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DOJ sues realpage for algorithmic pricing scheme that harms renters

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Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#391

Post by marcinzm »

adamsb6 wrote: post #377
nightpool wrote: post #271

Earlier quoted context omitted.

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.…

Reading through the details on the lawsuit now: https://www.documentcloud.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 nonpubl…

> 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.

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#392

Post by crazygringo »

gruez wrote: post #381
crazygringo wrote: post #354

Earlier quoted context omitted.

> 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…

>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.

> 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.

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#393

Post by warkdarrior »

JumpCrisscross wrote: post #366
mcmcmc wrote: post #328

Earlier quoted context omitted.

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.

> "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.

> 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.

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#394

Post by pchristensen »

pc86 wrote: post #361
mullingitover wrote: post #358

Earlier quoted context omitted.

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.

It's less a belief that the government shouldn't do anything well, and more a belief that it can't.

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.

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#395

Post by gruez »

samstave wrote: post #386
gruez wrote: post #382

Earlier quoted context omitted.

>43,000+ units That... seems like a drop in the bucket in terms of housing supply?

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 th…

>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.

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#396

Post by pchristensen »

mcmcmc wrote: post #328
kstrauser wrote: post #266

Earlier quoted context omitted.

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.

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.

Microeconomics (including supply, demand, elasticity, etc) is pretty reliable. Macroeconomics has a lot of uncertainty and social science squish.

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#397

Post by duped »

SoftTalker wrote: post #308
duped wrote: post #299

Earlier quoted context omitted.

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.

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.

That's a very different situation than the one you initially replied to. It's also not something everyone can do.

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#398

Post by gruez »

JumpCrisscross wrote: post #385
gruez wrote: post #376

Earlier quoted context omitted.

>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.

> 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.

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

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#399

Post by BeetleB »

JumpCrisscross wrote: post #368
BeetleB wrote: post #342

Earlier quoted context omitted.

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…

> 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…

> 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.

Re: DOJ sues realpage for algorithmic pricing scheme that harms renters

#400

Post by BeetleB »

pc86 wrote: post #365
BeetleB wrote: post #342

Earlier quoted context omitted.

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…

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 successfu…

> 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. :-)

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