I'm at a farmers market with 4 produce stands. If one
| stand hikes their prices 40% for whatever reason,
| presumably people would start to consider visiting the
| other 3 produce stands.
|
| Why wouldn't the other stands consider raising their prices
| with the increased attention?
| bluGill wrote:
| > If you are not filling your unit immediately, you are
| losing thousands of dollars a month.
|
| This is false. If you have 100 units with monthly rents at:
| 100x$900 = $90000, 90x$1000 = $90000. 85x$1100= $93500. Of
| course we have no idea how many people will decide to not
| rent from you at different rates, but it should be obvious
| that the numbers can work out to it being better to not
| rent a few units if the price goes higher by enough as a
| result.
|
| You are correct that a cartel has incentive to defect, but
| is it enough? You are correct that this is prisoner's
| dilemma, but it is a multiple round game which has very
| different incentives from a single round. You are better
| off in a single round defecting, but you are better off in
| repeated rounds if everyone plays with the cartel and so
| they are not defecting. (or at least not too much)
| ericd wrote:
| It's enough if there's enough inventory. The only reason
| it functions is because there's not enough inventory in
| many of these markets.
| pessimizer wrote:
| > 85x$1100= $93500
|
| And don't forget that you get to write off 15 empty units
| at the presumption of a $1100/mo rate. Or Airbnb them.
| mjcl wrote:
| I worked for a public REIT that started using YieldStar
| when I worked there. Once they changed to YieldStar, all
| pricing came out of YieldStar. Rental quotes for prospects
| were only generated from YieldStar. Any deviation from the
| YS price had to be approved by the regional VP and they
| were not common.
|
| They did this because RP was able to demonstrate that
| accepting a bit more vacancy in the very near term meant
| higher rents (thus higher renewals) which more than paid
| for the additional vacancy.
| alexpetralia wrote:
| What about the counter incentive, that lowering rents
| lowers valuations, which affects creditworthiness and
| financing by lenders?
| matwood wrote:
| I generally agree with your assessment. As someone mentioned
| above though, I think the emails where RealPage is telling
| landlords not to lower prices are much more damning. It puts RP
| as the locus of collusion.
| seydor wrote:
| > they only have 12,000 clients
|
| When you perform said Zillow or Craigslist search, do you
| settle for the higher end of the range of prices or the low
| end? Realpage only needs to manipulate a relatively small
| number of listings to have a huge impact in all rent prices.
| legitster wrote:
| The lower end! I usually undercut the market rate by ~$50.
|
| My house rents for $2400 a month. If I leave it on the market
| for just a month I would lose more money than I would gain in
| 2 years at a higher rent! So the incentive is to get it
| rented out as quickly as possible and get it booked before
| the other guy.
|
| So my incentive is to be just a bit lower than the other guy
| so mine goes first.
|
| I will not deny that the market rate for housing is absurdly
| high, but it is still a market and incentives still matter.
| bluGill wrote:
| That is because you only have one or a few units. When you
| have many units the numbers work out very different for
| empty units in exchange for higher rent.
| kelnos wrote:
| > _While RealPage might command 80% of the market for this type
| of software, they only have 12,000 clients. There are over 5.2
| million multi-family dwellings in the US._
|
| Those statistics don't tell us enough to see if this is a
| problem, though. In the extreme case (obviously this is not
| true), _everyone_ uses pricing software, so RealPage 's 80% is
| 80% of all dwellings, and those 12,000 clients own 4.2M multi-
| family dwellings.
|
| Also what matters is number of _units_ , not number of multi-
| family dwellings. Owning a duplex does not give you the same
| clout over local rentals as, say, owning the only large (at
| say, 500 units) apartment complex does.
| kerkeslager wrote:
| > While RealPage might command 80% of the market for this type
| of software, they only have 12,000 clients. There are over 5.2
| million multi-family dwellings in the US. It's only a monopoly
| in that they offer a very niche product. So I doubt the
| implication the justice department is making here - that
| RealPage is having a significant impact on market price through
| widespread collusion.
|
| Well, given your only justification for your doubt is that you
| compared clients to multifamily dwellings, I gotta say, your
| doubt is pretty not founded in reality.
|
| > Furthermore, housing is a market - nobody is "competing on
| merits".
|
| Oof, bro.
|
| "Competing on merits" is the entire justification for why free
| markets are important. If you're arguing that nobody is
| competing on merits, then that starts to sound like you're
| arguing that competition isn't working here.
|
| > Realpage advertising that it gets the best dollar for its
| clients isn't that much different than your Schwab account
| letting you know you shouldn't sell your MSFT share for $50.
|
| The difference being that Schwab doesn't have the pull to
| price-fix MSFT. In cases where a single coordinates to control
| 80% of shares of a stock and then price-fix it, that is, in
| fact, illegal.
|
| > While I appreciate the breaking up of a potential cartel
| here, and this is a software I would never use, I would hold my
| breath if I was expecting a sudden change in the rental market
| because of this. Inventory is still fundamentally limited, and
| unless the DOJ bans all market research, the going rate is
| still the going rate.
|
| I agree with you that housing prices are not likely to
| drastically change as a result of this, but my reason is that
| this isn't the only price-fixing mechanism in place.
| legitster wrote:
| Competition clearly isn't working for housing. Because it's
| not a competitive market. I am just skeptical to the extent
| it is due to pricing cartels.
| bluGill wrote:
| It is a competitive market. However supply is often supply
| constrained (both by bad zoning and that some places are
| just better than others). The cartels only work because
| supply is constrained enough that they have power, if
| supply was less constrained the cartel could not raise
| prices as much (when supply is constrained you need less
| members in the first place).
|
| I support looser zoning rules as reducing supply
| constraints is the only long term way out of high rents.
| However some places are better than others and there is a
| limit to how much looser zoning can reduce prices. (I
| wouldn't live in a tiny mud hut even if it was cheap and
| legal)
| gen220 wrote:
| If we loosen zoning, and a half-dozen skyrises go up that
| are owned by a ~cartel~ group of friendly property
| developers, with X% of housing required to go to low-to-
| middle income households with a govt-required vacancy
| rate on that segment, do you think that would make rental
| prices go down?
|
| Because we've run this experiment in Downtown Brooklyn
| for the last ten years, and rent has only gone very
| significantly up.
|
| I think, at some point, you have to begin asking
| questions of the concept of nonresident landlordism and
| privately-owned massively-multifamily housing, rather
| than zoning, when changes to zoning don't actually make a
| difference to residents.
| bluGill wrote:
| A half dozen isn't much. The real question is how would
| it be different. I contend it would have been worse but
| we cannot know.
| gen220 wrote:
| I guess it was closer to a dozen if you add up all the
| smaller ones. City tower, the Death Star looking one, the
| Alexa looking one, the 3 or 4 medium sized ones on Gold
| St, the Brooklyner, the 5 or 6 medium sized ones on Hoyt,
| the One with the Apple Store, the three or four around
| Barclays Center.
|
| We're talking about residential space for 10s of
| thousands of people that completely changed the vibe of
| the neighborhood for better and worse.
|
| You don't need the counter factual to look at the prices
| they're leasing for. Or to understand that the wealthy
| folk in these buildings look down at the cutesy
| brownstones and think to themselves "oh it'd be nice to
| live in one of those next!". To realize that the influx
| of monied people and the accompanying influx of goods and
| services to pander to them induces top-end demand for the
| neighborhood and inflates rent.
|
| The kind of high-density housing we build in this country
| does not deflate housing prices.
|
| To clarify, it might be different if the neighborhoods
| surrounding this area were not majority owned by
| nonresident landlords, often the children of the original
| purchasers.
|
| Increased supply solves pricing when you have a
| competitive and free market, but the point people in this
| thread are trying to make is that housing (especially in
| urban areas) is not at all a free and competitive market.
| Landlords can afford to let an apartment lay fallow.
| However, people not only _need_ places to live, but they
| believe that they can't afford (socially, career-wise,
| whatever) to leave a set of zip codes. It leads to rent
| being a one-way ratchet that dramatically outpaces wage
| growth and inflation.
| ceejayoz wrote:
| > While RealPage might command 80% of the market for this type
| of software, they only have 12,000 clients. There are over 5.2
| million multi-family dwellings in the US.
|
| This is pretty misleading.
|
| "Greystar was the largest apartment manager in the United
| States, with over 726,826 units/beds..." -
| https://en.wikipedia.org/wiki/Greystar
|
| That's one client. (And yes, they are a client.
| https://www.realpage.com/case-studies/greystar-optimizes-
| sub...)
| myprotegeai wrote:
| CaaS - Collusion as a Service
| coding123 wrote:
| part of the issue is that Americans don't haggle prices.
| djyaz1200 wrote:
| A key problem with rent pricing is that a form of price fixing is
| imposed by fair housing law in a way that educated folks know how
| to circumvent, but many do not.
|
| When a lease is advertised at X price, it is not legal to offer
| one monthly price to one tenant and a different one to another,
| so no negotiating can occur. This also allows smart landlords to
| price fix without software because all rates are known since the
| posted rate is the rate. This inhibits true price discovery.
|
| The cheat code is to ask for free months and spread that discount
| over the lease term. However, this creates a situation where, at
| the end of the lease, the landlord has you set at the regular
| month price (or higher), and you have little leverage. Also your
| good deal is unknown to others who will continue to overpay.
|
| Attacking a software is an easy out, attacking the system that
| artificially increases rents in the whole system by outlawing
| more aggressive tenant negotiation is the hard problem.
| bluGill wrote:
| > This also allows smart landlords to price fix without
| software because all rates are known since the posted rate is
| the rate.
|
| The rates change monthly though, and smart landlords were
| already changing their rent every month.
| jmyeet wrote:
| Good.
|
| There are two new aspects to RealPage in terms of being
| anticompetitive:
|
| 1. Using information from one customer to help set prices for
| other customers. Once you hit a certain market percentage, this
| effectively allows you to set prices; and
|
| 2. If everyone uses the same software that spits out the same
| results then this is _effectively_ collusion even if it 's not
| _actual_ collusion, as in the trope of dark, shadowy figures
| meeting in a cigar-filled room.
|
| Every aspect of our life is getting financialized as companies
| seek to extract every dollar from us. You see it with PE buying
| up vet clinics en masse for example. If you've wondered why your
| vet bills have gotten so expensive, that's probably why.
|
| Anyway, using rent to squeeze every dollar from people in a way
| that raises everybody's rents with the blessing of the state
| (which has been the case until now) is _state violence_. It is
| using the necessity of shelter to cerce money from you.
|
| People in general don't see this sort of thing as violence but it
| is. Just like polie crackdowns on protests are state violence.
| underseacables wrote:
| Reading this is depressing. The best decision I ever made was
| talking to a realtor, who connected me with a good lender, and
| buying a place. It wasn't easy but continuing to assume ownership
| was out of reach, and throwing money away on a rental, in
| hindsight would have been far worse.
| bluGill wrote:
| For some people this is the right answer. However owning has a
| set of downsides that make it worse for some people. Most
| people get too dogmatic that their situation and choice is the
| right one even though there are many different situations, and
| some people are making the wrong choice. Right vs wrong choice
| can often only be seen in hindsight as well.
