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DOJ sues realpage for algorithmic pricing scheme that harms renters

justice.gov

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

#111

Post by legitster »

bbatsell wrote: post #59
legitster wrote: post #30

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 typ…

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…

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.

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

#112

Post by diogocp »

Carrok wrote: post #23
lukev wrote: post #16

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…

> 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.

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.

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

#113

Post by everforward »

jasode wrote: post #78
kpw94 wrote: post #65

Earlier quoted context omitted.

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…

>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…

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.

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

#114

Post by RhodesianHunter »

legitster wrote: post #56
currymj wrote: post #4

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. Ho…

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.

>I have a strong incentive to undercut them

Not in a supply constrained market where your rental will be occupied either way.

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

#115

Post by Alupis »

RhodesianHunter wrote: post #106
Carrok wrote: post #45

Earlier quoted context omitted.

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.

I'm not trying to be snarky, I'm genuinely curious. Have you ever read the economics literature on price controls?

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...

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

#116

Post by bluGill »

deepsun wrote: post #31
Manuel_D wrote: post #25

Earlier quoted context omitted.

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…

> If there's no profit to be made in building housing, why would anyone want to build housing? To live in it.

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.

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

#117

Post by Manuel_D »

bdcravens wrote: post #107
Manuel_D wrote: post #25

Earlier quoted context omitted.

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…

> 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…

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).

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

#118

Post by RhodesianHunter »

bick_nyers wrote: post #18
bearjaws wrote: post #7

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 pr…

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.

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.

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

#119

Post by bluGill »

failuser wrote: post #102
from-nibly wrote: post #36

Earlier quoted context omitted.

You want to live in an apartment complex by yourself?

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.

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.

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

#120

Post by bdcravens »

Manuel_D wrote: post #117
bdcravens wrote: post #107

Earlier quoted context omitted.

> 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…

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.…

You can be prosecuted for price gouging of essential goods.
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