| nickff wrote:
| IANAL, but I am not sure that RealPage is actually violating the
| first two sections of the Sherman Anti-Trust Act. It definitely
| seems RealPage may be assisting in organizing price-fixing, and
| the word 'contract' in section one may get them in trouble, but
| they do not seem to be doing it "in restraint of trade or
| commerce among the several States, or with foreign nations", as
| rent is local, and I'm not sure that their contract with clients
| actually forces the clients to accept 'recommended rents'.
|
| https://www.law.cornell.edu/uscode/text/15/1
| https://www.law.cornell.edu/uscode/text/15/2
| Animats wrote:
| The Justice Department is being soft on corporate crime here.
| This is a willful Sherman Act violation. The Sherman Act has
| criminal penalties, but Justice is only filing a civil case. All
| that the complaint asks for is an injunction and costs. There's
| no disgorgement. No breakup of large landlords. No shutdown of
| RealPage.
|
| This is worth publicizing during election season. Rents are going
| up due to collusion.
| Animats wrote:
| Criminal antitrust prosecutions seem to have stopped in 1977.
| Unclear why they never restarted.
| js2 wrote:
| There are criminal antitrust cases[1], but they are hard to
| win. From "Why Does the Antitrust Division Keep Losing
| Criminal Trials?"[2]:
|
| > Even in the best of circumstances, prosecuting criminal
| antitrust cases can be challenging. They require a deep
| understanding of a particular market and proof beyond a
| reasonable doubt that the defendants entered into an illegal
| agreement. His- torically, the Division relied on multiple
| witnesses to testify that an agreement, or "meeting of the
| minds," existed. There is often a thin line between lawful
| information-gathering and unlawful price-fixing, making it
| difficult for jurors to understand what, exactly, constitutes
| criminal conduct. One former Antitrust Division attorney went
| so far as to say that juries "don't like to convict in
| antitrust cases" because they view violations as "technical."
| Another recalled seeing jurors appear shocked when they
| learned during trial testimony that an antitrust conviction
| carries a maximum sentence of 10 years in federal prison. An
| attorney who interviewed jurors after one trial said that
| some jurors expressed anger that the Division was expending
| resources to prosecute these cases at all.
|
| [1] https://www.justice.gov/atr/criminal-enforcement-fine-
| and-ja...
|
| [2] https://www.americanbar.org/content/dam/aba/publications/
| ant...
| Animats wrote:
| That's a great article. Most of the problems mentioned
| don't apply to landlord price-fixing. That's an issue
| jurors can understand. There's a large class of
| identifiable victims. The collusion is easy to show.
| treyd wrote:
| It feels like antitrust law needs an update now that we
| have computers that let us move the collusion one degree
| away fairly easily. It's still price fixing even if you
| don't know the names of the parties you're collaborating
| with.
| ungreased0675 wrote:
| Hopefully the DoJ (metaphorically) puts the company's head on a
| pike, as a warning to others. Businesses that use technology to
| make life worse for the public should tread cautiously.
| Ekaros wrote:
| Not just the company. Also all of it customers who have
| followed their recommendations. All of them should be hit
| extremely hard.
| __MatrixMan__ wrote:
| They should take a page out of the FBI's book: leave the software
| up as a honeypot, sue the users into oblivion, and use the
| proceeds to fund further antitrust operations.
|
| Otherwise we're just going to end up with the same software back
| from the grave, but with no company behind it to sue this time.
| 1vuio0pswjnm7 wrote:
| Shooting fish in a barrel.
| vinnyglennon wrote:
| Howmuchrent.com is trying out rental transparency to show rental
| prices historically, cout cases plus reviews by tenants etc. For
| Ireland currently, which has most of the populated areas under
| rental control
| EasyMark wrote:
| This is definitely one of those companies I would love to see be
| completely taken down. We need to revise monopoly and cartel laws
| because I suspect the current Supreme Court will not see eye-to-
| eye with the DOJ on this as they are strict textualists now. If
| the law doesn't say "cartel by intention of digital equivalency"
| or something else descriptive I don't think SCOTUS will bite any
| longer or apply common sense interpretation as any good judge
| should.
| oconnore wrote:
| I am excited and optimistic that we appear to be applying
| economic principles to housing! Now that we're getting rid of
| centralized price controls / collusion, next can we do
| supply/demand?
| pstuart wrote:
| On the demand side it would be nice to keep PE firms from
| hoovering up all the single family homes.
|
| https://www.thesling.org/are-hedge-funds-and-private-equity-...
| candiddevmike wrote:
| Would be interesting to see what would happen if renters had
| the option to buy the underlying property/unit somehow after
| being a tenant for a certain time.
|
| The goal should be ownership for folks who want it, not a
| nation of renters.
| Loughla wrote:
| You can rent your home with x% profit, but after x # of
| years the home sells to the renter.
|
| I like it but that seems like a system VERY susceptible to
| abuse.
| mcmcmc wrote:
| You can bet landlords would be doing everything possible
| to force renters out just before the purchase window
| comes open.
| gs17 wrote:
| That's definitely an issue, even if constructive
| evictions can be prevented, landlords would also have to
| be forced to renew leases (at limited rent increases).
| bilbo0s wrote:
| One small catch, maybe even a constitutional hold up?
|
| It's not really your home if you are obliged to sell it
| after x years.
|
| The traditional societal compact with private property is
| that the property is yours for as long as you choose to
| keep it. (Providing you pay the taxes covering the costs
| to provide municipal services to your property.)
|
| This kind of changes that, and I'm not sure it would
| stand up to constitutional scrutiny?
| candiddevmike wrote:
| No one is forcing you to rent it
| bilbo0s wrote:
| Again, traditionally, renting your property on terms an
| owner unilaterally determines was seen as a right of
| owning private property. Provided you're able to find a
| renter who agrees to your terms, and provided your terms
| are legal, you were allowed to rent your property, again,
| forever. For instance, it was perfectly legal to rent
| your apartments for USD1500 per month, and at the same
| time, allow your kid to stay in one of the apartments for
| free and give a USD500 a month break to a long term
| renter who maybe lost his job. It was your property, so
| whatever terms you had with each renter was very much
| considered to be your business. (Again, within the bounds
| of legality. You can't be asking for a cut of the drugs
| dealt out of your apartment as a condition for instance.)
|
| Unless I'm misunderstanding the proposal, this would
| change that practice. You would be told how much you
| could rent the property for, as well as the date you
| would need to sell the property. (Which, I'm guessing,
| would be based on the rent amount?) So a radical change
| from before in terms of private property rights.
| pc86 wrote:
| Forcing people to sell private property against their
| will is generally a pretty bad economic policy.
| SoftTalker wrote:
| All they have to do is offer the owner an adequate price.
| duped wrote:
| The problem is they can't give the owner an adequate
| price when they're paying for the owner to grow more
| equity in the property while also needing to save at a
| faster rate to afford a downpayment on a mortgage.
| SoftTalker wrote:
| Then they are renting something they can't afford, if
| ownership is their goal.
|
| When I was saving for my first house I lived in a crappy
| little 1 bedroom apartment for a few years so that I
| could get a down payment together. I had the income to
| afford renting a larger apartment or a house in a nicer
| area but I would not have been able to save anything.
| ebiester wrote:
| When was this?
|
| Have you paid attention to the percentage of wages
| required for a unit nationally? In your area?
| JumpCrisscross wrote:
| > _Have you paid attention to the percentage of wages
| required for a unit nationally? In your area?_
|
| Roommates.
| ebiester wrote:
| I too had roommates coming up. People today have
| roommates coming up. That doesn't change the fact that
| even with roommates, the burden is disproportionately
| higher than it was for the last generation, particularly
| with housing.
|
| Median household county in my area is about $55,000 a
| year. The median price of a house is $450,000. Assuming
| two people, the 50th percentile wage is equivalent of
| $14/hour. (This as an eyeball looks pretty close to a
| median wage.) Fair market rent for a 2 bedroom apartment
| (40th percentile) is 1500, or 32% of income.
|
| If you let everyone get their own bedroom? For a below
| median two bedroom apartment, they will barely be able to
| afford the place.
|
| A 4 bedroom place is $2500, so you're going to get about
| 100 dollar discount, but that all gets wiped out if one
| of your roommates leaves and you can't find a
| replacement. The more people sharing a space, the more
| risk there is.
|
| It's tougher out there right now if you're not on an
| engineer's wage.
| JumpCrisscross wrote:
| > _doesn 't change the fact that even with roommates, the
| burden is disproportionately higher than it was for the
| last generation, particularly with housing_
|
| Oh totally agree. Just pointing out that a straight
| comparison of wages to home prices doesn't dictate
| unaffordability.
| SoftTalker wrote:
| If you are saving a down payment for a house you need to
| be spending far less than "32% of income" on your current
| rent. You need to move farther out, find a
| smaller/shittier place to live, be frugal with everything
| else, and/or increase your income. This has always been
| the case, unless you are earning well above average
| income.
| duped wrote:
| That's a very different situation than the one you
| initially replied to. It's also not something everyone
| can do.
| andrewaylett wrote:
| There's nothing _actually_ wrong with renting, if there 's
| enough supply to stop profiteering by landlords.
|
| What's frustrating is when (as appears to be obnoxiously
| common in the UK) affordability requirements for mortgages
| mean someone "can't afford" to buy _even when their
| mortgage payments would be less than their current rent_.
| While the landlord probably has an interest-only mortgage
| and doesn 't pay tax on their mortgage payments.
|
| Here's a thought: tax landlords based on their self-
| assessed property value, but make it so that the tenant has
| the right to buy the property for that amount.
| tantalor wrote:
| You can't just ban them. Where there is profit to be made,
| they will find a way around any regulation.
|
| You have to change the structure of the market so they no
| longer see these investments as profitable.
|
| One way local areas do this is by "homestead tax exemption"
| which reduces property taxes if you live in your own home,
| but this is binary and punishes small landlords equally as
| big ones.
| notatoad wrote:
| > which reduces property taxes if you live in your own home
|
| My town is experimenting with allowing this exemption if
| anybody claims the address as their primary residence,
| whether it is the owner or not. The main purpose is to cut
| down on people keeping vacation homes, but it should also
| make things more expensive for flippers and speculators.
|
| Small landlords are no better than big ones if they're
| keeping properties empty.
| SoftTalker wrote:
| Those taxes just get added to the rent charged.
| chasebank wrote:
| Indeed they would, however, the underlying asset value
| would drop to allow for market rents. That's the point.
| pc86 wrote:
| In a free market, yes. But not when the demand is so
| artificially constrained. Rents go up and people are
| forced to either pay a higher percentage of their income
| to rent, or move farther away.
|
| Housing is not a free market by any stretch of the
| imagination, so if you just move one lever you don't
| always get the response you would in a true free market.
| debacle wrote:
| It's a complex problem. Some landlords are great, keep nice
| homes, and take care of the property. Some homeowners are
| absolute slobs, and don't take care of their properties.
| But, in general, "landlord" quality is considered the
| lowest level of effort/materials for maintenance.
|
| Once an area reaches a certain % of landlords (no idea the
| actual %, but it's low), it leads to a general decline of
| the neighborhood. These landlords are buying starter homes
| (apartments and houses) whether they are PE companies or
| individual landlords, driving up the cost of "cheap"
| housing.
| chongli wrote:
| It has to be binary, doesn't it? If it's some sort of
| progressive scheme with tax brackets based on number of
| properties owned then PE will find a way to structure their
| holdings so that each legal entity only owns a single
| property. The only way to prevent that is to mandate that
| the owner of the property be an individual (not a business
| or trust) who resides on that property for more than 183
| days per year.
| lupusreal wrote:
| Lots of profitable activities are banned and the bans are
| generally quite effective. For instance, selling cigarettes
| and liquor to children.
|
| Now you might say those bans aren't 100% effective, but why
| do they need to be 100% to be justifiable?
| naltroc wrote:
| can we please.
| Analemma_ wrote:
| These PE firms specifically say in their SEC filings that the
| most credible threat to their business model is
| municipalities removing restrictive zoning regulation and
| allowing the natural rate of market-rate housing to be built
| (0, 1). You can foil their schemes and bankrupt them by
| electing officials who are pro-development.
|
| [0]: https://d18rn0p25nwr6d.cloudfront.net/CIK-0001687229/a15
| 4763..., ""We operate in markets with strong demand drivers,
| high barriers to entry, and high rent growth potential,
| primarily in the Western United States, Florida, and the
| Southeast United States."
|
| [1]: https://www.sec.gov/Archives/edgar/data/1562401/00011931
| 2513..., "The continuing development of apartment buildings
| and condominium units in many of our target markets increases
| the supply of housing and exacerbates competition for
| tenants."
| rcpt wrote:
| You do that by building enough houses to make housing
| unattractive to investment firms
| codedokode wrote:
| There is never enough houses, or they are located in the
| middle of nowhere thousand of kilometers from nearest
| subway station or supermarket.
| alistairSH wrote:
| You're assuming everybody wants/needs a single family
| with a yard.
|
| SFHs _should_ be expensive and considered a luxury. At
| least in a desirable urban /suburban location.
|
| We could/should/must provide more housing in those
| desirable areas, but it likely should be a mix of high-
| rise, mid-rise, small apartment units (which could be
| owner-occupied or rentals), duplexes and triplexes, and
| row-homes/townhomes.
| bunderbunder wrote:
| Alternatively, we adjust the tax code to reflect the
| instinct that people should deserve to keep a larger
| percentage of money when they actually worked to earn it,
| and that income that's essentially free to people who
| already have lots of money should maybe be taxed at a
| higher rate.
|
| I realize this is a spicy take, but we've really got to get
| away from this thing where we advantage passive income for
| wealthy landowners. It didn't work out well for society in
| enlightenment-era France, it didn't work out well in
| Victorian England, it didn't work out well in Tsarist
| Russia, and I'm not convinced that removing birthright
| qualifications and primogeniture makes all _that_ much more
| equitable in the modern USA than it did in any of those
| periods that we tend to look back on as being indefensibly
| elitist.
| enriquec wrote:
| Or stop stealing everyones money through inflation?
| bunderbunder wrote:
| All models are wrong. But the model that suggests that
| inflation is directly controlled a knob that policymakers
| can turn on a whim is incredibly useful to the people who
| stand to profit the most from deflationary policies.
| duped wrote:
| To be fair, the income isn't "free" and the margins are
| basically zero for small-time property owners on the rent
| itself. The bulk of the income comes from appreciation in
| value of the real estate, and when you sell you owe
| capital gains taxes (which are exempt on sales of a
| primary residence). And in most places the property taxes
| are higher, for my home it's about 15% higher.
|
| I only know this because I have been preparing to rent my
| primary residence to see if it's more economical to sell
| today or hold and sell later, while renting. The answer
| is the latter, but in terms of real cash I will be in the
| red for about 2 years until the (very small) difference
| in mortage + insurance + taxes + upkeep and the rent will
| be profitable. And even then, it's maybe $150/month.
|
| All told it's a slightly better investment than S&P 500
| index funds, but resistant to downturns. But it's not a
| real source of passive income, you don't get your cash
| out for years.
| bunderbunder wrote:
| It sounds like you're looking at it from the perspective
| of someone who's wealthy enough to take on a few rental
| properties of their own. The economics start looking
| rather different from the perspective of a real estate
| speculation hedge fund. The same forces that make it such
| easy money for them are also the ones that make it not
| such easy money for you. When they drive up prices it
| curtails any more liquid form of asset growth you might
| have by pulling all the money over to the on-paper value
| of the property. That's fine for them because real estate
| is still pretty darn liquid from the perspective of hedge
| funds and REITs. But it's not very liquid at all from the
| perspective of a small-time landlord who needs to
| actually look their tenant in the eye and tell them
| they're facing eviction because the owner of their home
| needs to free up some spending money. This, in turn,
| helps them by creating barriers to entry that push
| smaller competitors out of the business and securing
| their place in the oligopoly they're trying to engender.
| duped wrote:
| The actual number of residential properties owned by
| hedge funds is a pittance compared to the number owned by
| individuals and small time land lords. So I have a hard
| time seeing how they're pushing smaller competitors out
| of the business when the smallest competitors aren't even
| doing it as a business.
| hn72774 wrote:
| While we are at it, make it easier for mom-and-pop landlords
| to rent out their homes so that they can compete with the
| resources of PE firms. Too many renter protections where I
| live and the consensus is don't ever try to be a landlord
| here. One bad tenant/squatter can bankrupt you.
| HeatrayEnjoyer wrote:
| Let's find a solution that doesn't poke even more holes in
| what little social safety net the US has.
| hn72774 wrote:
| One could argue that a owner of one single family home
| that could be turned into a rental loses out on the
| social safety net of diversified income and someday
| retirement, and is subsidising renters on the
| government's behalf.
|
| Most of us are a couple events of bad luck away from
| homelessness. Mon-and-pop landlords included.
| no_wizard wrote:
| Land Value Tax[0] is the way. It strongly incentivizes the
| following:
|
| > _The owner of a vacant lot in a thriving city must still
| pay a tax and would rationally perceive the property as a
| financial liability, encouraging them to put the land to use
| in order to cover the tax. LVT removes financial incentives
| to hold unused land solely for price appreciation, making
| more land available for productive uses. Land value tax
| creates an incentive to convert these sites to more intensive
| private uses or into public purposes._
|
| The entire purpose of a land value tax is to encourage the
| productive use of land, which boils down to either building
| stuff on it to make it more productive or selling it to
| someone else so they can largely do the same.
|
| Otherwise it is a simple tax burden to hold. While extremely
| wealthy individuals may choose to do this, its unlikely that
| businesses (like PE firms) are going to let their tax
| obligations stack over time and hold empty land / buildings
| etc. Same goes for individuals who are taxed at wildly
| different rates (like in California with Prop 13) simply
| based on time of sale
|
| [0]: https://en.wikipedia.org/wiki/Land_value_tax
| enriquec wrote:
| This has already failed. The bay area is full of empty land
| and buildings owned by firms and a horrific housing
| situation. Doesn't stop the statists from proposing yet
| more tax for every single problem though.
| kmeisthax wrote:
| California doesn't count because they have a de-facto
| landed gentry.
|
| In 1978 they passed a ballot initiative[0] that locks in
| property tax rates until a home is sold or renovated.
| This was further amended[1] to allow generational
| transfers of those rates. The end result is an extreme
| disincentive to sell land and a class of homeowners with
| favorable tax treatment who want the state to be coated
| in amber. Any market intervention is useless without
| addressing the harms caused by the current property tax
| regime and the people who benefit from it.
|
| [0] https://en.wikipedia.org/wiki/1978_California_Proposi
| tion_13
|
| [1] https://en.wikipedia.org/wiki/1978_California_Proposi
| tion_13...
| no_wizard wrote:
| California does not have a land value tax, even
| attempting to study the effects of a land value tax
| failed[0]
|
| [0]: https://www.billtrack50.com/billdetail/1555689
| kstrauser wrote:
| Getting rid of the law of supply and demand is like getting rid
| of Boyle's law. Legislate whatever you want but the behavior
| those laws model will still exist.
|
| I prefer to think of it this way. I like my markets free as in
| GPL, not free as in BSD. That is, I want the market itself to
| be free with limitations on the participants that keep them
| from taking it for themselves.
| colechristensen wrote:
| Uh, you're reading the wrong thing about it. Fixing supply
| and demand means things like punishing vacancies with
| taxation, promoting construction with tax breaks, and
| removing the demand by severely limiting rent seeking real
| estate investors.
| kstrauser wrote:
| Are you sure that's what they meant? I'm completely on
| board with everything you describe (and liberating the
| market from the people monopolizing it for their own
| benefit). I've heard way too many people arguing that we
| should do away with supply/demand, as though it were a
| regulation we should repeal, and didn't understand it as an
| inherent property of the system.
| pchristensen wrote:
| And promoting construction by making it legal to build
| housing. Probably the biggest, most direct action that
| could be taken.
| kstrauser wrote:
| Amen.
| BeetleB wrote:
| I follow the RE space, and have done some RE investments
| (albeit mild ones - I don't own homes to rent or anything
| like that).
|
| > punishing vacancies with taxation
|
| Outside of tourist spots, this will hurt more than it will
| help. Most RE investors lose money on vacancies (it's
| literally a line item in their expenses) and work hard not
| to have them. They definitely do _not_ make more money by
| artificially limiting supply that way. I assume you 're
| targeting rich folks who own multiple homes (and do not
| rent them)? They're what - less than 5% of all vacancies?
| Perhaps less than 1% in many cities?
|
| Almost everyone I know who purchases houses/apartments to
| rent them would get out of the business if vacancies were
| taxed - they operate these properties on a narrow margin -
| most of their "profit" is due to depreciation benefits and
| gaining equity from the payments the renters are making
| (and in a minority of cases, property value growth).
|
| It may sound like if they sell, that's a good thing (more
| people can buy their offloaded property), but a lot of
| houses would also go out of circulation, because these
| people often buy distressed homes that banks won't give a
| loan on - and they renovate them, bring them up to code,
| etc.
|
| I suppose if you could tax vacancies only for those that
| are not trying to rent them - sure. I'm on board.
|
| > promoting construction with tax breaks
|
| There are plenty of these, although it varies from location
| to location. But it's a pretty common RE investment
| strategy to go for these, as the tax savings can be very
| significant. People pool their money for a down payment on
| a construction loan (be it for an apartment complex or
| office building), build it, and are required to hold it for
| a number of years to get the tax breaks.
|
| Of late, the push has been in the _other_ direction -
| states /cities are removing some of these tax breaks - not
| sure why - perhaps they weren't as effective as they
| thought?
|
| > and removing the demand by severely limiting rent seeking
| real estate investors.
|
| There are ways to do this that may not be popular. The main
| one would be to remove fixed interest mortgages. Most
| developed countries don't have them - that's why plenty of
| foreigners buy in the US market.
|
| Another is to allow property taxes to track actual property
| values (i.e. remove the cap on increase in property taxes).
| You can imagine how unpopular this will be for SF
| residents.
|
| Remove tax benefits like bonus depreciation or accelerated
| depreciation.
|
| Remove tax benefits that allow one to count RE losses
| against their W-2 income (it's tricky to do it, but
| possible for AirBnB investors).
|
| Basically, just remove most tax benefits :-) The majority
| of RE investors get in it for tax benefits, not
| appreciation, and not that much even for cash flow (cash
| flow is fairly pathetic in most cases - getting $200/mo is
| considered good).
| gs17 wrote:
| > because these people often buy distressed homes that
| banks won't give a loan on - and they renovate them,
| bring them up to code
|
| There could easily be exemptions to a vacancy tax to
| allow for, or even encourage, renovating a home.
| pc86 wrote:
| Taxes on vacant rental units means they'll be sold
| sooner, and increases the odds they'll be sold to an
| occupant instead of a speculator. I am a capitalist above
| basically anything else but that sounds great to me (and
| I already own a home and will likely never move again).
|
| > Almost everyone I know who purchases houses/apartments
| to rent them would get out of the business if vacancies
| were taxed
|
| Yes, you've successfully articulated the point. In an
| actual free market where supply can be added easily with
| minimal headache, buying an asset to rent it back is
| perfectly fine. In something like the housing marketing,
| buying a home specifically to rent it out is bad whether
| it's one unit or one thousand because supply is already
| artificially constrained. The end of that line is
| BlackRock buying up thousands of homes and materially
| hurting Americans. The fact that some random person with
| a few million in inheritance can make money in the
| interim is irrelevant.
|
| > but a lot of houses would also go out of circulation,
| because these people often buy distressed homes that
| banks won't give a loan on - and they renovate them,
| bring them up to code, etc.
|
| It's pretty easily to exclude vacant homes with open
| permits that are actively being renovated or with 203(k)
| loans, or to provide revenue-neutral tax breaks. This is
| a legitimate criticism but it means you address the
| criticism, it doesn't mean the original goal is bad or
| impossible.
|
| > There are ways to do this that may not be popular. The
| main one would be to remove fixed interest mortgages.
|
| We should definitely remove fixed-interest mortgages for
| non-owner occupied purchases.
| colechristensen wrote:
| >> Almost everyone I know who purchases houses/apartments
| to rent them would get out of the business if vacancies
| were taxed
|
| >Yes, you've successfully articulated the point.
|
| And the goal. Why raise taxes on vacancies? To push out
| owners whose primary goal is to leach out a few
| percentage points above loans they can get or to sit on
| property while it appreciates in value (while harvesting
| tax benefits on the depreciation of the structures they
| maintain to a minimum because _margins_)
|
| There just shouldn't be a class of people whose business
| is harvesting tax benefits and arbitrage of trust by
| banks.
| BeetleB wrote:
| > We should definitely remove fixed-interest mortgages
| for non-owner occupied purchases.
|
| Just as with single payer health care: While it works
| very well in other countries, people in the US will
| insist it will fail here. :-)
| JumpCrisscross wrote:
| > _Most RE investors lose money on vacancies (it 's
| literally a line item in their expenses) and work hard
| not to have them_
|
| Plenty of landlords would rather a unit in a building go
| empty for longer than compromise on rent in a way that
| weakens their negotiating position with the other units.
| (Also, with lenders.)
|
| The argument for taxing vacancies is city taxes are often
| set on the assumption of occupancy. A vacant unit doesn't
| contain a tax-paying worker. The vacancy tax adjusts for
| that.
|
| > _Remove tax benefits like bonus depreciation or
| accelerated depreciation_
|
| Agree.
| colechristensen wrote:
| >Also, the argument for taxing vacancies is city taxes
| are often set on the assumption of occupancy. A vacant
| unit doesn't contain a tax-paying worker. The vacancy tax
| adjusts for that.
|
| Also important for commercial vacancies. The rent is too
| high, costs for commercial goods and services (and
| especially food and entertainment) is inflated by
| inflated rent so restaurants and consumer businesses
| can't stay open because they can't afford to pay the rent
| and lower prices to attract customers at the same time.
| And yet a huge proportion of the commercial space is just
| empty.
|
| A vacancy tax makes up for that missing tax revenue from
| a running business and also just raises the quality of
| life for the people of your city by giving them
| opportunities for things to do and lowering the bar for
| entry into running a business.
| gs17 wrote:
| >Plenty of landlords would rather a unit in a building go
| empty for a little longer than compromise on rent
|
| Yep, I watched my last apartment (which I left partially
| because the rent went up to an unreasonable price) sit
| vacant for several months and laughed at how he could
| have made much more money if he compromised slightly on
| rent (which he seems to eventually given in to, so his
| greed only served to lose him money and not get the price
| he wanted).
| kstrauser wrote:
| Our previous landlord evicted us to "rent it to her
| sister". We saw it listed for rent at a higher price soon
| after, and then it sat empty _for 4 years_. That did my
| heart good.
| BeetleB wrote:
| > Plenty of landlords would rather a unit in a building
| go empty for longer than compromise on rent in a way that
| weakens their negotiating position with the other units.
| (Also, with lenders.)
|
| In my experience: A tiny minority (for housing - not sure
| about commercial). This is one of those cases where
| selection bias applies. As most landlords really hate
| vacancies, the ones you _do_ see are the tiny few that
| don 't. And because they let them be vacant for months,
| it adds to the selection bias. They perhaps own most/all
| of the property, so the vacancy cost is miniscule (only
| property tax).
|
| I do know the bulk of landlords are fussy about the type
| of consumer they get (e.g. decent credit rating, etc),
| and will allow for longer vacancies to get them - the
| rationale being that a bad occupant costs more than the
| vacancy charge - especially in tenant friendly states
| like California (extremely expensive to evict).
|
| Keep in mind - the bulk of them don't own the properties
| outright - they are paying a loan. In a place like where
| I live, they may need to pay $2000/mo on a property that
| they rent out for $2300/mo. That $300/mo is a very slim-
| to-nonexistent profit margin once you account for costs.
| If it goes vacant for a month, they are losing over 6
| months of net revenue. When you factor in the costs, it
| may well be closer than a year's worth of gain. The
| property doesn't appreciate much here, so they're not
| gaining in that fashion. Now when an eviction takes 4
| months to execute, you can do the math on how they may
| prefer a 1 month vacancy to a bad tenant.
|
| Really: Get rid of fixed interest mortgages and you'll
| discourage rent seeking behavior. Most are playing the
| long game: They'll accept a net loss of, say, $100-200/mo
| because they know their costs are (relatively) fixed, and
| in, say, 5 years the rents will have gone up enough to
| break even or yield a small profit. Keep it up for the
| next 30 years and they've made good money (and had a
| tenant pay for all the equity).
|
| If you want to discourage rent seeking, discourage the
| main incentive: The cheap loan.
| JumpCrisscross wrote:
| > _A tiny minority_
|
| Of landlords altogether, sure. Counting by unit in high-
| demand locations, unclear.
|
| > _property doesn 't appreciate much here_
|
| You're describing a stable housing market. Those aren't
| where RealPage is accused of making mischief.
| mcmcmc wrote:
| This is moronic. Economic theory is a self-reinforcing veneer
| of soft science studying observed human behavior with wild
| variance between different cultures, geographic markets, and
| individual people.
|
| The "laws of supply and demand" are not empirical laws of
| physics. They are general principles with well-known
| exceptions and flaws of their own. You should lay off the
| microdosing.
| enriquec wrote:
| to anyone even remotely studied in economics - this is
| astoundingly ignorant. And the hubris is incredibly
| cringey. Please provide a counter example to the soft
| science law of supply and demand?
| JumpCrisscross wrote:
| > _" laws of supply and demand" are not empirical laws of
| physics_
|
| Game theory is mathematics, not science. You can derive the
| basics of supply and demand from game theory.
|
| Economics is a soft science. But so is history and, I'd
| argue, a good deal of computer science.
| warkdarrior wrote:
| > You can derive the basics of supply and demand from
| game theory.
|
| You can derive supply and demand from game theory once
| you make some assumptions about preferences, costs,
| rationality of players, etc., all of which are non-
| mathematical, mostly empirical concepts.
| kstrauser wrote:
| Supply & demand is such a basic emergent property of, well,
| anything involving life as we know it, that I have a hard
| time imagining opposition to it.
|
| If a vendor anywhere in the world has more stock than their
| customers want, the price goes down. If more people want it
| than the vendor can provide, the price goes up. If there's
| more food than animals that want to eat it, animals eat
| their fill and the rest rots. If there are more animals
| than food, each spends increasing effort developing
| strategies to get more than their neighbors.
|
| Now, if someone claims they can prove that demand
| increasing by X results in prices increasing by exactly Y,
| I'm with you. There are too many variables to make that
| predictable. But the basic idea behind it? That's pretty
| fundamental.
| pchristensen wrote:
| Microeconomics (including supply, demand, elasticity, etc)
| is pretty reliable. Macroeconomics has a lot of uncertainty
| and social science squish.
| NegativeLatency wrote:
| On the supply side Strong Towns is pretty interesting:
| https://www.strongtowns.org/housing
| SoftTalker wrote:
| I live in a town where all the officials express politically
| popular laments about the affordability of housing, but every
| time a developer wants to build apartments or tear down some
| old run-down post-war cookie-cutter houses for modern duplexs
| or tri-levels these same officials run them through a gauntlet
| of demands and then often as not end up denying the permits.
|
| They say they want dense, walkable, core neighborhoods but when
| people actually try to build denser housing it's like pulling
| teeth.
|
| There actually is _some_ building happening but the demand is
| so far ahead of the supply that it 's not nearly enough.
| FireBeyond wrote:
| > I live in a town where all the officials express
| politically popular laments about the affordability of
| housing, but every time a developer wants to build apartments
| or tear down some old run-down post-war cookie-cutter houses
| for modern duplexs or tri-levels these same officials run
| them through a gauntlet of demands and then often as not end
| up denying the permits.
|
| Hah, in my town, the developers and officials are all best
| friends, posts all over Facebook, going to each other's kids
| soccer and football games, going on vacation together, going
| out fishing together...
| vipshek wrote:
| Which state is your town located in, out of curiosity? I'm
| trying to build a mental rolodex of which states have towns
| that are development-friendly.
| FireBeyond wrote:
| Washington. But it also I think depends on which
| developer you are - seems like two developers here have
| 90%+ of the new developments.
| bilbo0s wrote:
| That's not most municipalities though.
|
| There are a lot of places, particularly the high demand
| places, where the cost of acquiring the houses in the first
| place is the hang up. Everyone is certain they can get half a
| mil minimum. That drives costs considerably when you need 1/2
| a block, or a full block for high density development. It's
| not easy. You could even have to end up giving the current
| land owners some preferential share of the finished
| development. Which, of course, means there's less profit for
| other potential partners at the end.
|
| People ask, why are apartments so expensive? In high demand
| areas, that's a big part of the reason. Land acquisition
| costs were so high that it precludes building anything that
| can offer that <USD3000 a month price tag. (And to be honest,
| that's not even all that affordable really. But it
| illustrates how the numbers on a lot of these new
| developments work out.)
|
| Usually the municipality or the state has to step in with
| some kind of break in order to make the numbers work out. And
| that's when we get to the step you're talking about where the
| state or the municipality demands this or that or the other.
| But the politicians have to demand something for the break,
| or it's seen as just having handed over taxpayer money to
| their buddies in construction. ie - corruption.
|
| So from beginning to end, it's a tough problem.
|
| EDIT:
|
| It seems before I even finished typing my message, sibling
| messages appeared illustrating the point I was making in the
| last paragraph. There is no way in today's environment of
| completely broken down professionalism and trust, that a
| politician can give a concession without getting something
| for his/her community that s/he can use as justification for
| the concession. Otherwise, people, rightly or wrongly, just
| see it as handing free money to a politician's friends.
| JumpCrisscross wrote:
| > _Land acquisition costs were so high that it precludes
| building anything that can offer that <USD3000 a month
| price tag_
|
| "The median time for securing approval to build in San
| Francisco is 627 days" [1]. Land-development loans cost
| between 8 and 12% [2]. The financing cost _alone_ of that
| delay thus adds 15 to 20% to the cost of any housing in San
| Francisco. At the median.
|
| Add the risk of not getting approved and the cost of the
| lawyers and lobbyists and I wouldn't be surprised if these
| officials bump real estate costs by 50%.
|
| [1]
| https://www.sfchronicle.com/opinion/openforum/article/sf-
| hou...
|
| [2] https://eyeonhousing.org/2023/05/rates-on-development-
| and-co...
| no_wizard wrote:
| Land value tax would fix this in a hurry. Land owners would
| be incentivized to sell or make more productive use of
| their land, which adds enough positive pressure for them to
| go to market and make a deal. The biggest flaw in US
| housing is the ability to hold out at effectively no cost
| even as land value skyrockets. The taxation does not keep
| pace with the actual value. This allows stubborn sellers
| who want above market sales to hold out, potentially for
| years, until someone buys at an inflated price, with no
| real downside.
|
| Combine with upzoning and it would really stimulate the
| housing market in short order without subsidy.
|
| Land, being largely finite - especially when you start
| considering how communities make land more valuable etc -
| shouldn't be treated as a manufactured good. A land value
| tax is the only way to bring market incentives to real
| estate, because otherwise there is no pressure on owners to
| sell or otherwise make more productive use of land. Our
| current policies from local to state to federal, all
| incentivize holding land regardless of its utility.
| aidenn0 wrote:
| It's death by a thousand cuts. If it takes an architect
| working 10+ hours a week for 2-3 years get permits, that sets
| a fairly high floor on the cost for new development.
| HDThoreaun wrote:
| YIMBY policy was the biggest issue at the DNC. Most of stars
| spoke of it in their speech and it was part of the first policy
| speech Harris gave. Dems are at least acknowledging the issue,
| but the enumerated powers clause may make it difficult to enact
| federally. We need to get YIMBY politicians elected locally.
| chongli wrote:
| Yes, one way we could fix supply/demand is by scaling up the
| density of detached and semi-detached neighbourhoods. This
| means mandating narrow one-way streets (6m wide) and banning
| wide two-way streets (15m wide), forcing smaller front yards
| (reducing setback distances), eliminating garages and driveways
| in favour of street parking, allowing narrower properties and
| smaller homes overall. Furthermore, we should be allowing mixed
| use zoning so that small shops, restaurants, cafes, and bars
| can serve these neighbourhoods and promote a walkable
| lifestyle.
|
| These neighbourhoods can be served by light rail / street cars
| allowing more distant travel via rapid public transit, further
| reducing the need for cars. Look at a lot of the older
| neighbourhoods in big cities such as Riverdale in Toronto [1]
| to see what _streetcar suburbs_ look like.
|
| [1] https://www.youtube.com/watch?v=MWsGBRdK2N0
| __loam wrote:
| We should build large numbers of commie blocks until PE firms
| regret buying residential properties.
| mullingitover wrote:
| Better yet, we can just copy Singapore or Vienna's public
| housing systems and actually have desirable public housing.
|
| Arguably, the reason we don't already have this is because a
| large contingent of the voting public has been conditioned to
| believe that if the government does something well, it's
| communism, so the government should do anything well.
| pc86 wrote:
| It's less a belief that the government shouldn't do
| anything well, and more a belief that it can't.
| mullingitover wrote:
| Right, and I'd argue that the belief that it _can 't_ do
| things well frequently comes from the government being
| deliberately handicapped by those who believe it _should
| 't_ do things well. For example crippling (or outright
| trying to destroy) the US Postal Service out of the
| belief (or vested interest) that private delivery
| companies shouldn't have to compete against a publicly
| subsidized service.
| pchristensen wrote:
| There are plenty of motivated actors that are terrified
| that the government _will_ do a good job, and so they
| work to sabotage it so it won 't be effective
| competition.
| SpicyLemonZest wrote:
| The reason we don't have it in the US is that many cities
| tried and failed to make it work in the 50s and 60s, to the
| point that we have a slang term "projects" memorializing
| the failure. Public housing can't be desirable unless it's
| safe, and it's not clear whether anyone knows how to run a
| crime-free public housing project in the US.
| seanmcdirmid wrote:
| We don't have it because we aren't a city state. In
| Singapore, you have a few choices, but they are all in
| Singapore. If the public housing system came to the USA
| without any local residency requirements, everyone would
| want to live in a few hot cities and the system would just
| fall apart. Not only that, once residency restrictions are
| in place, people will be stuck in places due to their
| public housing, they won't be able to just move to Seattle
| for better job opportunities.
| __loam wrote:
| This is bizarre reasoning.
| seanmcdirmid wrote:
| It really isn't. It's simple game theory. People want to
| live in nice places. So they will all want their public
| housing in a nice place, but people generally like the
| same places, and that doesn't really work for 380 million
| people. Someone will have to live in Mississippi, but
| then that also locks them down since we aren't using
| market anymore to determine who gets to live where.
| seanmcdirmid wrote:
| Commie blocks don't work, just ask China who has an even more
| messed up property market than we do.
| HDThoreaun wrote:
| The chinese property bubble was created because of the lack
| of equity markets for chinese investors to dump money in.
| Without good investments to be had the chinese turned to
| pure speculation in the real estate market. Their housing
| market is actually quite good at providing housing, in fact
| theyve lifted 800+ million people out of poverty in the
| last 80 years. Just the crappy financial regulations that
| caused the problem.
|
| The American housing market does not seem to have much
| speculation right now. Houses actually provide utility
| around equal to what they cost here, theres just a big
| enough wealth disparity combined with not enough housing
| that a huge number of people cant afford that price.
| seanmcdirmid wrote:
| The construction industry really is a jobs program for
| rural surplus labor, they've optimized their construction
| techniques for that with the same 30 story blocks with
| slightly overbuilt concrete walls and floors. But they
| have surplus units and even in hot cities like Beijing or
| Shanghai you'll find empty apartments that haven't even
| been renovated yet. It's not clear where this will end.
|
| The American market has lots of speculation. Many
| landlords are just in it for the appreciation given that
| they can't even make a mortgage payment with rent, I know
| of multiple homes in my (Seattle) neighborhood owned by
| Chinese investors that are barely lived in.
| HDThoreaun wrote:
| They build the same building over and over again because
| theyve had to create litearlly a billion units in the
| last 50 years and it's faster that way.
|
| There are unsold units because the price went crazy due
| to speculation. Empty housing is one of the main
| indicators of a real estate bubble. American vacancy rate
| has slowly crept up but is still extremely low outside of
| manhattan. Americans tend not to believe housing will
| appreciate faster than the stock market, so housing
| speculation is limited, although of course not unheard
| of. We'd need LVT for that.
| seanmcdirmid wrote:
| The empty houses are definitely sold. They are just being
| held since the return on an unrenovated unit is higher
| than a renovated one. They are speculating long term, and
| being landlords doesn't give them much. There are also
| apartments that have been sold but are never being lived
| in before the building is torn down and rebuilt, but
| they'll still make their return regardless.
|
| As for the USA, yes it isn't as bad here yet. But it's
| getting there.
| __loam wrote:
| We could also ask the Soviet Union which despite being an
| authoritarian shithole, did not have homeless people.
|
| In any case, most cities in the US have obvious supply side
| issues with housing. It doesn't matter who builds it, we
| need more supply. Why shouldn't it be the government?
| seanmcdirmid wrote:
| Soviet Union had a residency system also so everyone
| didn't just move to Moscow.
|
| Can we build enough housing in SF, Seattle, LA, SD to
| satisfy demand? Keep in mind that as soon as housing is
| affordable in these cities, even more people will move to
| them...so how much is enough?
| samstave wrote:
| >> _Now that we 're getting rid of centralized price controls /
| collusion_
|
| > _give me a dossier on BlackRock 's holdings in real estate,
| go into detail on their holdings in residential, get as much
| real financial from their filings and reports. Give me a
| markdown table and an instaml/instaql schema for the data
| model_
|
| * Blackrock would like a word
|
| https://i.imgur.com/PLwQ6sa.png
|
| https://i.imgur.com/1oAdbdC.png
|
| https://i.imgur.com/nH0Vzf8.png Fund
| TotalAssets ResidentialAssets #units BRGIF
| $14.8B $10.3B 43,000+ units BREIT $12.2B
| $6.5B 25,000+ units BREIT II $8.5B $4.8B
| 18,000+ units
| SpicyLemonZest wrote:
| You and what I assume is your AI companion are victims of
| some viral misinformation about BlackRock. BREIT and BREIT II
| are managed by an unrelated company named Black _stone_ - the
| fund names in your third image are incorrect. BRGIF does not,
| as far as I can tell, exist at all.
| samstave wrote:
| Do you know the history behind both BlackRock and
| BlackStone?
|
| Same DNA:
|
| >> _he business that would become BlackRock started under
| the umbrella of Schwarzman's firm in 1988. "They used to be
| called Blackstone Financial," Schwarzman said. "We started
| in business together. We put up the initial capital."
| Schwarzman started Blackstone three years earlier in 1985._
|
| >> _When Fink decided to branch out on his own, he needed a
| new name for his asset management operation, Schwarzman
| said. "Larry and I were sitting down and he said, 'What do
| you think sort of about having a family name with "black"
| in it.'"_
|
| Thanks for the input though - I am working on figuring out
| how to document all these entanglements - there are a lot
| of others also attempting to do so, if you have any links
| to such, I appreciate real data that I can trust (I am
| mapping out The Oligarchs, their entanglements, and
| what/who they are/actually own.)
| gruez wrote:
| >43,000+ units
|
| That... seems like a drop in the bucket in terms of housing
| supply?
| samstave wrote:
| But thats a lot of power over rent cost 'normalization'
| given they can set the prices on a large # of units and
| pretty much all real estate is driven by "comparables in
| the area/market" thats an awful lot of "comparables"
|
| Also these are basically fake numbers.
|
| Unit could be an entire complex with hundreds of actual
| apartments.
|
| ---
|
| EDIT:
|
| They dont own any direct units, apparently, but they own a
| large percentage of the companies, developers, funds that
| do.
|
| It a far more nuanced issue and hard to get a true
| understanding of, as money is the grout that fits
| everything together - its hard to see how it all works.
| gruez wrote:
| >But thats a lot of power over rent cost 'normalization'
| given they can set the prices on a large # of units and
| pretty much all real estate is driven by "comparables in
| the area/market" thats an awful lot of "comparables"
|
| If their ownership is a drop in the bucket on a national
| level, then what you're proposing would only make sense
| if they're heavily concentrated in a few cities. Is there
| evidence this is happening?
|
| >Unit could be an entire complex with hundreds of actual
| apartments.
|
| Dividing the total asset value by the number of units
| gets you around 300k, which seems in the price range for
| a single family home. That doesn't entirely rule out what
| you're describing is happening, but if it is the effect
| must be low.
| jihadjihad wrote:
| "Over a century ago, Congress passed the Sherman Antitrust Act to
| protect competition in the marketplace. As the Supreme Court has
| explained, the "central evil" addressed by Section 1 of that Act
| is "the elimination of competition that would otherwise exist,"
| including competition on prices.
|
| When the Sherman Act was passed, an anticompetitive scheme might
| have looked like robber barons shaking hands at a secret meeting.
|
| Today, it looks like landlords using mathematical algorithms to
| align their rents."
|
| https://www.justice.gov/opa/speech/attorney-general-merrick-...
| gruez wrote:
| >Today, it looks like landlords using mathematical algorithms
| to align their rents."
|
| It's unclear how that can ever be outlawed though. Given the
| classic supply/demand curve, everyone can theoretically
| independently derive the optimal price. Doing so would arguably
| be basic business acumen, and I'm not sure how the government
| can ban that without banning any sort of pricing research, or
| preventing businesses from setting prices. Realpage goes beyond
| this by pressuring landlords to accept their recommended price,
| and that's probably what got them in hot water, but they could
| probably have gotten away with it if they didn't do that.
| llamaimperative wrote:
| It seems like you're saying "I don't know how they'd do a
| thing they're not trying to do." I wouldn't read too much
| into the slight vagueness around the distinction between just
| setting prices with the information available versus what
| Realpage was actually doing (as you describe) - I'm sure the
| case itself will draw such a distinction pretty well.
| gruez wrote:
| >It seems like you're saying "I don't know how they'd do a
| thing they're not trying to do."
|
| because the commenter I was replying to was characterizing
| what realpage was doing as "using mathematical algorithms
| to align their rents", which isn't illegal in and of
| itself. I specifically acknowledged in my previous comment
| that realpage was doing more.
| llamaimperative wrote:
| That wasn't the commentator here, that was a quote from
| the opening (verbal) remarks. I.e. commentator + DOJ +
| you + I all know the distinction being drawn by the case,
| the AG just didn't dive into it in the first 3 sentences
| of his opening remarks on the case.
| spencerflem wrote:
| The optimal rent for who? The point is that if Everyone has
| higher prices, because you can't not have a place to live
| people will be forced to pay more
| gruez wrote:
| The market clearing price on supply-demand curve.
| advael wrote:
| There's a huge difference between researching your
| competition and coordinating with them. In effect, Realpage
| is acting as a mechanism for landlords to coordinate prices
| collaboratively rather than competitively. It just hopes to
| get away with it by having them outsource the analysis part
| of this to a third party. It likely would have gotten caught
| sooner if it weren't for the nonsensical attitude regulators
| have taken toward software products, where using a computer
| to do something is treated as somehow different from simply
| doing it
| gruez wrote:
| >There's a huge difference between researching your
| competition and coordinating with them
|
| If you read my comment carefully, you'd see that I was
| specifically talking about "independently derive the
| optimal price", not any sort of coordination.
| advael wrote:
| If you read my comment at all, you'd notice it leads with
| drawing a distinction between your hypothetical scenario
| and the actual case at hand. If you read my comment
| carefully, you might also notice that I'm being extra
| charitable by not pointing out that your hypothetical
| relies on oversimplifying how pricing signals operate in
| the real world. Of course you can make the problem seem
| to go away if you demand a simplification that elides all
| the details relevant to the problem.
| gruez wrote:
| >If you read my comment at all, you'd notice it leads
| with drawing a distinction between your hypothetical
| scenario and the actual case at hand.
|
| And that distinction was specifically acknowledged in my
| original comment.
|
| "Realpage goes beyond this by pressuring landlords to
| accept their recommended price, and that's probably what
| got them in hot water"
|
| >If you read my comment carefully, you might also notice
| that I'm being extra charitable by not pointing out that
| your hypothetical relies on oversimplifying how pricing
| signals operate in the real world. Of course you can make
| the problem seem to go away if you demand a
| simplification that elides all the details relevant to
| the problem.
|
| How does "how pricing signals operate in the real world"
| prevent my model from working? All you need is some sort
| of market research firm to provide key statistics like
| vacancy rate, disposable income, and average rent, and
| every landlord can arrive at approximately the same same
| rent.
| advael wrote:
| Right, I think that's not the only distinction here. Yes,
| Realpage pushes its customers to accept its
| recommendations. But by centralizing where this research
| is done, it doesn't have to do that to be engaging in
| anticompetitive behavior, because it also aggregates data
| volunteered by other organizations you might be nominally
| competing with, and the more people are using this
| service, the less likely a competitor might have some
| information that's not publicly available (or even that
| is available but isn't part of some standard method of
| analysis) they might be using to compete on price. The
| centralization of this service across competing
| organizations unto itself is a form of price-fixing,
| regardless of whether the company also demands that you
| use its estimates
| JumpCrisscross wrote:
| > _unclear how that can ever be outlawed though_
|
| There are certain categories of information that you are
| legally prohibited from sharing with your competitors. How
| you will set prices in the future is one of them [1].
|
| Whether competitors agree on a specific price or a system of
| pricing ( _e.g._ X per square foot, or raise rent 1% every
| year except prime numbers when rent goes up 10%, or raise
| rent by the last number of the month 's lottery number) is
| irrelevant. A landlord looking at RealPage's YieldStar price
| could be confident they wouldn't be undercut in the same way
| someone who's made a handshake deal with their competitors
| would.
|
| Where this crosses into liability for RealPage is if they
| knew this was how their tool was being used, or worse,
| marketed it as such. From what I've read, that seems to be
| the case.
|
| [1] https://www.justice.gov/archives/jm/antitrust-resource-
| manua...
| gruez wrote:
| >There are certain categories of information that you are
| legally prohibited from sharing with your competitors. How
| you will set prices in the future is one of them [1].
|
| Right, but if you read my comment more carefully, I was
| specifically talking about the case where everyone derives
| the optimal price independently. Nowhere is sharing the
| price with your competitor mentioned.
| JumpCrisscross wrote:
| > _I was specifically talking about the case where
| everyone derives the optimal price independently_
|
| If you're using the same model you know your competitors
| use it isn't an independent derivation.
| gruez wrote:
| What if there's only one plausible model rent valuation,
| or there's multiple plausible models that spit out
| basically the same number? For instance, options are
| widely priced using the black-scholes model, because
| that's basically the state of the art. Is everyone using
| that model engaging in price collusion as well? Sure,
| there might be a bunch of parameters that are adjustable
| that each landlord has to come up with themselves, but
| with access to enough data each landlord crunch the
| numbers and converge on what the optimal values are.
| Better yet, an academic could do the work for them and
| publish a paper telling everyone what the optimal values
| are. Now what, are they supposed to be banned from
| engaging in research on what the optimal price is?
|
| [1]
| https://en.wikipedia.org/wiki/Black%E2%80%93Scholes_model
| JumpCrisscross wrote:
| > _What if there 's only one plausible model rent
| valuation, or there's multiple plausible models that spit
| out basically the same number?_
|
| Then we'd have a different situation.
|
| > _options are widely priced using the black-scholes
| model, because that 's basically the state of the art. Is
| everyone using that model engaging in price collusion as
| well?_
|
| Options dealers would _absolutely_ get smoked if they all
| started using the same model to increase spreads. As for
| the base pricing model, everyone is constantly iterating
| and adapting it. Because they 're competing. (Source:
| former options market maker.)
| crazygringo wrote:
| > _Realpage goes beyond this by pressuring landlords to
| accept their recommended price, and that 's probably what got
| them in hot water, but they could probably have gotten away
| with it if they didn't do that._
|
| Yes, but it seems like that would miss the point of Realpage
| entirely. Which is that if all landlords pay for it and are
| pressured to follow its recommendations they all make a lot
| more money.
|
| Using algorithms to _set_ your prices is fine. Using a
| _shared_ algorithm to _align_ your process is _not_. That 's
| quite easy to outlaw. The "pressuring" part here is extremely
| clear.
| gruez wrote:
| >Yes, but it seems like that would miss the point of
| Realpage entirely. Which is that if all landlords pay for
| it and are pressured to follow its recommendations they all
| make a lot more money.
|
| This would entirely hinge on what you think "the point of
| Realpage" was. Some argue it's collusion as a service, but
| it's also plausible that they're offering pricing research.
| crazygringo wrote:
| > _but it 's also plausible that they're offering pricing
| research._
|
| It's not plausible when they strongly pressured landlords
| against accepting rents lower than suggested.
|
| That pressure wasn't an accident, and it wouldn't make
| any sense in a product that was merely pricing research.
|
| Now RealPage has been around for 26 years and didn't
| start out doing that. But at some point they transitioned
| into illegal price fixing as a service, because their
| pricing determinations were _not_ treated as optional
| recommendations.
| blackeyeblitzar wrote:
| We need a total revision of the antitrust act to respond to all
| the ways in which mega corp distort the market and limit
| competition with it being a full monopoly.
| dfee wrote:
| I don't know much about the company or situation, admittedly. But
| this wasn't the strongest claim:
|
| > they said their probe involved data scientists who dug into
| computer code to understand how these algorithms set prices
| adamsb6 wrote:
| Curious where the line is supposed to be for gathering market
| information and making pricing decisions.
|
| Surely it would be legal if I had an employee scour all the
| rental listings in my area and use that to give me price
| distributions for similar units to the ones I'm advertising.
|
| But according to the DOJ if I hire a company to do this, it's
| not?
|
| What if I have two units to list and it wouldn't make sense for
| me to hire a whole employee for this purpose? I can't share the
| cost with other small players by paying a company that
| specializes in this task? The big companies get this benefit due
| to their scale and the little guys don't?
|
| If I wrote a program to do this for me, would that be legal?
|
| Could I sell the program to others?
|
| Could I open source it?
|
| Could I sell a hosted version of the program?
| Aurornis wrote:
| > But according to the DOJ if I hire a company to do this, it's
| not?
|
| That's not what was happening. Your understand of the suit is
| missing the real problems.
|
| They had a program for automatic rent increases that were
| calculated based on data that would have been private in normal
| markets (rent being charged for units not on the open market).
| There were a lot of factors beyond simply informing people what
| could be found in public data.
| kstrauser wrote:
| You can do those things. What you can't do is acquire a huge
| chunk of the market and require your users to accept the prices
| you "suggest" to them based on your knowledge of what their
| competitors are charging.
| nightpool wrote:
| That's not what RealPage did. RealPage (in landlord's terms)
| "uses proprietary data from other subscribers to suggest rents
| and term"--not just publicly available data. Additionally,
| there's a market impact level to this. When you control 70% of
| the market, you're a monopoly, regardless of whether you're
| controlling market prices because you're a landlord or because
| you're just telling the landlord what price to use. The law
| ~says that you cannot control 70% of the market.
|
| So, yes, if you sell a hosted version of your program that sets
| prices for 70% of the market and then use you contracts and
| incentives to police landlord's compliance with your program
| (another key feature! if RealPage was _just_ providing the
| data, they would have been less of an issue, but they were also
| using financial kickbacks to ensure landlords kept their prices
| high), you are forming an illegal monopoly or price fixing
| cartel.
| adamsb6 wrote:
| In other contexts there's no problem with using proprietary
| data to set prices, so long as you don't run afoul of insider
| trading regulations.
|
| Landlords also don't have monopoly pricing power, they're
| making tradeoffs. They can't list their unit for a million
| per month or else it would never sell. They can't list it for
| a dollar because they would lose money and be flooded with
| applicants.
|
| They're trading between the highest price they can charge and
| the unit sitting vacant. AFAIK this is the value RealPage
| adds, it predicts what the optimal price would be.
|
| If it were instead doing something like predicting the market
| price is X, but telling landlords to set it at 1.3X and stick
| to their guns while units sit vacant and that eventually
| renters would have to give in, then it would be a price
| fixing scheme.
|
| Discovering the market price is not a price fixing scheme.
| Otherwise the NYSE is a price fixing scheme, far more than
| RealPage.
| hughesjj wrote:
| > In other contexts there's no problem with using
| proprietary data to set prices, so long as you don't run
| afoul of insider trading regulations.
|
| I believe the parent comment mentioned proprietary data for
| accuracy, since you had only mentioned publicly available
| data. Parent comment then goes on to describe various ways
| Realpage _does_ violate monopoly power.
| SoftTalker wrote:
| They also (as I understand it) have landlords sign an
| agreement that they will charge RealPage's suggested rent and
| not undercut it. This is the collusion part. It's not just a
| market research service, they are manipulating prices.
| adamsb6 wrote:
| Reading through the details on the lawsuit now: https://www.d
| ocumentcloud.org/documents/25060739-us_et_al_v_...
|
| It is alleged that they use proprietary data, and it looks
| like they definitely do.
|
| RealPage doesn't appear to police landlord's price setting
| decisions. I see how you could get this from the first
| paragraph here, but the paragraph immediately after dispels
| it:
|
| > 28. In addition to agreeing to share nonpublic,
| competitively sensitive data with RealPage, each AIRM and
| YieldStar licensee agrees with RealPage to use the AIRM or
| YieldStar pricing software as RealPage designed it. Landlords
| are expected to review daily AIRM or YieldStar floor plan
| price recommendations and use the programs to set scheduled
| floor plan rents or even unit-level prices > 29. While
| landlords may not accept every price recommendation, they use
| AIRM or YieldStar as their pricing software, regularly review
| AIRM or YieldStar floor plan recommendations, use AIRM or
| YieldStar to set a scheduled floor plan rent, and use AIRM or
| YieldStar to set unit-level prices.
|
| I think "expected to review... use the program to set rents"
| must be a description of how the software is designed, not
| some reward or penalty scheme for setting recommended prices.
|
| There's a whole section starting on page 54 that details how
| RealPage encourages landlords to converge on price, and
| there's no enforcement mechanism mentioned.
|
| The law also does not prohibit a company from dominating a
| market. It prohibits using monopoly power to engage in
| certain practices. And monopoly position isn't an input to
| the price fixing function: it would be illegal even if
| between two self-employed plumbers.
| marcinzm wrote:
| > There's a whole section starting on page 54 that details
| how RealPage encourages landlords to converge on price, and
| there's no enforcement mechanism mentioned.
|
| I mean, not sure what else I'd call something like this:
|
| >If a property manager disagrees with the direction of a
| recommended price change--e.g., the manager wants to
| implement a price decrease when the model recommends a
| price increase--the RealPage pricing advisor escalates the
| dispute to the manager's superior.
| hyeonwho4 wrote:
| It seems to me like there are two significant factors in this
| case which likely cross the line: using private information
| from competitors (inventory, actual current prices) and clients
| being penalized for not sticking to the recommended prices. The
| latter (enforcement of cartel pricing decisions) makes the
| former more effective, and seem particularly egregious.
| adamsb6 wrote:
| I would agree that having a price enforcement mechanism
| crosses the line, but I can't find evidence that they do.
| duped wrote:
| I think you're missing that in order for your employee to do
| that work they would have to access public information, which
| is also available to renters.
|
| If on the other hand, you got an employee to call up landlords
| and get the rental pricing for every one of their units in
| exchange for the rent of all your units, and then agreed to set
| your pricing together - that's textbook price fixing.
|
| There's nothing illegal about collating publicly available
| information and selling it to others as a service. There is
| something illegal about collating private information and using
| it to advise many competing businesses what their prices should
| be.
| ganoushoreilly wrote:
| I think the issue is with RealPage, they all use it's algorithm
| for automatic pricing adjustment. It's not the hiring of a
| company, it's the collusion of the company to artificially
| inflate and manipulate pricing across multiple locations, under
| the auspice of "increasing rents and owners value".
|
| You absolutely can "share cost" publicly, but colluding on
| pricing is where it get's questionable.
|
| The platform itself by itself to analyze pricing isn't a
| problem, where I think the problem arises is when the contract
| for you to use the platform tie you and your properties pricing
| to the platforms suggestion. Thus making the platform the
| deciding factor.
|
| It's dicey and will be an interesting read. Rentals are an
| interesting industry as is, many will sit 80% full rather than
| 100% because of platforms like this that can squeeze more out
| of them. I've rented from apartments that use this platform and
| it's wild. Every renewal was either same or cheaper rent for
| moving across the hall vs staying for a 20% increase in the
| same apartment. It's designed to squeeze and put pressure on
| you. Shady.
| bell-cot wrote:
| From an "outside the black box" PoV of the rental market, there
| is _very_ little difference between:
|
| (1) 95% (say) of landlords secretly meet somewhere, conspire,
| then set their new rent rates together
|
| (2) 95% of landlords secretly meet somewhere, conspire, then
| all set their new rent rates based on the "individualized"
| advice of Rent, Loot, & Pillage Consulting Co.
|
| (3) 95% of landlords listen to marketing pitches from RealPage,
| understand the between-the-lines message that using RealPage's
| software would be a great "all the added profits, but none of
| the legal exposure" alternative to a price-fixing conspiracy,
| and decide to buy & use the software.
| singron wrote:
| I recommend reading the filing since the DOJ isn't saying this.
|
| The main differences is that RealPage collects and digests
| nonpublic information among competitors.
|
| The DOJ also has a lot of evidence that RealPage knew that this
| would increase prices and prevent competition.
|
| RealPage itself is also a monopoly. There are strong network
| effects with the service, and RealPage's willingness to
| allegedly anticompetitively raise prices means a another more
| scrupulous competitor is unlikely to succeed.
| mint2 wrote:
| after at least a year of regular posts on real page, where all
| the articles I've seen here specifically cite how real page
| enforces their pricing, why are there always posts that lead
| off with an entirely incorrect understanding of what real page
| does?
|
| Anytime a real page article is posted, a bunch of people come
| out expressing confusion and defend real page, asking why it's
| illegal to look up competitor pricing...
|
| Then they express surprise when told that real page does more
| than that - that it actually sets the prices and makes the
| price onerous to change and applies penalties if landlords
| still does change the price.
|
| But this info is always stated in the articles, so what how or
| where are the posters getting their initial incorrect info on
| real page? It seems they must be getting bad info somewhere
| because it doesn't seem plausible to guess at how real page
| works without even reading anything.
|
| And all of the incorrect understandings are always generous to
| real page.. is real page putting out a lot of fud somewhere
| that's getting to people who then come here after being misled?
| superkuh wrote:
| I can only hope they go after RealPage as vehemently and doggedly
| as they went after Backpage.
| duped wrote:
| Housing prices are publicly available information, rents should
| be too.
| gotaran wrote:
| In most of NYC that's the case
| HDThoreaun wrote:
| > Housing prices are publicly available information
|
| Dont look at utah
| alistairSH wrote:
| None of these states mandate disclosure of real estate
| transaction details...
|
| Alaska, Idaho, Kansas, Louisiana, Mississippi, Montana, New
| Mexico, North Dakota, South Dakota, Texas, Utah, and Wyoming.
| BoiledCabbage wrote:
| Market competition is essential for a functioning market.
| Eliminating software whose purpose is to prevent the market from
| competing on price is a huge win.
|
| We won't miss them.
| cyanydeez wrote:
| Of course, there not thing wrong with algorithms, until you go
| above and beyond and try to force everyone to obey it's
| recommendations.
|
| Which they did.
| dang wrote:
| Related. Others?
|
| _San Francisco seeks ban of software critics say is used to
| inflate rents_ - https://news.ycombinator.com/item?id=41227792 -
| Aug 2024 (185 comments)
|
| _San Francisco to Ban Rent-Setting Software Amid Gouging Worry_
| - https://news.ycombinator.com/item?id=41163936 - Aug 2024 (48
| comments)
|
| _San Francisco Moves to Ban Anti-Competitive Rent Software_ -
| https://news.ycombinator.com/item?id=41155792 - Aug 2024 (7
| comments)
|
| _San Francisco to ban software that "enables price collusion" by
| landlords_ - https://news.ycombinator.com/item?id=41133143 - Aug
| 2024 (17 comments)
|
| _Hoping to cut San Francisco rents, supervisors approve
| software-pricing ban_ -
| https://news.ycombinator.com/item?id=41125232 - Aug 2024 (1
| comment)
|
| _Why US renters are taking corporate landlords to court_ -
| https://news.ycombinator.com/item?id=40261647 - May 2024 (110
| comments)
|
| _Rents are soaring. Is RealPage to blame?_ -
| https://news.ycombinator.com/item?id=39992731 - April 2024 (207
| comments)
|
| _Lawmakers Seeking to Outlaw Rent Price Fixing Reported by
| Propublica_ - https://news.ycombinator.com/item?id=39206493 - Jan
| 2024 (56 comments)
|
| _Big landlords used software to collude on rent prices, DC
| lawsuit says_ - https://news.ycombinator.com/item?id=38114264 -
| Nov 2023 (375 comments)
|
| _The rent is too damn algorithmic_ -
| https://news.ycombinator.com/item?id=37829575 - Oct 2023 (147
| comments)
|
| _Landlord Software Is Making Life Hell for Renters, Report Says_
| - https://news.ycombinator.com/item?id=35786820 - May 2023 (17
| comments)
|
| _I saw RealPage 's crappy rent-jacking-up software so you don't
| have to_ - https://news.ycombinator.com/item?id=34926683 - Feb
| 2023 (403 comments)
|
| _DOJ will examine whether RealPage helped landlords coordinate
| rent increases_ - https://news.ycombinator.com/item?id=33744136 -
| Nov 2022 (123 comments)
|
| _RealPage and landlords illegally created a 'cartel' to set
| prices, lawsuit says_ -
| https://news.ycombinator.com/item?id=33633541 - Nov 2022 (3
| comments)
|
| _US senator seeks antitrust review of apartment price-setting
| software_ - https://news.ycombinator.com/item?id=33444092 - Nov
| 2022 (6 comments)
|
| _Lawsuit filed against rent-setting software RealPage_ -
| https://news.ycombinator.com/item?id=33317414 - Oct 2022 (50
| comments)
|
| _Clever algorithm may be what 's driving rent prices so high_ -
| https://news.ycombinator.com/item?id=33313028 - Oct 2022 (6
| comments)
|
| _Rent going up? One company's algorithm could be why_ -
| https://news.ycombinator.com/item?id=33224502 - Oct 2022 (279
| comments)
|
| _Landlords use software to set rental rates_ -
| https://news.ycombinator.com/item?id=3294248 - Nov 2011 (5
| comments)
| ndesaulniers wrote:
| Companies are culluding to suppress wages by algorithm, too. Look
| up a company called Aon, and their product called Radford Data &
| Analytics.
| eldridgea wrote:
| ~2019 I led a team of highly qualified security R&D folks
| inside Cisco (we were part of an acquisition), these folks were
| effectively highly specialized SWEs. But because the title was
| something like "security researcher" it was compared against
| the closet Radform ladder which was closer to to compliance
| officer.
|
| This meant the specialists were on a ladder with often _lower_
| pay than a standard SWE, and I couldn 't shift the bureaucracy
| enough to change that. People left for all sorts of reasons but
| a big part was being able to get 2x-4x the total compensation
| at other companies.
| ndesaulniers wrote:
| Sounds like first hand experience observing wages being
| suppressed as a result of Radford/Aon.
| HelloMcFly wrote:
| If anyone else runs into this issue, typically the direct
| route for things like this is to get involved a discussion
| with someone in your Total Rewards / Global Compensation
| team. These are usually the people that confirm the mapping
| of internal positions to benchmarks, and there is huge
| between-organizations variability in the quality behind that
| process.
|
| Many times normal managers or more generalist HR Partners
| (especially if more junior) may not appreciate that this is a
| data error vs. a frustrated hiring manager trying to tell you
| their subjective feelings are more correct than policy.
|
| That having been said: I still think the whole thing stinks.
| ndesaulniers wrote:
| HR is not your friend. Corporate Confidential by Cynthia
| Shapiro is a recommended read.
|
| My advice; get a better offer elsewhere, then see if HR
| wants to pay you your worth.
| tfehring wrote:
| The comment you replied to seems to be targeted at
| managers trying to advocate for their teams, not at
| individual contributors trying to advocate for
| themselves. I agree that reaching out to the compensation
| team as an IC is generally not going to be an appropriate
| or effective way to get a raise. But for managers,
| working with HR on issues like that is just part of the
| job.
| HelloMcFly wrote:
| Thank you, yes. This is not an uncommon managerial
| problem that is often resolved (not always; I've had both
| experiences), though perhaps not in a timely manner.
| lelanthran wrote:
| > HR is not your friend.
|
| Most people don't get this.
|
| HR exists to protect the company from the employees, not
| protect the employees from the company.
| dboreham wrote:
| I have some insight into this space (compensation analysis)
| through a family member. Either the VP was incompetent, or
| the mismatched job situation was used as cover for the
| outcome they intended (people leaving). "The bureaucracy"
| exists to serve businesses interests, and legal risks to
| same.
| sithadmin wrote:
| Not just by algorithm. In the US, many large employers utilize
| 'The Work Number' by Equifax for employment verification
| services, and share details about individual employees as
| granular as individual paycheck disbursements. This information
| is visible to other employers that buy in to the scheme, and
| obviously favors the employer in salary negotiations with a
| candidate.
| ndesaulniers wrote:
| Right, this indirection seems to give them a "throat to
| choke" the next time this goes to court.
|
| Opt out: https://employees.theworknumber.com/employee-data-
| freeze
| hoosieree wrote:
| Data brokers are a scourge. They should be illegal, or at the
| very least regulated.
|
| For example, here's an idea for one such regulation:
| If the company purchases aggregated salary data, they must
| publish their own salaries for at least 1 year.
| analog31 wrote:
| Possession of the data should be illegal. It can be
| enforced through statutory damages, similar to the damages
| paid for sharing copyrighted music recordings and movies.
| alasdair_ wrote:
| Just make PII copyright of the person it identifies,
| similar to how a "likeness" is owned by a person.
|
| Then sue for copyright infringement.
| henryfjordan wrote:
| Honestly what you describe is less likely to run afoul of
| antitrust law than hiring some firm who has all that data to
| tell you what salary to offer. At least you are looking at
| data and competing, not just paying some consultant to tell
| you and every other company to lower salaries.
| crowcroft wrote:
| Applying macro data to micro use cases without appropriate
| carve outs is one of the greatest sins in statistics, and yet
| it happens everywhere.
| perihelion_zero wrote:
| This is why I love jobs where you get paid based on a sales
| commission rather than in mystical dollar-hours. Get 10x the
| results, get 10x the pay.
| ineedaj0b wrote:
| This case -like the Sackler case- I hope they burn the company
| down with malice to make an example.
|
| I have similar feelings about Airbnb. I think they caused a good
| deal of harm, but I'm more kind to the argument they are allowing
| market forces to act. People are priced out by mid-level wealth
| holders in nice locations who rent out to tourists; homes young
| families could have enjoyed. Airbnb could be a net harm on
| society ~30 years from now. Still too early to tell imo
| staplers wrote:
| I hope they burn the company down
|
| Will probably just be a "fine" (got caught tax) and nothing
| changes. It's an explicit signal to keep doing it unless the
| punishment is worse than the profit.
| CPLX wrote:
| In the case of RealPage that doesn't seem like the most
| probable outcome. They've been caught red-handed engaged in
| blatantly illegal price-fixing conduct that has harmed
| millions of American families.
|
| They're up against the DOJ and plenty of red state AGs too,
| all signs point to them being nailed to the wall. At least at
| a corporate level, we don't have a good track record of
| sending execs to jail of course.
| staplers wrote:
| They'll make a big show for the headlines "record breaking
| $50 million fine for evil bad company" and it will be 35%
| of profit made on said practices.
| abakker wrote:
| Worse, the real profits made were by the individual
| landlords, so there's no incentive against a similar
| enough service to emerging instead.
| nox101 wrote:
| it also feels like it has no meaning unless they magically
| roll back rent prices by 50% or more... which isn't going to
| happen
| bankcust08385 wrote:
| Meanwhile, Bilt is sucking Wells Fargo dry by yuppie renters who
| can afford to spend $75k/yr dining out and paying $8k/month in
| rent.
|
| PS: I can't wait to delete the ActiveBuilding by RealPage app.
| pb7 wrote:
| How are the two related?
| Spivak wrote:
| They're not, "millennials eat out a lot" has become the new
| avocado toast. Like yeah when student loans, mortgage/rent,
| car payment, and bills are 6-8k out the door monthly it turns
| out a $40 night out stops moving the needle. If you eat out
| fri/sat every week that'll be 5% of your mandatory expenses.
| No one should be surprised folks don't give a shit.
|
| I use the Chipotle burrito index to help folks understand the
| non-cost of eating out. My student loans are 120 burritos, my
| rent was 261 burritos. Getting a sub-pump installed is 952
| burritos. Three cheers for prices of things rising non-
| uniformly.
| siliconc0w wrote:
| Concentration is more likely problem. When there are only a
| handful of competitors in a geographical area they'll find a way
| to collude one way or another, even if it's just a signal group
| or staring at each out while slowly raise prices. I think >=6 is
| probably the point where you might start to see defectors.
| stetrain wrote:
| Yeah. It seems like antitrust in the US will happily let
| competition consolidate down to 2 or sometimes even 1 viable
| provider, and the only react later once evidence of consumer
| harm can be shown via higher prices.
|
| At that point a lot of the damage is already done, and trying
| to reverse it is more complicated than preserving a competitive
| market to begin with.
| amatecha wrote:
| Now can we do airlines and hotels?
| jacobgkau wrote:
| While I can appreciate your frustration with the airline and
| hotel industries, I have to pay rent a lot more often than I
| have to buy plane tickets or hotel rooms, so I'd be glad to
| start with this one.
| mannyv wrote:
| FYI the way you get around this legally is to set up a nonprofit
| and funnel all your pricing information to that nonprofit.
|
| Then everyone uses the non-profit's data to set prices.
|
| You can also use aggregator websites to check pricing. I know of
| a bunch of small hotels that use expedia/booking.com/etc to do
| this.
| dev1ycan wrote:
| There needs to be serious consideration on actually enforcing and
| even straight up shutting down companies if found guilty
| regarding these topics that harm the lives of millions of people.
|
| I don't think this particularly will fix housing prices however
| (even though they're scummy), I think housing prices are a bubble
| that will eventually burst Japan style, even in the best case
| scenario you have a new population that is historically earning
| less than the population they (due to birth rates, not some
| conspiracy) are replacing, so while it won't crash as much as
| Japan's (out of tokyo), it will certainly not hold its million+
| pricing when nobody is able to afford that anymore, and rents are
| based on salaries just like property pricing, if renters cannot
| afford to pay anymore what is asked for then prices will fall,
| it'll take ~10-15 years more but the market will inevitably start
| falling.
| gunapologist99 wrote:
| This is not appropriate for the DOJ to be taking up. They have
| nearly unlimited resources and have far bigger fish to fry.
|
| The appropriate enforcement agencies are the States' Attorneys
| General. If they feel that their constituents are being harmed,
| they can take it up with the courts.
|
| There is certainly _zero_ evidence that RealPage has any sort of
| monopoly. The DOJ would have named that evidence in their _press
| release_ if they had any evidence at all that RealPage possessed
| any sort of monopoly power. This isn 't the National Assoc of
| Realtors (which obviously does actually have strong monopoly
| power), and where is the DOJ when the NAR lawsuits have been
| going on for the last several years? So, the Sherman Antitrust
| Act claims are tenuous at best.
|
| As it stands, this seems to be a ham-handed attempt to seek a
| consent decree for clumsy price-fixing, setting maximum rent
| prices, nationwide, without any appropriate legislation, as an
| end-run around Congress. And that _will_ actually harm consumers.
| abduhl wrote:
| >> this seem to be a ham-handed attempt to seek a consent
| decree to create minimum rent prices, nationwide, without any
| appropriate legislation. And that will actually harm consumers.
|
| Where does this contention come from? What makes it "seem" like
| this is the goal of the DOJ to you?
| gunapologist99 wrote:
| The DOJ has not a prayer of proving that RealPage (or its
| clients or whatever) controls more than a tiny minority of
| the housing market, because it just doesn't. This is a tiny
| tiny fraction of all housing nationwide.
|
| So, since it can't do that and actually _win_ this case on
| that basis, but on the other hand has virtually unlimited
| resources to string this out indefinitely, it 's after
| something else. So, what do you think that could be? My guess
| is that this is an attempt at forcing these complexes into a
| price-setting consent decree.
|
| (by the way, thanks for actually responding with a criticism.
| A lot of time people just signal they disagree but they can't
| be bothered or can't articulate a real response. I do
| appreciate the substantive argument even if we might
| disagree)
| globalnode wrote:
| hooray! took them enough time. someone please do
| realestate.com.au in australia too. knowing australia though it
| will be 50 years or never. real estate is one of australias
| biggest problems.
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